The obvious answer is to raise the price of energy, and this will happen over time, but it is the wrong answer – in the short-term at any rate.
The issue is not that energy is too cheap, rather it is that people have lots of demands on their attention. To make it worth people’s time to become involved in energy saving activities, if the return is not very high (because energy is cheap) then the process of reducing energy consumption needs to be made simple!
Look at the thermostat above. This is the thermostat to control the central heating/air conditioning in my home. I like to think I am reasonably technical. I have been a Windows sysadmin for a multi-national company, managing Windows, Exchange, Active Directory, ISA and SQL Servers. I edit php files regularly, I remotely manage my own CentOS server via SSH and I’ve even done quite a bit of regex scripting of .htaccess files!
I attended the SAP for Utilities conference earlier this week in Huntington Beach and I have to say I am impressed by the progress American utility companies are making towards being more customer centric!
The event was titled Sustainability for the New Energy Era and there was a full track dedicated to Smart Grids (obviously I attended almost all of the talks in this stream).
Attendance at the event was surprisingly strong with around 800 delegates despite the current economic woes.
This is the third SAP for Utilities event I have attended and I have to say I was very pleasantly surprised at this event by the number of times customer needs were referenced. Almost all of the Smart Grid talks mentioned the need to involve consumers in the process. Obviously, this is a point I have been banging on about for some time, but it is fantastic to see that the utilities are starting to finally get the message.
One of the best presentations of the event came from Paul Lau of the Sacramento Municipal Utility District (SMUD). SMUD is very unusual amongst utilities in its fanatical focus on its customers – from its About page:
For each of the last eight years, SMUD has received the highest customer satisfaction ratings of any utility in the state in the J.D. Power and Associates survey. SMUD received the second-highest score in the nation for commercial customer satisfaction in 2010.
One reason for this is that Sacramento Municipal Utility District is a community owned electric utility governed by a seven-member elected Board of Directors. SMUD are far from being unique in this model. During Paul’s talk he highlighted other reasons why SMUD is so popular amongst its customers.
SMUD take customer feedback very seriously – in fact, they solicit it. SMUD holds regular focus groups of their customers to find ways they can improve their offerings.
Also, the Board of directors goes out and holds meetings in the community to educate customers about the need for smart grids and consequently they don’t incur any of the blowback which plagued PG&E’s efforts in this area.
Paul commenced his address by paraphrasing Bill Clinton and saying that utilities need to realise that “it is the customer, stupid!” Now, coming from a utility co., that is refreshing!
Lastly, SMUD uses the term customers, not consumers or worse, ratepayers, as many utilities do. Just that slight shift in the lexicon says a lot about how SMUD prioritises its clientbase.
Utilities could learn a lot from SMUD’s focus on the customer – the good thing is that judging from the conversations I had at the SAP for Utilities event, the tide does appear to be turning in that direction.
Jaymi Heimbuch contacted me recently to ask if I’d agree to be interviewed for a TreeHugger article she was planning to write on Smart Grids. “Love to”, I said.
TH: What’s the biggest barrier with smart grids right now? Is it utilities not latching on? Is the technology too new? Is it that not enough people understand what it is?
There are multiple barriers to complete smart grid roll-outs at the moment. The biggest one, as far as I can see is money!
The smart meter roll-out alone costs in the order of $150 per household just for the device. Then there is the installation engineer on top of that. And the software to back it up. In terms of the software, remember that presently utilities take maybe one meter reading a month. When they start taking readings from smart meters they will be taking up to 2880 per 30-day month when they are taking 15 minute readings (or 720 for hourly readings). If they have 1 million customers they go from 1m meter readings a month to 720m per month (or 2,880m). That’s a massive jump in the amount of incoming data which needs to be stored, queried for billing, and held for however long.
A lot of the software to handle this is still being developed and utilities, being very conservative, don’t want to be guinea pigs. And newer technologies tend to have a price premium.
