If You Build It, Will They Come?

by Alex Laskey, OPOWER

We hear it all the time, and we’re sure you’ve heard it, too: the excited assertion that the smart grid is going to be the new Internet!

There’s a lot to this analogy and a lot to be excited about. Much like the Internet, the smart grid will distribute a vast amount of previously inaccessible information throughout its network. All kinds of new applications will be brought to market–from appliances that run when generation is abundant to in-home displays that provide instantaneous feedback–that promise to enhance and simplify users’ lives.

Unlike the Internet, the smart grid’s value proposition remains unclear for consumers. From a utility’s perspective, the smart grid’s value couldn’t be more accessible: Ensuring reliability, managing peak load and enabling the proliferation of renewable generation all have become industrywide necessities. While utilities can tell consumers that the smart grid will bring them cheap and reliable electricity, most consumers already get pretty cheap, reliable electricity without having to do much for it. From a consumer’s perspective, the smart grid’s applications represent more work, potentially less privacy and overall more pain for little to no additional gain.

“So,” our savvy consumer rightly asks, “what will this smart grid do for me?”

With a less-than-clear value proposition and almost certain prospects of short-term bill increases, consumer acceptance is among the critical–and formidable–challenges facing successful smart grid implementation. To gain this acceptance, utilities must invest time and resources in building a sustained comprehensive customer engagement strategy that will leverage the latest in marketing and consumer outreach.

Advanced Metering Infrastructure Requires Advanced Customer Engagement

As a vendor in the smart grid ecosystem, we are privileged to speak daily with numerous and varied utilities–from the largest, most forward-looking investor-owned utilities (IOUs) to mid-size municipals and rural cooperatives. Many of these utilities are planning or are in the middle of a smart grid rollout. At this point, nearly all of them have internalized that customer engagement and acceptance is the key to a successful rollout–with recent incidents in Bakersfield, Calif., and Texas only reinforcing this realization.

Despite this keen understanding, our utility partners consistently say they are unsure how to engage and win consumer acceptance, “How can we engage a large percentage of our customers? How can we demonstrate clear value?”

Two Pitfalls to Avoid in Deploying the Smart Grid

First, avoid two common mistakes in early deployment.

1. Don’t let the technology folks drive your consumer-engagement strategy. Installing smart meters and their companion communications infrastructure is a formidable technological challenge, requiring sophisticated engineering solutions. After all the investment, hard work and ingenuity that have gone into deploying a utility’s smart grid, it is tempting to allow a heady, high-tech approach dictate the face of the smart grid for consumers. This is precisely what utilities should avoid. High-tech grids don’t need high-tech front ends; they need faces that consumers can understand, relate to and use. Creating this face is also a formidable task, but one for which a different set of talents and tools must be brought to bear. Meeting the challenge requires strategic marketing solutions developed and deployed by those who best know how to communicate with, motivate and engage consumers. When selecting a consumer-engagement platform, a utility should seek a best-in-class communications solution. Web portals offered by metering and meter data management systems companies are almost too convenient to pass up. They’re typically free, already integrated and come with assurances of functionality. But will the portal work for consumers? Is the portal designed to make sense and engage consumers? Or is it designed to an engineering spec? Plans to install in-home displays (IHDs) suffer from a similar, IT-centric viewpoint. According to a recent filing by Southern California Edison, fewer than 15 percent of households will have an IHD installed by 2020. What about the other 85 percent of consumers? Eighty-five percent of households isn’t a negligible techno-phobe remnant; it is, instead, almost all of us. Utilities will not reach consumers adequately if IHDs, without more, are the centerpieces of consumer-engagement strategies.

2. Don’t assume customers are interested in monitoring energy usage. We may wish it weren’t so, but in our experience, most consumers have neither the time nor the inclination to assiduously monitor their energy usage. Current data supports our assessment. Sign-up rates for energy management portals are dismal: less than 10 percent to be sure, with rates more likely hovering at 5 percent or below. Likewise, even the most engaged consumers lose their taste for monitoring over time. One of the largest IHD studies to date–the 30,000-home Hydro One pilot in 2008–recorded a meaningful 5.2 percent decrease in demand over two years. But of these highly engaged consumers, only 29 percent of participants reported that they still paid attention to the device by the study’s end, and this despite the substantial and likely noticeable savings on participants’ energy bills. After the IHD’s novelty wears off, only one in three people still will pay attention to it.

The Smart Way Forward

That successful consumer engagement is a necessary component to any smart grid deployment is no longer a new insight. Most utilities are beginning to invest considerable time and resources into a strategy that includes building or buying the best consumer-facing tools to achieve a high level of engagement.

A few actionable lessons, however, can be distilled from experiences of those utilities leading the charge:

1. Be proactive. Don’t allow a high bill to be the first thing consumers see after smart meters are deployed. Instead, build a comprehensive customer outreach strategy that uses all existing channels, including the mail and call center. Meaningful penetration of IHDs and home area networks will take many years. Waiting for those channels to become available means too many missed opportunities for good communication.

2. Market and influence. The front end to your smart grid should be built by your marketing department or vendors with expertise in meaningfully engaging consumers. Don’t be fooled; most consumers would prefer to watch TV instead of their IHDs.

3. Start now. Ideally, the consumer-outreach strategy should begin months before any smart meters are operational. Gaining consumer acceptance of the smart grid is more than a one-time marketing activity. It requires transforming a utility’s relationship with consumers long term.

A successful smart grid rollout depends on meaningful relationships with consumers.

With increasingly ambitious energy efficiency goals, the need for higher consumer participation in all utility programs–including the smart grid–means that the relationship between a utility and consumers must be transformed.

Do not confuse that undertaking with the technical challenge of upgrading the grid. The two present different hurdles that should be addressed simultaneously by two parts of an organization. Expertise in engineering must be complemented by expertise in mass marketing, communications and influence. Build that, and consumers likely will come.

Author

Alex Laskey is president and co-founder of OPOWER. Recently he was invited to the White House to discuss innovation and job creation in the green economy with President Obama. Laskey has served as a campaign manager, strategist and public opinion analyst for several candidates nationwide, and has worked for the White House and on a presidential campaign. He has a bachelor’s degree in history of science from Harvard University. Reach him at alex.laskey@opower.com.

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