Wednesday, May 26, 2010

Post # 19 - Seventy Percent of Americans Have Never Heard of Smart Grid

According to a study released this week by the strategic marketing agency EcoAlign, approximately 70 percent of Americans are not familiar with the term "smart grid." However, the study, "Separating Smart Grid From Smart Meters? Consumers Perceptions and Expectations of Smart Grid," indicates that consumers can become favorably disposed to the smart grid as they learn more details. But the study also highlights some obstacles to consumer acceptance, as well as to a possible mismatch of industry versus consumer expectations.

For the study, EcoAlign defined "smart grid" as a "larger network of interconnected devices in homes, businesses and communities that will allow service providers to offer new applications, including new billing and payment options." Based on this definition, 55 percent of the survey respondents believed that they would benefit from a smart grid, while 50 percent found the ability to review their own energy consumption to be "extremely or very appealing." One quarter of respondents think they would use the smart grid capability either daily or weekly; on average, respondents think they would use it about 12 times per month. EcoAlign says these are "strong findings of consumer good will and expectation with regard to rolling out the smart grid."

At the same time, the study underscores major potential stumbling block to consumer acceptance. Perhaps most significantly, and potentially most troubling, the respondents saw smart grid as "primarily a means to lower and/or manage rising energy bills." But what it that is not, in fact, a realistic expectation? As the study notes:
Energy bills are increasing and are expected to increase even more in the foreseeable future. Seventy-four percent of Americans surveyed are extremely or very concerned about the rising cost of utility bills. But will utility bills increase more than any potential cost savings or management options enabled by smart grid? In other words, after the smart meter has been installed and the consumer has access to the smart grid, what happens if the consumers’ bill is bigger, and perhaps, substantially bigger due to any number of factors external to smart grid: rising fuel input costs, increasing utility rates to replace and/or bolster aging infrastructure, new costs [relating] to renewable or nuclear power generation, or even if the consumer herself consumes more energy because of new devices or a changing lifestyle.
EcoAlign also sees a need to decouple smart grid smart meters. The study states that while smart grid represents "the entire ecosystem of hardware and software that allow for greater networking, interconnections, integration and bundling of products and services," smart meters are primarily geared to measuring and controlling the electric use. "For now, consumer perceptions are anchored by the smart meter’s commodity focus, and more specifically, the billing function, rather than a platform for a much broader array of management possibilities including the commodity, security, entertainment, and so on."

Finally, insofar as smart grid represents a two-way communication platform, EcoAlign states that "consumers have a reasonable expectation that communications coming to them from this platform will also be 'smart.'" But EcoAlign is concerned that the current ability of utilities and energy suppliers to deliver and communicate the way consumers increasingly prefer is limited by "back office infrastructure, and as importantly, by an industry culture that has not had to be consumer-focused for decades."

The EcoAlign study is one more piece of evidence that, for all its promise, smart grid development may not be totally aligned with consumer expectations.

Saturday, May 22, 2010

Post # 18 - British Consumers: Not Yet Ready for Smart Meters?

On the eve of the recent British elections, the UK government announced plans to equip every home in Britain with smart meters by the end of 2020. Energy suppliers would install approximately 26 million electricity and 22 million gas meters at a cost of £7bn – which works out to an annual per-household cost of about £15. Of that amount, £10 would be accounted for in supplier cost savings and £5 would be borne by their customers.

Balanced against these costs, the plan predicts major consumer benefits. Specifically, the plan envisions that the average consumer will see (through energy use reductions facilitated by smart meters) savings of approximately £25 to £35 per bill. See here and here.

But the question always remains: will consumers actually use smart meter data? In this regard, a recent survey suggests that, at least in the UK, consumers may not be ready for smart meters.

Late last month, on behalf of PassivSystems, a home technology firm, the British public opinion research organization YouGov conducted an online smart meter survey of 2085 adults. The YouGov survey suggests that approximately seven out of ten British consumers would not act on the information provided by smart meters even if smart meters were installed. See here and here. In other words, actual consumer behavior may trump the projected consumer cost reductions.

