Is 'saving money' the right smart grid pitch?

Or will low cost, long timeframe make message moot?

Phil Carson | May 07, 2012

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I find it instructive to see how smart grid plays out in the news because your customers consciously or otherwise pick up key messages this way. 

To wit: Commonwealth Edison just began work on the grid modernization package approved by the Illinois legislature last fall and covered in our "ComEd Stands by Grid Legislation" and "ComEd Wins Smart Grid  Okay." The Joliet Herald-News provided a bit of coverage on Saturday.  

"If all goes as planned," the writer qualified her lead, "ComEd customers should see their bills shrinking and their lights staying on more often over the next decade." 

Grid modernization "will significantly reduce outages, help customers manage their power use and save them money," the article continued. "The modern grid could report problems itself, alert customers' cell phones when power is restored and `heal itself' when there is a problem on the line." 

ComEd customers will pay an average of $3 per month and see digital meters and other technologies including distribution automation rolled out over a decade. The latter work aims to isolate faults and reroute power around an outage, limiting its impact. 

Although some customers have lobbied to retain their old analog meters, "the Illinois Infrastructure Modernization Act states the new meter will be provided to all customers, and the value hinges on having everyone participate, officials said." 

About a month ago, The Chicago Tribune did a piece—"ComEd to Create Outage Command Centers in Suburbs"—that promised more: 

"Hoping to avoid a repeat of the chaos caused by widespread outages in last summer's storms, Commonwealth Edison announced Wednesday that it will set up temporary operation centers in areas where 20 percent of customers go without power for three hours or more..." 

"At one point more than 850,000 people in northern Illinois were without power for days," the Tribune continued. "Outraged customers turned out en masse to a hearing in Highland Park to complain about lost work time, rotten food and an automated system that provided wildly inaccurate power restoration times."

The Act that enabled grid modernization tied reliability to ComEd's compensation, plus the utility scrapped an ineffective, automated restoration information line, add lines to its call center and beef up first responders. A smartphone app is on its way.

The state attorney general had argued that ComEd should compensate those with damages in last summer's storms, while the utility argued that blackouts are unpreventable acts of nature. The state attorney general had found "a neglected system littered with decrepit utility poles, equipment choked by vegetation and transformers dating to the 1950s." 

The point I'd make is that this coverage is packed with promises, including that energy management will result in actual savings—"shrinking bills" is the phrase few consumers would buy—and fewer outages, with convenient restoration times sent to mobile phones. All for $3 per month.

The issue is whether those promises are credible and deliverable. David Kolata, executive director of the Citizens Utility Board, wisely called this "a step in the right direction" albeit one that "will depend on implementation." And education, if not more. 

Another piece in the Tribune two weeks ago underscored the latter point. "For Many, ComEd's Smart Grid Needs an Explanation" reported that many participants in ComEd pilot projects had not been able implement any significant energy management recommendations or save money.

My take? These are the vagaries that utilities face when offering long-term value propositions. The term "shrinking bills" is particularly unlikely to come true. And the newspaper forum found the "deadly smart meter" riff alive and well in Chicagoland.  

Would it be more honest—and therefore more credible—to acknowledge that electricity prices will almost certainly rise going forward and that active management, at best, can mitigate that rise? It's tempting to say customers will "save money," but if it turns out not to be true, the industry has squandered significant good will on billions of dollars of investment by customers. Likewise, we've seen recently that improvements in outage management are not a preordained result of grid modernization. (See "Managing Expectations on Outages?")

On the other hand, incremental cost increases to pay for grid modernization—to the tune of $3 per month—over a decade has the virtue of being low impact over a time frame that lends itself to customer apathy.

Despite the low cost per customer and the mind-erasing timeline, I wonder whether the arguments that ComEd and its peers are putting forth are worthwhile or should be tempered. 

Readers, please weigh in with your thoughts. 

Phil Carson
Editor-in-Chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757

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Comments

Consumers want more than just savings

A research consultant recently traveled around the U.S. — from East Coast to West Coast to the Midwest — on behalf of the Smart Grid Consumer Collaborative (SGCC) to sit down and listen to consumers talk about their reactions and perception toward smart grid, and smart meters, and their interest in new smart grid-enabled programs. What we heard and learned is that consumers want more from the smart grid than just “bill savings.” The savings benefit is too narrow a focus when consumers find many smart grid benefits important. Some are considered so important that consumers are willing to pay for them. Prominent among them are: “Improved reliability and restoration,” “Increased access to renewable energy” and “availability of better usage information and new pricing options.” Yet, no two consumers are alike, even though they all consume electricity. Our research findings have also shown that the benefit or set of benefits to be stressed in communications should vary by consumer segment. The “willing to pay for” benefits varied from segment to segment as each has different attitudes toward conversation, energy efficiency and energy use. Over the coming weeks, the SGCC will be providing more detailed insights and adding color to five consumer segments in the US in terms of their individual values, attitudes, beliefs, and behaviors toward the smart grid, energy efficiency/management, and the environment. Readers can access more detailed highlights about what consumer segments want and what they’d like to know about the smart grid and smart meters on the Smart Grid Consumer Collaborative’s website - www.smartgridcc.org

Marketing 101

Lost in the focus on technology and smart grid are two key challenges facing utilities: their historically poor marketing and their lack of innovation.True, they haven't been asked to do that, but their woes today can be directly tied to these two deficits.