Circling back to the price for the utilities. If they have 1 million customers, they are looking at spending hundreds of millions on the smart grid roll-out (smart meters, communications infrastructure for smart meters, back-end database for data, back-office apps for using the data – customer care, billing, etc.).
One of the big deals about smart grids is that it will help us reduce our consumption – from the utilities perspective, they should invest these large sums of money so we can reduce the amount we purchase from them? You can start to see the difficulties.
TH: What’s the most apparent way a smart grid will change the average person’s daily life? What about the most important way?
You know, the best way a smart grid could change the average person’s life is ‘not a jot’ – apart from reduced utility bills.
Utilities are talking up demand response programs and how they will be able to come into your house or apartment and turn down your air conditioner (for example) at times when supply is short and demand is high. This is a top-down approach destined to piss off customers and will in no way get buy-in from a skeptical public.
Far preferable would be some kind of automated demand response, completely controlled by the consumer, so far example as a homeowner I’d set my dishwasher at 8 PM to come on at 5c per kWh or 5 AM, whichever comes first. As long as the dishes are done by 7 AM, I’m happy. Similarly with other devices. Plenty of loads in the home are movable. You don’t care when your hot water is heated, as long as it is hot when you need it hot. A well lagged (insulated) boiler would mean you could heat it when electricity is cheap, and then use it whenever.
By the way, totally counter-intuitive but cheaper electricity has a higher renewable percentage so actively selecting for cheaper electricity means you are actively selecting for electricity with a higher percentage of renewables in the mix. How does this work?
Well, electricity prices on the wholesale market are very volatile. Consumers are protected from this but electricity prices can fluctuate by orders of magnitude within a 24-hour period. Price is set by good old supply and demand. Demand fluctuates according to day of week, time of day and by season. As the price drops on the wholesale market, it becomes less attractive for more expensive generators (the ones with start-up costs for their generation – the fossil fuel burners, for example) to stay selling in so they drop out. The renewables, on the other hand, are price takers. They don’t have significant start-up costs for generation so they stay in the market no matter what price they get. So, as the price drops, more and more fossil fuel generators drop out and the percentage of renewables in the mix increases!
TH: Other than this change in demand and timing, how will the smart grid help us incorporate renewables into the grid?
Utilities are used to dealing with a situation where their generation (gas coal, oil) is steady and predictable in its output and their customers’ demand is unsteady but generally predictable (demand tomorrow = demand this day last year +1-2%, say).
For various reasons utilities are having to move to a situation where they need to incorporate more renewables into their mix. Renewables generation is not steady and is only slightly predictable (via weather forecasts, for example). Because electricity has to be used as it is generated (can’t be stored, generally), the more unstable the generation, the more unstable the grid.
How can you fix this? Well, one way would be to align the demand with the supply.
We had a really solid briefing with Convergys today. The firm sells software and services to telcos and utilities for customer care and billing – it has 80k employees worldwide, 550+ clients, and $3bn in revenue.
According to Greenmonk research most utilities are failing to understand the the need to put the customer right at the center of their Smart Grid strategies. I pushed Kit Hagen, senior director of marketing, on the issue and he came back with a strong response.
“We often see utilities refer to IT as “the meter to cash process”- there is no customer in that. They’re calling the customer a meter.
Now you’re not going to just have disaggregated generation, but potentially a bunch of devices sitting behind the meter itself, and utilities should want to understand whats going on there. The world doesn’t end at the smart meter: think of kitchen appliances, for example.
This is an area the utilities need to start addressing. We can enable the technology, we can help the utilities…”
Electricity microgeneration, supported, for example, by feedin tariffs. How would a utility handle that from a billing perspective, send out two bills – one for consumption and one for production?
Kit’s colleague Mary Tillman, director of product marketing, offered up a near perfect analogy for the kinds of challenge we’ll need to fix – mobile phones and SIM cards.
“Think of roaming. We need the same model for electric vehicles. How is someone that travels from London to Edinburgh in their EV going to be billed for recharging?”