Of course, this type of survey – asking consumers to predict future conduct based on new, unproven, and not yet available technologies – cannot be viewed as definitive. But the YouGov survey is one more indication that consumers haven’t yet bought into the smart meter concept – and may prove resistant when asked to foot the bill for smart meter installation.

Monday, May 17, 2010

Post # 17 -- Lessons From Ontario

In the spring of 2004, the government of Ontario announced that 4.3 million homes and small businesses in the province would be equipped with smart meters by 2010. This effort is part of a broader initiative to build almost an entirely new electricity system in Ontario, replacing about 80 per cent of the province’s current generating facilities as they retire over time and expanding the system to meet future growth. (See here and here for more information about the overall Ontario initiative).

But as in California, Texas, and Australia (see Post ## 6, 8, 11, 13, and 15), smart meter roll-outs by Ontario’s Hydro One and Toronto Hydro have not gone smoothly. Many (perhaps most) Ontario customers who have been on smart meters the longest have actually seen their bills increase. This appears to be partly a function of smart meter reporting and data errors by the Ontario utilities similar to those that have plagued roll-outs in other locations. That type of problem – while maddening to customers – at least is correctable. But more significantly, these bill increases seem largely to reflect the stubborn fact, regardless of smart metering's potential to provide consumers with real-time information upon which to base their daily energy use, in the real world most Ontario consumers (for whatever reason) are not changing their behavior.

That reality, which extends beyond Ontario and in many ways remains the smart grid "gorilla in the room," is not just a case of “you can lead a horse to water. . . .” Rather, a key question on the consumer side of the smart grid/demand response equation always has been whether, regardless of their theoretical access to information, consumers (in addition to all the other demands on their time) reasonably can be expected to become energy specialists who are able and willing to reorder their energy use (e.g., do the laundry at 3:00 a.m.; prepare meals at odd hours; become energy procurement experts traders in their spare time).

This is not to say that such a change is either impossible or necessarily undesirable. But to get there will require a lot of heavy lifting by industry stakeholders and a level of consumer acceptance and buy-in that does not presently appear to exist anywhere.

Beyond consumer behavior, Ontario provides another example of concerns driven by smart meter installation -- namely, the issue of consumer privacy and data ownership (see Post ## 4 and 5). Last week, Dr Ann Cavoukian, Ontario’s Information and Privacy Commissioner, issued her Annual Report for 2009. While recognizing the potential consumer and environmental benefits promised by the smart grid, the Ontario Commissioner cautions against sacrificing consumer privacy “amidst a sea of enthusiasm for electricity reform.” The Commissioner states that her “overarching privacy concern is the Smart Grid’s ability to greatly increase the amount of information that is currently available relating to the activities of individuals within their homes — their habits and behaviours.” Her report argues that the Ontario government must ensure that privacy is “embedded” in the electricity reform framework in Ontario.

Again, that is a global concern not just limited to Ontario.

Tuesday, May 11, 2010

Post # 16 - Pacific Gas and Electric Co. Releases Previously Non-Public Smart Meter Reports

Complying with orders from the California Public Utilities Commission, Pacific Gas & Electric Company yesterday released approximately 700 pages of smart meter installation status reports covering the period from August 2006 through April 2010 (see here). PG&E previously had provided these reports to the CPUC on a confidential basis, but earlier this month, in response to numerous consumer complaints (see Post ## 6, 8, and 13), the CPUC ordered that the reports be made public (see Post # 15).

PG&E also held a press conference yesterday, apologizing for the problems to date, defending its overall performance, and describing steps to improve that performance. While acknowledging that smart meters caused billing errors for over 40,000 households and that customers often had problems getting PG&E to respond – Helen Burt, PG&E’s senior vice president and chief customer officer, called the situation “simply unacceptable” customer service – PG&E emphasized that 99% of the smart meters installed to date have functioned properly.