The supreme irony in the electric utility industry is that consumers don't value their product. more than they do. What utilities deliver daily to households and buisnesses has become as essential as oxygen and water, and yet the relative price one pays still barely amounts to how much one spends monthly on discretionary entertainment or consumer goods - two great successes! Electricity remains the bargain of the century, when one reflects on what we do with it. But people remain ficlkle, indifferent to electricity as long as it works, then lashing out at utilities in the contexxt of a rate case (monopolistic money grabbers) or outage (incompetent bureaucrats). Ignorance and conditioning over time have led consumers to devalue electricity and the utility that delivers it. That's a shame, but also a failure in marketing. 

The good news is that its not too late to turn the ship, but it will take an about face on the part of regulators and utilitiies and the customers they serve. The 21st century holds great promise for changing the way we think about our grid - that is, the grid is an investment by society in a common good - and the product it delivers. We'll need to imagine a new business model more in line with today's economy, oriented around tailored services, compelling value, innovaitve applications and customer satisfaction. When utilities start thinking of the grid as one tool of many to deliver energy services, when they start leading the regulators and consumers to a value-driven paradigm, then we will know we are on the path. We have a long way to go as a society to reconsider the role and value of electricity, but the goal is certainly within our means to acheive. The first step is recognizing the problem.

John Cooper, Author "The Advanced Smart Grid" and Partner, NextWatt Solutions

It's Lots of Little Things

While I think there needs to be a value proposition behind investments made under the rubric of "Smart Grid", it has to be tempered with some realism.  In California, many proponents of restructuring made the same claim - bills would be lower.  That's an absurd promise because under the "regulatory compact", bills could rise if fuel prices and other costs went up, and in fact they did, allegations of manipulation aside.

However there's another insidious effect few people seem to really understand.  Under current law, vertically integrated utilities are entitled to recover all of their reasonably incurred costs, which means initiatives that reduce demand and/or energy use won't necessarily lead to any meaningful change in consumer bills.  The aggregate impacts can be large, but the impact on individual consumers, especially in the residential class, can be almost too small to notice.

I still think interval meters are a good idea, albeit with the ability to record consumption on much smaller intervals than an hour.  But I also think there needs to be more focus on consumer education and simple, intelligent pricing that recognizes the time-varying cost of electric production.  Widespread outages caused by inadequate maintenance and old infrastrure are not smart grid problems, they're basic management issues that should be fixed on the shareholder's dime (that's what the allowance for depreciation is supposed to facilitate).  Raising fleet average capacity factors in the 50% range require changes in consumer behavior, which is why I mention intelligent pricing and consumer education.

But of course, it's much easier to make somewhat extravagant promises that are supposed to unfold over a long period of time and hope folks forget those promises before the reckoning comes.

Jack Ellis, Tahoe City, CA

Is 'saving money' the right smart grid pitch?

Peek reduction and energy efficiency are the two most important goals in the implementation of Smart Grid projects. Any other benefit for consumers such as "shrinking biills" is a different issue.

Good will is squandered when these projects fail

I would just like to point out that the failure of Xcel's Smart Grid project in Boulder, CO was the last nail in the coffin of acrimonious feelings between the two. This article focused more on the system-wide implementation of Smart Grid rather than the consumer, but the lessons are still the same.

Smart Grid is still a very nebulous concept. Outside of a few core system monitoring and automation technologies, it's still not clear to me that even utilities have decided what Smart Grid is. Standards are still being decided, and security is a looming issue that nobody has solved yet. Would anybody buy a new car model so poorly fleshed out?

Utilities make improvements all the time to their generation and distribution systems. Some work, some don't but eventually the industry figures out what does. But this is all done behind the scenes. For example, how many people know about the increase in energy efficiency at nuclear plants over the past decades? Outside the industry, who really cares? So I don't see why Smart Grid should be any different. Rather than treating it as one big fully birthed concept, it might be better to move gradually with less fanfare. It's only the pressure of generating Green PR that causes this massive confusion at the consumer level.

The sad truth is that most consumers don't even look at the details of what causes the prices increases in their bill. Besides, a $3 per month extra charge is probably going to be swallowed up in price increases for such things as switching from coal to renewables and natural gas. Nobody has talked about the EPA-mandated costs going forward of gradually shutting down coal plants, nor the costs of state-mandated minimum renewable requirements. I was in Colorado in 2004 when the voters there passed their renewable mandate, and the cost issue was just a hand-wave. Now we are starting to see the actual costs from that transition. If consumers are worried about where the price increases in their bill are coming from, that's probably the first place to start the discussion.

     Milton Scritsmier

     Boulder, CO