Climbing Out of the Smart Grid Trough of Disillusionment

Gartner Hype Cycle

We are entering what Gartner would call the trough of disillusionment for smart grid.  It is the stage of the Gartner hype cycle when the initial lust for the potential and benefits of smart grid technology gives way to the morning after realization that getting to those smart grid promises is going to take longer and cost more—a lot more.

The recently released Oracle survey of utility executives is the clearest signpost to date of our progress along this hype cycle.  The wait and see attitude of the utility executives in that Oracle survey suggest that it is too soon to give up on smart grid with best opportunities both to realize its promise and reap the rewards for patience and perseverance are ahead of us.

Why is this important?

The first reaction to the Oracle survey results might be to write off smart grid as a fad and go back to ‘business as usual’ which is what the utility executives surveyed really want to do. Why, because it is comfortable and, some believe, safe.  But the lessons of technology change are clear.  While not every company is suited to be an early adopter of new technology, doing nothing can often be the most risky of all the strategy options because it leaves the company unprepared for the changes taking place around them.  Doing nothing wastes the precious lead time that companies need to educate themselves and their customers about the changes ahead, their costs and yes—the rewards change brings.

What rewards you say?

That is the question customers have been asking since their utility and its regulators first told us that the power grid was outdated, that it needed to get with the digital program and use technology to be more efficient, more flexible, more secure.  As customers we heard that message and grabbed our wallets—-how much is this going to cost me?

Regulators are good at piling on new requirements and they are often swayed by political correctness mostly because they are spending OUR money to support their cause célèbre du jour.  Utilities are captive because they depend upon regulators to approve their rates and are subject to regulatory purgatory if they don’t follow direction.  States are also subject to both seduction and regulation by the Federal Government.  In the case of smart grid, the seduction took the form of stimulus grants to advance smart meter deployment sometimes faster than either utilities or regulators were ready to do so.

That is why EPRI, the Electric Power Research Institute, revised upward its estimate of the build out cost of smart grid to about $476 billion up 4X from its original 2002 estimate.  What changed?  Well, the smart grid is about more than smart meters and the real benefits of all that smart grid investment will likely come more from the improvements in technology, grid performance, flexibility, efficiency and security behind the scenes that customers never see.

It’s a little like taking your Dad’s 1957 Chevy and rebuilding it a part at a time.  Your spouse might notice the new paint job or that satellite radio slipped into the dash but never looks under the hood.  Yes, at the end of this process you will have spent probably more than 4X what that 1957 Chevy cost new—if you are lucky, but it will be worth it!  That is essentially the message we hear from regulators, smart grid vendors and utility executives. Clark Gellings, now an EPRI Fellow put it this way:

“We need to tell power customers there is going to be an improved power system that will result in reduced costs even if they do not see an immediate reduction in their bill.”

The odds of persuading utility customers that this statement is good news are about as good as persuading your spouse that all those parts piled around that rusty old 1957 Chevy in your garage will one day turn into something you will show off in the 4th of July parade as she waves to the crowd from the seat next to you.

Clark Gellings answer reveals the biggest hurdle utilities face with smart grid today.  The hurdle is not understanding the changes in information technology and operations technology smart grid will bring. It is not getting regulators to approve the investment in these new technologies.  The biggest hurdle is adapting the utility culture and business model to be more customer facing and then changing the way the utility communicates with, educates, engages and involves customers in this great science experiment we call smart grid.

Why change?

Because unless customers have a stake in this evolution toward smart grid and see the potential it offers the hassles of getting there are just not going to be worth it.  The Bakersfield Effect is a now classic example of how NOT to deploy smart meters even though PG&E is deservedly one of the most forward thinking utilities in the business today.  It’s pace of change is so fast that its traditional utility culture, customer engagement practices and communications have not yet caught up with the need to bring customers along for the vision of the smart grid celebration embodied in that ride in a 1957 Chevy pimped into a modern day muscle car with a PHEV engine and virtually no emissions that we dream of.

Customers need to be part of the 4th of July parade celebration for smart grid and utilities must enable that and more if they want to realize the full promise of smart grid for themselves and retain the role as gateway to customers in our smart grid-enabled future.  Utility business as usual in this smart grid evolution puts the utility future at risk far more certainly than the changes required to bring customers along for the ride.

The lesson from the Gartner-style technology learn curve analysis is that after the trough of disillusionment comes the slope of enlightenment and then the plateau of productivity.  I know these geeky phrases suggest this “what have I done” feeling in the trough of disillusionment will get better but utility executives surveyed by Oracle don’t seem convinced this is going to produce the rewards they seek. Don’t give up too soon and work to ‘infect your customers with the vision’ of the smart grid rewards of new technology ahead so they can help you climb out of the trough faster.  Utilities need for their customers to lust after the promises of smart grid just like you lust after that 1957 Chevy turned PHEV.