But in recognition that its customer service and communications strategy need an upgrade, the company announced that it has set up a smart meter dedicated call center – where 165 employees can handle customer questions – and is holding town hall meetings in neighborhoods where its doing smart meter installations. PG&E also said it would begin posting weekly information on the number of smart meters having problems and will increase the number of "side-by-side meter tests" to 300, comparing data from old meters to new smart meters.

In response to calls by some consumer groups for a smart meter “moratorium,” PG&E's spokespersons said that the company does not plan to stop installing smart meters. Meanwhile, PG&E’s critics can be expected to comb through the existing posted reports and the forthcoming weekly information for ammunition.

For more on yesterday’s press conference, see here, here, and here.

Friday, May 7, 2010

Post # 15 - Smart Meter PUC Updates and Consumer Hearts and Minds

In the continuing saga of the troubled roll-out of Pacific Gas & Electric's smart meter program (see Post Nos. 6, 8, and 13) , the California Public Utilities Commission this week ordered the company to make public PG&E's own confidential reports on the status of its smart meters. At the same time, communities in Northern California next on PG&E's smart meter schedule are asking the CPUC to order a moratorium on further installation to allow further review of issues such as accuracy, security, privacy, and environmental effects.

Meanwhile, the Public Utility Commission of Texas, in response to concerns about smart meter roll outs in that state (see Post No. 6), has just announced that testing of smart meter accuracy -- promised earlier this year -- has begun. This independent testing will focus on digital electric meters being installed by Oncor and Centerpoint Energy. These tests will focus not simply on the accuracy of the meters themselves, but also on the accuracy of information transmitted from a smart meter back through the advanced metering infrastructure that gathers and organizes information to prepare a customer’s electric bill.

These California and Texas actions occur against the continuing backdrop of consumer concerns and confusion about smart metering -- coupled with basic consumer lack of understanding and buy-in to the whole issue of the Smart Grid and smart technologies. In that regard, a study issued this week by international research firm Parks Associates reports that -- even as utilities have deployed 13 million smart meters to U.S. households -- only 11 percent of U.S. consumers are familiar with the term "smart grid". As I've noted before, there exists a real problem of the utilities and their IT vendors getting ahead of utility customers and the public on a whole range of Smart Grid issues.

Monday, May 3, 2010

Post # 14 -- FERC Commissioner Moeller Cautions Against "Overpromising."

As previously discussed, in 2007 Congress directed the Federal Energy Regulatory Commission, in coordination with the National Institute of Standards and Technology, to develop standards and protocols necessary to insure interstate Smart Grid functionality (see Post # 2 and my paper, “Smart Grid: The Devil Is In the Details.”

Last week, FERC Commissioner Philip Moeller, recently nominated by President Obama for a second term, emphasized that regulators need to be realistic and restrained in their discussions of the Smart Grid.

Testifying on April 27, 2010, before the Senate Committee on Energy and Natural Resources, Moeller said that the Smart Grid has “revolutionary and transformative potential” to enhance efficiency in the Nation’s electric grid. At the same time, however, Moeller underscored that this potential “will not be immediate and will occur at varying paces throughout the nation.” In particular, Moeller cautioned that FERC itself must be careful not to overpromise the benefits of the smart grid to consumers lest there be a backlash that slows the pace of its implementation.”

I think that last point is crucial, and not just for FERC and other regulators, but for all Smart Grid proponents. Ultimately, the bill for Smart Grid will be picked up by consumers, taxpayers, and utility ratepayers. And before they will accept that burden, consumers, taxpayers, and utility ratepayers must be convinced that there is something in it for them. These days, too much Smart Grid discussion takes place among “true believers.” Getting the public on board will require down-to-earth advocacy that identifies clearly articulated and truly likely benefits, free from “pie-in-the-sky” promotion.

The full text of Commissioner Moeller’s recent testimony can be viewed here.