Are consumers ready for the smart grid? Are electricity suppliers ready?

DEFG’s strategic marketing agency, EcoAlign, released its eighth EcoPinion consumer survey report titled, “Separating Smart Grid from Smart Meters.” The announcement by CEO Jamie Wimberly occurred at ConnectivityWeek 2010 in Santa Clara, California. Wimberly stated:

Consumers conceptually like the idea of smart grid, but the report highlights three critical challenges: (1) meeting consumer expectations of smart grid to lower costs or cut energy consumption; (2) moving beyond the commodity (smart meters) to a much fuller value proposition (smart grid); and (3) aligning the smart grid with smart communications and marketing that recognizes personal preferences and needs.

The EcoAlign press release discusses the report findings in greater detail. The full report can be downloaded free of charge from DEFG’s Web site. CEO Anto Budiardjo of Clasma Events, co-sponsor of the report, stated:

The industry has made a compelling business case for smart grid on the utility side of the meter, but we are in a period of discovery in regards to the consumer benefits of smart grid. The report points to the need for a more refined communications strategy as a bridge to the introduction of new products and services.

A compelling case can be made for the advancements which will occur in this decade as retail electricity providers and others apply new technologies to old electric industry needs: end-use energy efficiency; load management to clip peak and manage loads; management of distributed generating units; management of energy storage devices; etc. The electric utility grid is highly complex and is balanced and controled moment-by-moment. For the past century, much of that control has been exercised exclusively on the “supply-side” of the meter; that is, through the control of the elements of grid (transmission, distribution, generating units) to exactly match the aggregated customer load. Now there is an opportunity for the control to extend to the consumer side of the meter in two ways: traditional central control and automatic consumer response. Pricing signals and associated services will allow automated devices (under consumer management) to respond.

Are consumers ready for the smart grid?

But what do consumers understand about all of these smart grid changes? Extremely little. What do they need to understand? Extremeny little (today). They need to understand that utilities are upgrading the old grid — bringing it into the 21st century! Many of the changes behind the scenes will not seem remarkable to consumers. (You mean you couldn’t do that before?”) And the myriad changes that may occur in the future on the consumer side — changes that affect consumer behavior — are not yet available. In fact, most of them are “not yet knownable” or even “not yet conceived of.” Many interesting technologies exist, but no one knows for sure what technologies will result in products and services that consumer prefer and will accept. The new services must be economical for consumers, service providers and utilites. The future is wide open and uncertain, but in a good way.

Are electricity suppliers ready? (the “period of discovery”)

Electricity suppliers need to develop the appropriate mix of new technologies, new price offerings, and new services that will succeed in the marketplace. A few are ready today, and others are years away. Many will come to market in the near term; however, most of these will fail. The understanding of consumer motivations and behavior is uncertain. Think of it this way: typical residential consumers have had flat-rate pricing for the electric commodity for so long that they do not understand how to apporahc the problem creatively . They do not understand that each major appliance in their home could operate more efficiently with a different level of reliability, a different pricing scheme, and a different level of control. Consumers are so accustomed to “flip-the-switch” reliable service (a premium product sold as basic electricity) they they are not ready for the alternatives. This will change, but most consumers are not yet ready.

Consumers are not to blame. The new products and services are not ready, but numerous companies are beginning to make themselves heard. 

A new regime will emerge. A revolution will occur over the next decade as consumer preconceptions are dashed and as new service providers enter the market with a new vision of customer service combined with new technologies, products and services.

What does this mean for the grid operator?

The utilities that operate the grid must be cautious in communicating with consumers. They must not over-promise cost savings or new services. They ought to focus on the piece of the puzzle which is under their control including utility-side-of-the-meter improvements in outage detection, reliability improvements, etc. The customer-side-of-the-meter issues are best left to the competitive market suppliers; that is, to the vendors and service providers who are going to make commitments to serve consumers. Each of them will have a plan to reach out to consumers with product and services which are supported by a business plan and approach which can succeed.

Will the day arrive in the not-to-distant future when the utility tariff to sell the electric commodity is as quaint as the horse and buggy? (Or the electric vehicle is so well integrated into the smart grid as to turn gasoline cars into buggies!) Stay tuned.

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