Great analogy Mary – and that’s just within the UK… what about Pan-European requirements? For context – in case you have missed it, it turns out that EVs are one of the promising distributed storage mechanisms- the car battery becomes part of a “virtual utility”, as per Better Place. We’re going to need the equivalent of GSM, and SIM card standards to support smart grid ecosystems of networked devices.
Not to put too fine a point on it – wireless communications companies are rather more used to this kind of model than traditional utilities, which could prove to be a competitive advantage. The role of the traditional utility billing engine fundamentally changes in smart grids – its definitely time to start refactoring these systems. T-Mobile is already driving a SIM to smart grid integration strategy.
Top down, customer takes what we give them just won’t work in smart grids. Roaming puts the customer first, and “number portability” will have to be part of the model. As we have been saying lately – smart grids and wireless networking are converging.
In the Smart Grid Heavy Hitters video interview series I have been publishing here on GreenMonk, one of the questions I ask all interviewees is, “What is a Smart Grid?” Almost all the interviewees talk about an infrastructure capable of full end-to-end, two-way communications. That is, communication from utilities down to the appliance level in-home, and from appliances back up to utilities.
Great. But what does this mean in practice and is this something utility companies have given enough thought to?
Utility companies currently typically take one meter reading per month. With the roll out of smart meters and smart grids that will change drastically. If a utility goes to 15 minute meter reads, we are talking about a shift from one meter read a month to around 2,880 meter reads a month (4 x 24 x 30 = 2,880).
This has huge implications for a utility company’s IT infrastructure. They will need to capture and store orders of magnitude more information than they have ever needed to previously.
On top of that, the information coming from smart meters is vastly more complex than the simple output of analog meters, as well. Particularly if the consumer is also a producer, selling energy back to the grid (via generation or from storage), getting rebates for lowering consumption in times of peak demand and/or getting roaming bills for charging up electric vehicles at public charging facilities, for example.
What will utility companies do with this new data?
Well, the primary use of this data will be for billing. Do utility companies have billing systems in place which are able to take in these vast quantities of data and output sensible bills?
Today’s bills are generated off that single monthly meter read, however bills generated from 2,880 meters reads a month (or even 720 – one meter read per hour) will be very different. They should be easy to understand, reflect the intelligence gained from the extra information and offer customers ways to reduce their next bill based on this.
Crucially too, utility companies will need to be pro-active in contacting people who go out of their normal pattern of usage/billing, otherwise we’ll see even more consumer backlash against smart grid roll-outs.
Obviously, transitioning away from paper bills to electronic ones will vastly enrich the possibilities utilities have with data presentation for customers as well as offering utilities ways to monetise their billing delivery (Google Adwords for bills anyone?).
On the consumer side, consumers will need to be able to see their energy consumption in real-time. Not only that, but to ensure that they act appropriately on the information, the user interface will be critical. A poor user experience will see a deluge of calls swamping customer care as people struggle to understand their consumption patterns. Or worse, mis-understand and send their bills soaring!
Consumers will need to be given ubiquitous, secure access to their energy consumption information. But more than that, consumers will also need to be given the tools to help them reduce their bills, without necessarily reducing their consumption (i.e. load shifting).
This will also necessitate a move to smart appliances by the consumer (appliances which can listen for price signals from the smart grid and modify behaviour according to a configurable set of rules). The Smart Appliances market is expected to reach $15bn by 2015 so the move to smart appliances can represent a new revenue stream for utility companies. Especially if they, with consumers consent, utilise energy-profile information from consumers smart meters to make more appropriate energy saving suggestions.
All of these changes require seismic shifts by utility companies both in terms of IT investments, but also in terms of their approach to customer care and communications.
Are they up for the challenges ahead? With the increasing liberalisation of energy markets and growth in consumer choices, they better be!
It was a great conference, I met a ton of interesting people and had some fascinating conversations.
I can’t help feeling a little deflated though.