There is a surprising lesson in some of the pilot programs going on in dynamic pricing and other changes smart grid enables.  Customers can actually save money—not much, but enough when combined with the good feeling of being in control of their energy bill to produce satisfied customers.  Other changes experimented with in Europe and elsewhere are showing promise like “prepay” where instead of getting one big utility bill customers make smaller, bite sized purchases on energy online or with a swipe card reader.  Expanding energy audit services to help customers really diagnose the root causes of their energy use and the cost effective options for self-help have also proven winners.  But to date only a small percentage of typical utility customers participate in these programs when available and the Oracle survey suggests utility executives do not expect improved participation in the future.  Utilities must change that through better communications and marketing to improve customer involvement and satisfaction.

Utility ‘Business as Usual’ Must Change

The corollary to the learning curve lesson is also clear—the big payoff from smart grid is going to require big changes in utility ‘business as usual’ habits.   It means:

  • Leveraging the smart grid data and insight it produces to enable the power grid to be both scalably bigger and securely modular at the same time—and turning that data into customer-friendly products and services.
  •  Refining Interoperable Smart Grid best practices for grid design and construction, distribution automation, integration of renewable and distributed energy resources, microgrids and the modular supply and demand options that will likely characterize the utility of the future.
  • Transforming the grid structure from three huge interconnects that divide North America into regional transmission organization where investment and control over system improvements is fragmented across 50 state regulators. Scaling the size of the smart grid is the surest way to bring competition to bear to drive the marginal cost of new energy resources to grid parity prices. Scale is the condition precedent to attracting and retaining the investment and interest of the global giants in technology needed to support smart grid’s future.
  • Securing Strategic Energy Reliability by giving FERC and its Canadian Energy Board counterpart authority to integrate this fragmented, modular system into one North American mosaic that unleashes the power of big data and big technological change to produce big results in performance improvements, security and, yes—-benefits for customers in the form of new products and services that will someday, as Clark Gellings tells it, reduce costs.
  • Every Utility Operations Benefit must also have a Customer Benefit Corollary.   Gaining customer involvement in the process of change requires a multi-channel communications strategy that explains the customer benefits that accrue from improved utility operation, reduced cost of service, and expanding service options.  Instead of allowing the focus to stay in the trough of disillusionment, the utility communications program must help customers see the promise of smart grid at the plateau of productivity level (to use Gartner-speak) . That is when smart grid is truly mainstream paint a realistic picture of customer options and benefits that are worth it–we’ll get it!

The unstated fear in Clark Gellings quotation above—change is always risky business, must be named out loud because the more we expose our fear of change to sunlight and discuss the opportunities change creates the less threatening it is.  That is what we need utilities to do NOW to help customers climb out of the trough of disillusionment with you

But utilities need help with customer communications.  Talking to customers is not second-nature to most of them.  The Oracle survey reveals one way communication safely at arms length is the preferred method of communication still today—and they know that is not going to work well for them.

Utilities need help to from vendors to educate customers about smart grid benefits.  Having credible third party vendors of new technology talk passionately and clearly about how customers can benefit from their products and services in a smart grid future can help open the dialog between utility and customers.  Customers want their utility to give them useful information and help them make choices among vendors for new services.  The utility still can control the gateway to customers for the future but not unless they invest in the communications channels and trusted advisor relationships that will be essential for the plateau of productivity ahead.

Utilities need help with big data and the insight potential it creates.  Let’s face it, even the largest investor owned utility is no match for the computing power of IBM, GE, ABB, Siemens and other giants lining up to take market share in the smart grid future.  The traditional go-it-alone approach to private networks, enterprise systems and custom modifications is going to produce a data nightmare for utilities as they begin disgorging customer use information for use by third part vendors in offers products and services to customers.  Big data requires big, high performance computing prowess few utilities will be able to supply on their own.

The trough of disillusionment is a miserable place to be in the technology learning curve but that is where we are with smart grid.  Success is not assured and there remains a 50/50 probability of failure.  If utilities do fail in smart grid deployment it will not be because of smart meter deployment.  It will be because they failed to turn that smart meter data into useful products and services that not only reduces the cost of utility operations but also expands customer options for energy efficiency, demand response, grid security and access to renewable and distributed energy resources in ways that give customers more control and offer benefits of convenience, security, bundles service choices, and options for lower costs that reinforce their lifestyle choices not try to change them.

Business as usual is the surest path to smart grid failure.