More Smart Grid Insight

Michael Giberson

According to Accenture, 46 percent of consumers surveyed said they didn’t want smart grid-based energy management systems if it leads to higher electricity bills.  My guess is that the other 54 percent of consumers didn’t understand the question.  The summary distributed by Accenture contains several other bits of should-be-obvious information – consumers are concerned about data privacy, consumers want to be compensated if utilities can remotely turn off appliances, consumers want to be able to locally reverse remote utility cut-off instructions – but even as many of the results seem obvious, it still adds up to some more-than-obvious insight into what consumers want. The FT Energy Source blog also comments on the report.

At the Searching for Insight blog, Gary Hunt offers a consumer’s perspective on smart grid developments informed by years working in energy and information technology businesses.  See his:

9 thoughts on “More Smart Grid Insight

  1. Hello Mr. Giberson,

    In response to Mr. Hunt’s article “Threats to the Utility Business Model Future,” I posted an additional smart grid insight:

    Mr. Hunt has shown very important facts on the obsolescence of the utility business model, which I understand can be complemented to favor government restructuring in the power industry as soon as possible. Giving the benefit of the doubt to that business model, he writes that “[t]he traditional central station power generation utility business model is under assault on many fronts. It has endured for 100 years because of its reliability and low average costs.”

    However, that apparently enduring front has also been already lost. I do not remember where I learn that the utility business model is nothing more than winning rate cases to the regulator. The main problem is that state regulators instructions need to change to enable business model innovations. The value destruction associated with extending business as usual regulations is not longer advisable for all stakeholders.

    As Mr. Hunt will see in the post “The ‘Genius’ of the Macrogrid ‘And’ Truly Fair Microgrids ( ),” it is not longer true that the business model can endure “because of its reliability and low average costs.” He will also see that microgrids are here to stay.

    The conclusion of that post reiterates that: “[s]tate Legislatures need to give a new mandate to state regulators to enable truly politically correct (or better yet truly fair) microgrids. By trying to go the easy way out, microgrid proponents’ ongoing strategy won’t work; it will reveal state governments’ lack of vision that sets the poor to bid against the microgrids.”

  2. Smart grid technology in this study is bumping into the paradox that will afflict most market-based approaches. Market based thinking works really well when you are dealing with companies that can cost-justify analysts that can read through piles of data and choose the best energy usage plan for their organization.

    When we get home from a 10 hour workday and need to get food on the table we aren’t particularly interested in wondering what effect this will have on our utility bills due to energy usage during peak hours. We also don’t want to spend what’s left of our evening reviewing energy usage statistics when we need to be helping our son with his homework, volunteering for community organizations and spending time on exercise, yard work or any of the hundreds of other things we are expected to do with our lives.

    All these market-based means for reducing costs tend to assume that I have an infinite supply of time to review the data and that even if I have, that there is something that I can do with the information when I have it. I just want to pay a fair price for services rendered. I don’t want to be washing my clothes at Midnight because the meter says it will be cheaper then.

  3. I am of the opinion that we will see a thriving business in microgrids and that they will become a key strategy of both C&I and residential energy consumers. Back when I was running Austin Energy in the mid-1980’s we developed the concept of the Conservation Power Plant combining many demand side management programs into one strategy designed to produce enough energy efficiency to offset the need to built the next 200MW power plant. It proved a very useful and popular marketing strategy for our DSM programs. Today that same concept is being re-introduced as a “virtual power plant” by new entrants like EnerNOC, COMverge, CPower and others for use initially with commercial and industrial customers. Eventually I believe we will also see it used to aggregate residential customers.

  4. Blooming Engineer raises a relevant point. Typically new technology rolls out to the geeks and gadget-lovers who are just the sort of people that would devote some time and energy to reducing costs, and enjoy doing it. Smart meters are being rolled out to consumers whether or not they choose to be early adopters, and whether or not they want to plow through data and make sense of it all.