I’m a huge advocate of Smart Grids. I gave my first international talk about Smart Grids and demand side management (Demand Response) at the Reboot conference in Copenhagen back in early 2007. We are now a full three years later and many utility companies have yet to roll out smart meter pilot programs.
Others are rolling out smart meters more because of pending of legislative requirements than because of any desire help reduce people’s energy footprints.
In fact, after talking to more utility companies, I suspect that smart grids may not proceed beyond smart meter deployments in some regions. The recent Oracle survey of Utility CxO’s confirms this view
utilities executives put improving service reliability (45 percent) and implementing smart metering (41 percent) at the top of the list [of Smart Grid priorities]
So why the apparent passive aggressive response from the utility companies?
Well, they have to keep the lights on. To paraphrase the old saw, they do not want to ‘fix’ their grid, if it ain’t broke! And, let’s be fair, the idea of investing large sums of money to help their customers use less of their product isn’t one which sits comfortably with them. That’s understandable.
But there is a huge global imperative for Smart Grids – the Smart 2020 report said:
Smart grid technologies were the largest opportunity found in the study and could globally reduce 2.03 GtCO2e , worth €79 billion ($124.6 billion).
How then do we square that circle?
We could legislate for them but a better approach would be to change the landscape in which the utility companies operate such that there is a business case for full smart grid deployments.
I suspect the best approach would be the introduction of a carbon tax. This is something we need to do anyway (and the mechanisms for doing so are a topic for a separate post) but if there were a tax on CO2 production, it would be in utility companies (and their customers) interests to cut back on energy consumption.
Even if there were a strong business case for smart grids, given the glacial speeds at which utility companies move, I suspect it is going to be many years before we see full smart grid implementations.
The electricity grid may not need “baseload” generation sources like coal and nuclear to backup the variability of supply from renewables.
Jon Wellinghof is the Chairman of the US Federal Energy Regulatory Commission (FERC). FERC is an independent agency that amongst other things, regulates the interstate transmission of electricity, natural gas, and oil – for more on FERC’s responsibilities see their About page. Chairman Wellinghoff has been involved in the energy industry for 30 years and appointed to the FERC as a commissioner by then president Bush in 2006.
Last year, shortly after being appointed as Chairman of the FERC, Mr Wellinghoff announced that:
No new nuclear or coal plants may ever be needed in the United States….
Wellinghoff said renewables like wind, solar and biomass will provide enough energy to meet baseload capacity and future energy demands. Nuclear and coal plants are too expensive, he added.
“I think baseload capacity is going to become an anachronism,” he said. “Baseload capacity really used to only mean in an economic dispatch, which you dispatch first, what would be the cheapest thing to do. Well, ultimately wind’s going to be the cheapest thing to do, so you’ll dispatch that first.”…
“What you have to do, is you have to be able to shape it,” he added. “And if you can shape wind and you can effectively get capacity available for you for all your loads.
“So if you can shape your renewables, you don’t need fossil fuel or nuclear plants to run all the time. And, in fact, most plants running all the time in your system are an impediment because they’re very inflexible. You can’t ramp up and ramp down a nuclear plant. And if you have instead the ability to ramp up and ramp down loads in ways that can shape the entire system, then the old concept of baseload becomes an anachronism.”
This was quite an unusual contention at the time (and still is) and despite the Chairman’s many years working in the sector it was, by and large, ignored – even by the administration who had appointed him to the Chairmanship. In fact, the Obama administration has since announced financial backing for new nuclear power plants.
However, a study published last week by the Maryland-based Institute for Energy and Environmental Research backs Chairman Wellinghoff’s assertion. In a study of North Carolina’s electricity needs it concluded backup generation requirements would be modest for a system based largely on solar and wind power, combined with efficiency, hydroelectric power, and other renewable sources like landfill gas:
“Even though the wind does not blow nor the sun shine all the time, careful management, readily available storage and other renewable sources, can produce nearly all the electricity North Carolinians consume,” explained Dr. John Blackburn, the study’s author. Dr. Blackburn is Professor Emeritus of Economics and former Chancellor at Duke University.
