Powering the Smart Meter Promise

Stephen Knight and Dennis Mahoney, PricewaterhouseCoopers

The reviews are in, and they are less than stellar.
“Electricity customers in for shock,” the Toronto Sun reported.
“Smart meters will be a shock for users,” explained The Age in Melbourne, Australia.
In the U.S., The New York Times published, “Consumers argue that the meters are logging far more kilowatt-hours than they believe they are using.”

But the media headlines don’t tell the full story. While smart meter implementation in some markets has been rocky, consumers and utilities are beginning to reap this advanced technology’s benefits. The lessons they’ve learned can help others avoid the pain and negative publicity.

Hype Cycle’s Ups, Downs

Like nearly all highly touted technologies, smart meters have yet to completely live up to consumers’ expectations. Utilities around the globe have rolled out smart meter programs to great fanfare only to experience similar responses: enthusiasm followed by disappointment, followed by concerns, complaints and, in some cases, even lawsuits.

The benefits of the smart concept are real, but they were advertised to utility customers under the guise that what is good for the utility is good for the consumer. The ease with which the public would accept meters was overhyped. Smart meters and smart grids have been advertised as next-generation tools that reduce energy demand, lower energy costs and reduce environmental impact. Consumers quickly embraced the sales pitch, especially during rising energy prices and increasing concerns over greenhouse gas emissions.

The suggestion that everyone with a smart meter would see immediate, meaningful benefits without any effort was incorrect but widespread. In many markets, it took customers who didn’t understand the technology just one or two monthly bills to become disenchanted, or worse, to feel they had been duped.

Logistical issues at some utilities only made adoption more difficult. In New Zealand, for example, customers who had been on legacy tariffs automatically were switched to current rates when their smart meters were installed, making it appear as if the meters were causing their bill increases. In Australia, the introduction of peak pricing was not communicated effectively, and many consumers were shocked by their initial bills. And in the Netherlands, concerns over customer privacy caused a two-year delay in the introduction of smart meters. Adoption was made optional because of complaints that energy-use data could be interpreted to identify living patterns and other personal information.

In many markets across the globe where smart meters have been deployed, the public is in the “trough of disillusionment,” the lowest stage in what we know as the technology hype cycle, a term popularized and copyrighted by Gartner Inc. to describe how new technologies mature. That trough occurs after a new technology’s highly publicized benefits fail to materialize quickly, leaving consumers wondering what all the fuss was about. Recent experiences around the world, however, provide more than hope that smart technology can live up to its promise.

A Primer on Smart Technology

Smart grids and smart meters were conceived as a set of tools to help consumers manage their energy demand more effectively and utilities to balance loads across their systems. Smart grids integrate the actions of all users connected to an electricity power system, employing communications, innovative products and services and intelligent monitoring and control technologies to:

  • Make it easier for utilities to efficiently manage the full array of power generation assets, including traditional generation facilities and renewable sources such as wind turbines, to meet customer needs,
  • Provide consumers with more information about their own usage and peak demand so they can adjust their behavior, and
  • Reduce the environmental impact of power generation through incentivizing customers to shift electricity usage from peak to off-peak hours in an effort to avoid running peaking generation units.

Smart meters enable consumers to track their usage in real time and better understand their power habits via in-home display units, Web-based interfaces or both. In conjunction with smart technology, utilities can adopt pricing plan options that incentivize customers to use power wisely. Smart meters also can provide:

  • Improved billing efficiency,
  • Improved outage detection and restoration,
  • Reduced operating costs,
  • Lower energy power purchase costs resulting from reduced-peak loads, and
  • Environmental incentives.

Most developed countries have some level of smart meter market penetration, with Italy, Sweden, the Netherlands, Canada, Australia and pockets of the U.S. leading the way. By 2025, more than 500 million business and residential customers worldwide will be outfitted with smart technology, experts said. In many countries, this growth is being driven by government intervention—either in regulations or financial incentives. For example, the U.S. has committed $3.4 billion in grants to spur investment in smart meter and smart grid technologies.

Changing Behavior isn’t Easy

Still, the commonality of negative experiences has many utility executives wary of advancing their own smart meter plans. With proper planning and leadership, however, the probability increases that rollouts will encourage consumers to readily adopt the technology and benefit from it.

Many utilities have found it possible to demonstrate business case benefits for smart technology investments. Customer behavior can be changed, and consumers can be incentivized to shed load or at least shift some usage to off-peak times. On the other end of the network, usage data collected by smart meters provides significant operational and efficiency advantages for utilities.

In the earliest rollouts, some utilities failed to realize that changing customer behavior requires more than equipment installation. The key is ensuring customers understand their roles in making it all work. That demands a long-term communication effort that must be planned and executed with precision and perseverance.

It’s not enough to leave a flyer on customers’ doors.

To be successful, utility executives must change their thinking about smart technology. Rollouts are not just a technical installation or an engineering process; they are an opportunity to build lasting customer relationships that can improve brand value and open the door to revenue opportunities.

In addition, the introduction of smart technology is a change management effort, internally and externally. Customers must be persuaded to change their behavior, but so must organizations. Electricity companies used to operating quietly in the background must step out of that comfort zone and engage with customers in ways that are common for technology firms but unheard of for public utilities.

None of this is easy, but successful utilities will find that they can prevent the trough of disillusionment that has accompanied earlier rollouts, ensuring that customers and utilities themselves begin to reap smart technology benefits sooner.

An Opportunity to Engage

In helping utilities manage smart meter rollouts, we’ve identified three actions that help manage customer expectations, facilitate technology adoption and usage and speed the delivery of promised benefits.

1. Invest in strong project management. The smart technology rollout requires top-quality project management to ensure all moving pieces work in unison. Evolving technology, community concerns, regulatory requirements, supply chain issues and capital spending pressures combine to necessitate the need for strong project management capabilities and experience with large-scale capital projects. Delivering customer and stakeholder benefits on time and budget requires knowledge of best-practice methodologies and a strong governance structure.

2. Know your customers. Understanding customers and their needs enables utilities to tailor rollouts accordingly. For example, by leveraging customer location and usage data, utilities can target a greater tailored communication message to customers most interested in receiving smart meters and those most likely to benefit (i.e., large users), setting up for the program’s success. Incorporating customers’ value propositions into initial at-home explanations of the technology—and ensuring only qualified, trained employees are deployed to meet with customers—increases the likelihood that consumers are comfortable with the program and that the proper expectations have been set. Some U.K. utilities, for example, send a smart meter installer and a trained educator to engage customers in their homes. Those educators also identify up-sell opportunities for utilities, such as customers who needed new boilers or energy-saving windows.

3. Begin customer engagement and education early and maintain throughout the rollout. The communication and education program in support of the rollout is critical. Constant communication between the utility and its customers—with embedded levels of flexibility to overcome objections or respond to burgeoning issues—enables utilities to understand customer concerns regarding pricing, privacy, customer data and price increases. Utilities can tailor the messaging and frequency of communication to manage customer perceptions. For example, customers who need help or those most likely to use energy management services can receive special assistance and information. Consumers are more sensitive to everything during smart technology rollouts, and issues such as price changes, data protection and communication can create backlash if handled poorly.

Strategy and planning, business process readiness and change management oversight are critical components of any smart technology rollout.

With the proper management approach, customer-centric tactics and a commitment to robust communication and education, utilities can increase the value from their investments in smart technology and help it deliver its promise.

Stephen Knight is chairman of PricewaterhouseCoopers’ U.K. smart metering group and a leading member of the firm’s global smart metering community. Dennis Mahoney has worked five years on North American and U.K. smart meter implementations.

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