Getting to the Promise of Smart Grid

For more than 100 years customers have been conditioned to be passive consumers of electricity.  We flipped the switch and the lights came on.  At the end of the month we got a bill based upon the average cost to serve all customers in our class.  We could not shop for power but state utility regulators looked out for us and kept utility rates and service reliability in check.

The promise of Smart Grid is that it will revolutionize the way electricity is produced, delivered, and used. But to realize that Smart Grid promise we must give up our passive ways and actively participate in managing our energy use.  Oh, and one more thing on the horizon—we must give up average cost pricing and subject ourselves to ‘dynamic prices’ that go up and down depending upon demand.

For many customers this promise of smart grid is more like heartburn. So far Smart Grid has been all about Smart Meters and customer experience to date has been either no big deal or—‘Hey! What’s the big deal jacking up my bill?’ But most of the promise for customers is ‘in the future’ and requires new products and services to make sense of all that smart meter data, installation of sensors, gadgets, dashboard and other things we never realized we needed to actively manage our energy use.  Our utility promises to send us email or Tweets to alert us when we are using energy unwisely or moving to a higher rate tier—oh, oh, that just sounds like trouble to us.

For utilities the promise of smart grid is also a mixed blessing.

As Federal stimulus money and pressure from state utility regulators pushed utilities to spend big money to install smart meters in order to realize their share of the promise.  There are still daunting challenges to realize that promise from meter data management, distribution and grid automation, and the triple threats of distributed energy resource integration, demand response, and home area networks.

The leading utilities have pioneered and caught a few smart grid arrows in the chest as they faced unintended consequences of its rollout.  Oncor took heat from customers in Texas as bills went up and smart meters were blamed.  PG&E had a ‘Bakersfield moment’ when angry customers showed up at a public meeting waving their utility bills.  Both companies are engaged in a methodical process of explaining why utility bill went up and also trying to repair the damage to customer confidence.

But the biggest problem facing utilities is the same one facing customers—culture and tradition.  Just as customers were conditioned over 100 years to be passive about energy use, utilities are accustomed to being in control of the system with central station generation, bulk transmission and discrete local distribution systems.  Yes rates were regulated but utility regulators wanted reliability and few customer complaints.  So the core competency of every regulated utility became regulatory affairs and reliability.

Competitive wholesale power generation, energy efficiency and demand management programs and then renewable energy ate into that utility control, but Smart Grid promises to allow all these separate threats to the utility business model and more combine and scale into the’ mother of all challenges’ in integrated distributed energy resources that not only enable each customer to be self sufficient but worse, enable that utility meter to spin backwards forcing the utility to buy excess home generated power back to the utility using net metering.

This is the equivalent of the old joke about the chicken and the pig and breakfast.  You know the one I mean—the chicken is involved but the pig is committed.  Living into the Smart Grid promise the customer is involved but the utility is committed. And the changes Smart Grid imposes on utilities fly in the face of 100 years of utility culture.  That heartburn for utilities is that the promise of Smart Grid promises to give customers control over their energy destiny—eeeGads!

Left to their own devices, customers and utilities would likely find common ground –or utility regulators will split the baby and impose discipline on both sides as they have for 100 years.  But wait!  Smart Grid has many interveners in the process each wanting a piece of the action from private equity investors, start-ups producing tools or products of every type seeking the gold at the end of the Smart Grid rainbow, software and IT services companies integrating the moving parts, and energy management companies assisting customers assemble the smart grid parts to meet their own needs.  All of these interveners need the utility to cooperate with them, enable them, assist them realize the promise but doing so is complicated in the absence of interoperability standards, consistent rules and uncertainty.

So how will we get to the promise of Smart Grid?

By creating a genuine marketplace for Smart Grid ideas, technology and services using open standards the convergence of IT and Operations Technology (OT) is speeding the integration of Smart Grid capabilities by bridging the gaps between utilities and customers enabling each segment of the energy value chain to pursue their own strategic interests.

But smart grid is about more than smart meters.  It is the more than sum of the parts, but we have not yet figured out how to realize the promise without leaving behind the policies and customers that have served us well for 100 years. New entrants from Silicon Valley and IT are offering new ways to see the opportunities but that cuts both ways. Both utilities and customers are on a journey to the smart grid future and no one knows the outcome but everyone sees the promise.