“Critics of renewable power point out that solar and wind sources are intermittent,” Dr. Blackburn continued. “The truth is that solar and wind are complementary in North Carolina. Wind speeds are usually higher at night than in the daytime. They also blow faster in winter than summer. Solar generation, on the other hand, takes place in the daytime. Sunlight is only half as strong in winter as in summertime. Drawing wind power from different areas — the coast, mountains, the sounds or the ocean — reduces variations in generation. Using wind and solar in tandem is even more reliable. Together, they can generate three-fourths of the state’s electricity. When hydroelectric and other renewable sources are added, the gap to be filled is surprisingly small. Only six percent of North Carolina’s electricity would have to come from conventional power plants or from other systems.”
With larger and more inter-connected electricity grids, the requirement for baseload falls even further because the greater the geographical spread of your grid, the greater the chances that the wind will be blowing or the sun shining in some parts of it.
So, is there really any need for baseload power any more, or is this now just a myth perpetuated by those with vested interests?
Having put the question out there, I’m now going to discuss some of the factors which will influence the answer!
The first thing to realise from the Oracle data is that 76% of homeowners in the US are concerned with the need to conserve water in their community and 71% believe that having access to detailed consumption data would encourage them to take steps to lower their water use. So barring and big PR disasters like the PG&E Smart electricity Meter fiasco in Bakersfield, it would seem that the vast majority of consumers are bought into the idea of having smart meters to help lower water consumption.
How about the utilities? It looks like if they do decide to rollout smart water meters, they’ll very much be pushing an open door.
Funnily enough this is where it starts to get a bit nuanced!
First off, 83% of utilities who have conducted a cost-benefit analysis (n=86) support the adoption of smart meter technology, so that’s a good start, right?
Well, yes, but what are the motivations of the utilities?
It turns out that they are far more interested in using smart meters to enable early leak detection than in supplying customers with tools to monitor/reduce their consumption!
Right away this is problematic, if the aims of the utilities and their customers are not aligned, then this will greatly complicate any rollouts. Also, if the utilities are not strongly focussed on providing consumers with tools to reduce their consumption, any such tools which are provided to homeowners would most likely be sub-optimal (an after-thought).
Then, when asked what they perceived as roadblocks, the water utilities cited the lack of cost recovery or measurable ROI as well as the up-front utility expenses required – in fact, 64% of utilities are not even currently considering a smart meter program!
So, until the water utilities are as enthusiastic to roll out smart meters as their counterparts in the electrical utilities are, then the day that we see all devices which consume water having networked flow meters is still a ways off.
Of course, in the case of the electric utilities, their enthusiasm is certainly not hurt by the amount of recovery act monies being pored into smart grids!
There is no doubt about it but Google is a disruptive company.
First Google disrupted search, then advertising, then video (with their acquisition of YouTube), and then Office applications with the launch and continued development of Google Apps for Domains. Most recently Google has disrupted the mobile phone industry, first with the launch of their Android operating system and just a couple of days ago with the launch of their Nexus One mobile phone.
Curious about what all this meant I contacted Google spokesperson Niki Fenwick to try to get some answers – see my questions and her responses below:
TR: What was the thinking behind Google’s setting up Google Energy? Why is Google applying to the FERC for permission to trade in electricity?
NF: Google is interested in procuring more renewable energy as part of our carbon neutrality commitment, and the ability to buy and sell energy on the wholesale market could give us more flexibility in doing so. We made this filing so we can have more flexibility in procuring power for Google’s own operations, including our data centers.
TR: Google has made some investments in renewable generation (solar, geothermal and wind), does Google hope to take on the utilities by selling electricity? How does this tie into Google’s PowerMeter project?
NF: This move does not signal our intent to operate as a retail provider and is not related to our free Google PowerMeter home energy monitoring software. We simply want to have the flexibility to explore various renewable energy purchase and sale agreements (that means we can buy electricity wholesale, rather than through a utility).