    Eventually, many of the cost reduction strategies will become more or less automated and built into appliances or home energy management systems. I think one key to getting what works for the consumer sooner, rather than later, out of the smart grid is direct consumer access to meter output (instead of requiring consumers to get access to data collected, filtered, organized and re-reported by the distribution utility). (I stole this insight from the Toby Considine article I cited yesterday.)

  5. The Blooming Engineer and Mr. Giberson are suggesting to avoid the homogeneous smart grid and to enable customer choice. That is where Mr. Hunt and I defend the idea of the microgrids as a key element of a heterogeneous smart grid.

    In that light, please consider the following which is taken (a bit out of context) from the article “Super Grid: the Smart Grid that is Being Pushed”

    However, one very dangerous element that is not recognized is the non-trivial aspects of high-tech marketing. As shown by Geoffrey A. Moore, in his book “Crossing the Chasm,” a BusinessWeek Bestseller, “The real news, however, is not the two cracks in the bell curve, the one between the innovators and the early adopters, the other between early and late majority. No, the real news is the deep and dividing chasm that separates the early adopters from the early majority. This is by far the most formidable and unforgiving transition in the Technology Adoption Life Cycle, and it is the more dangerous because it typically goes unrecognized.”

  6. I totally agree with Barbara’s comment. Many thanks for discussing such an topical article with all of us. I’ve bookmarked your blog will come back for a re-read again. Keep up the very good work.

  7. Blooming Engineer (Is that Barbara?) wrote that “Smart grid technology in this study is bumping into the paradox that will afflict most market-based approaches.” I claim that it will also afflict most regulatory approaches.

    To support that claim, in addition to my above comments, I like suggest reading the whole discussion under the commentary “The ‘Next Big Thing’,” by Phil Carson, the editor of Intelligent Utility Insights at the Internet address

    Part of the supporting detail can be found in the post under that article, where I questioned: Isn’t the Next Big Thing About Business Model Innovations? Mr. Carson agreed.

    My emerging summary of the discussion, clearly out of context, is in the post “(Incremental) Efficiency Versus (Breakthrough) Innovation,” where I said:

    Mr. Carson,

    As you clearly write, the utility manager is trying to increase efficiency (incrementally). However, she is trying under an obsolete business model. That is exactly the problem that state legislators need to address, as soon as possible, to break open the barrier to (The Next Big Thing) business model innovations (breakthroughs) in the power industry to reap “the perfect opportunities.”

  8. As a follow up to his article “Threats to the Utility Business Model Future,” Mr. Hunt wrote the article “POWER PLAYS: How the Utility Empire can Strike Back!,” which can be seen at the link

    In response, last night I wrote a comment, which he responded today, and also expanded it last night into the EWPC post “Will Utilities develop the Next Big Thing?,” available at , which he has not responded yet.

    His argument against my first comment was: “Jose … Thank you for your thoughtful comments. I do not disagree that the States should bear some responsibility for the outcomes of their ratemaking and legislative decisions, but alas, those consequences are, in fact, more often born by the public as taxpayers or the public as ratepayers. In the case of smart grid and other regulatory decisions the burden will fall on the utility to remedy any problems, pay the cost of that remedy and plead with the regulators to recover the costs in rates.”

    While expecting his reaction to the whole EWPC post, my response initial response is:

    In the meantime, making a parallel of utilities and railroads, for the benefit of state governments, customers and taxpayers, I will respond Mr. Hunt with a quote from Megatrends on the “Law of the Situation: the railroads did not understand.”

    Suppose that somewhere along the way a railroad company, sensing the changes in its business environment, had engaged in the process of reconceptualing what business it was in. Suppose they had said, “Let´s get out of the railroad business and into the transportation business.” They could have created systems that moved goods by rail, truck, airplane, or in combination, as appopriate. “Moves goods” is the customer-oriented point. Instead, they continued transfixed by the lore of railroading that have served the country so well – until the world change.

    Of this phenomenon Walter B. Wriston, chairman of Citycorp, in 1981 said: “The philosophy of the divine right of kings died hundreds of years ago, but not, it seems, the divine right of inherited markets. Some people still believe there´s a divine dispensation that their markets are theirs – and no one else´s – now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else. All the king´s horses and all the king´s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard.”

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