by Bob Lento, Convergys
Consumers and utility providers are sold on the numerous smart grid benefits, but getting there is daunting for utilities, and consumers are impatient.
For utilities, taking risk out of a transformation of this magnitude is essential and will be key to moving the industry ahead at a pace consistent with consumer expectations. But where to begin?
One way is to look for analogs or industries that have traveled a similar path. For utilities, the wireless industry is a good place to look. Wireless companies have undergone transformational change in network (analog to digital) and business model (single play to quad play) during the past 20 years. While the match is not one-to-one in applicability because of things such as competition and regulation, the following lessons are insightful for utility providers as they begin their transformational journeys.
Preparing for the Data Tsunami
Going from a single read a month to interval reads every 15 minutes is no small task and keeps many utility CIOs up at night. How do you handle the data? What do you do with it all? Where should it be stored and for how long?
Communication service providers have faced these problems for years. The proliferation of prepaid offerings has required the development of systems that are essentially always on, allowing for real-time authentication and validation of balance and rate information. But more important, they have begun to look at this data as an asset rather than a hindrance.
Knowledge of individual customer preferences and recent activities is valuable to internal operations and external vendors who desire the ability to better tailor their products and services. Real-time customer data systems, such as decisioning engines and raters that can act in an instant, create the ability to automatically react and respond to customers' presence. Are they online right now? Calling into a call center? Are they fans of green energy? If so, wouldn’t now be a good time to offer a green bundle?
Part of the ability to de-risk the future is having access to systems that enable these individual transactions with customers off the shelf without having to build them from scratch. Partners that have these abilities inherent in their systems will help future-proof the utility, limiting the potential need for significant future investment and de-risking the unknown.
Controlling a New Customer Ecosystem
Consumers are presented with choice when buying and activating mobile phones. They can go to big box retailers or thousands of dealer locations to pick a phone from 20 models and select a plan based on individual needs. Does this mean the choice is unlimited? No, activating a phone from another provider’s network doesn’t work. Why? Because a network carrier has locked that phone to its network and certified its ability to operate.
What does this have to do with utilities? Consider the home area network (HAN) device market. Consumers are already looking to the likes of home improvement retailers for their smart thermostats and in-home energy monitors. When these devices are installed, they might not sync with utility bills or customer data portals. Massive customer dissatisfaction and potential costs in the form of calls to customer care centers are likely results.
A model similar to the wireless industry where a utility certifies a certain number of devices to its network provides choice to consumers while protecting the utility’s ability to control the ecosystem. Suddenly the customer data is synced, and the utility doesn’t face a wave of customer service calls. This is an example of the kind of cross-industry learning that can take place.
To de-risk the future, utilities must find partners with knowledge of these adjacent sectors and the ability to transfer the capabilities in mind share and technical capability.
Limiting Investment Risk During the Developmental Path
Rip and replace should not be the norm. It forces an all-in approach to a situation with too many unknown variables. Communications service providers figured out how to achieve critical business objectives such as lower churn, improved customer retention and decreased customer acquisition costs with overlay systems that work with their old systems.
Parallel billing for smart grid and smart meter customers gives a utility the ability to grow functionality as it grows its smart meter base. This limits the amount of upfront investment and supports deviations along the transformation path as business models and opportunities become more defined. Options for managed services also can be a good way to limit the total corporate commitment, yet still provide the necessary advanced functionality.
The risk associated with the move from the current grid to a smart grid is significant and cannot be underestimated, but it can be done in a way that mitigates risk. Taking a prudent approach by using customer data as an asset, understanding the customer ecosystem and limiting investment during development are activities in which every smart business should engage.
Utilities don’t need to accept the current mode of doing business, nor do they need to bet the farm to get next-generation technology and innovation.
Wireless companies formed strategic partnerships and created ecosystems committed to these common ideals and innovation without risk. Utility providers should, too.
The Dawn of Accessible Service
With smart grid, the old world of the analog, one-way power grid is rapidly drawing to a close. The industry is moving to more accessible service powered by digital smart grid technology. Enabling meter reads every 15 minutes and establishing sophisticated home area networks (HANs) puts personal energy management within reach—providing the level of data that puts changing consumption patterns squarely in consumers’ control. Like all things digital, the new grid will come under the sway of Moore’s Law, which states that computer-processing power doubles every 18 months to two years. As smart grid takes on this power, traditional time frames and delivery modes will give way to systems that are faster and smarter, characterized by:
- Two-way Real-Time Transactions. Smart grid will accommodate two-way interaction between meters and back-end systems. This enables the real-time rating of usage, making demand-based pricing possible. This data then can be shared with customers in real time via a Web portal or in-home device, enabling them to better manage their consumption levels.
- Scalability. At the outset, smart systems will read a meter every 15 minutes, managing a massive influx of sophisticated transaction data volume. As smart grid moves companies from monthly to quarter-hour readings, a customer base of 1 million will see transaction volumes rise from 1 million per month to 3.36 billion.
- Dynamic Pricing. Smart grid will enable dynamic pricing that includes time of use (TOU), critical peak pricing and critical peak rebates. Utility providers feel the need for this functionality today but need better systems to implement these rate plan changes more quickly and track them in more detail.
- Multichannel. Smart meters will enable more ubiquitous communication with end customers, for example, via interactive voice response (IVR), Web and mobile phone.
As far removed from today’s grid as these sophisticated capabilities may seem, they are the minimum requirements for smart grid deployments. Utility providers can follow these three easy steps to de-risk the path to successful smart grid transformation.