TR: Will Google Energy be used to develop more Smart Grid products?
NF: We don’t have any plans to announce at this time.
TR: How does this tie into Google’s partnership with GE?
NF: This move isn’t related to our partnership with GE.
So there you have it, according to Google this application to trade in electricity on the wholesale market is simply to gain more flexibility in procuring power for Google’s own operations, as part of Google’s carbon neutrality commitment.
Google have no plans to become a retail electricity provider.
a class-action lawsuit has been filed representing thousands that will demand damages from the utility and third-parties also involved in the $2.2 billion project.
Bakersfield residents believe their new smart meters are malfunctioning because their bills are much higher than before. PG&E claims higher bills are due to rate hikes, an unusually warm summer, and customers not shifting demand to off-peak times when rates are lower.
This has to be a huge embarrassment for PG&E and their partners who are spending $2.2 billion on this project.
Elizabeth Keogh, a retired social worker in Bakersfield, Calif., who describes herself as “a bit chintzy,” has created a spreadsheet with 26 years of electric bills for her modest house. She decided that her new meter was running too fast.
Ms. Keogh reported to the utility that the meter recorded 646 kilowatt-hours in July, for which she paid $66.50; last year it was 474 kilowatt-hours, or $43.37.
At a hearing in October organized by her state senator, Ms. Keogh took out two rolls of toilet paper — one new, one half used up — and rolled them down the aisle, showing how one turned faster than the other. “Something is wrong here,” she said.
Scores of electric customers with similar complaints have turned out at similar hearings. At one in Fresno, Calif., Leo Margosian, a retired investigator, testified that the new meter logged the consumption of his two-bedroom townhouse at 791 kilowatt-hours in July, up from 236 a year earlier. And he had recently insulated his attic and installed new windows, Mr. Margosian said.
I spoke to good friend and fellow Enterprise Irregular Jeff Nolan earlier today after I saw him Tweet:
yeah I’m actually pretty pissed, PG&E installed a so called “smart meter” and my utility bill increased $300.
It seems Jeff was having the same problem and his bill was also up significantly over the same month last year.
There are a number of problems here – all to do with transparency and communication.
If, as PG&E say, this is because of “customers not shifting demand to off-peak times when rates are lower”, then it follows that PG&E have either failed to communicate the value of shifting demand or the time when rates are lower.
One of the advantages of a smart grid is that the two way flow of information will allow utilities to alert customers to real-time electricity pricing via an in-home display. PG&E have not rolled out in-home displays with their smart meters, presumably for cost reasons. If they lose the class-action law suit, that may turn out to have been an unwise decision.
I’m waited for PG&E to put up the daily usage numbers, I won’t get those until next month for some unexplained reason
This defies belief, frankly.
It seems that PG&E’s smart grid rollout is woefully under-resourced at the back-end. What PG&E should have is a system where customers can see their electrical consumption in real-time (on their phone, on their computer, on their in-home display, etc.) but also, in the same way that credit card companies contact me if purchasing goes out of my normal pattern, PG&E should have a system in place to contact customers whose bills are going seriously out of kilter. Preferably a system which alerts people in realtime if they are consuming too much electricity when the price is high, through their in-home display, via sms,Twitter DM, whatever.
Jeff himself likened this situation to the e-voting debacle where the lack of transparency around the e-voting machines meant the whole process collapsed. In the same way, a lack of open standards around smart meters means we can only trust the smart meter manufacturers and utilities when they tell us that they are operating honestly. That is unlikely to fly.
This debacle has massive implications, not just for PG&E’s $2.2 billion smart meter rollout, but for smart meter projects the world over.
Transparency and communications failures can lead to utilities being sued by their customers, as we have seen with the PG&E example. Not a desirable situation for any company. The PR fallout from the Bakersfield rollout means PG&E will have a much harder time convincing other customers to sign up for smart meters and may potentially set back smart grid projects in California for years.
