Smart Grid Success Will Require Customer Cooperation<

In a few weeks, the U.S. Department of Energy (DOE) will announce which utilities will receive the first round of stimulus funding made available by the American Recovery and Reinvestment Act, commonly called the stimulus plan. It will make available $4.5 billion for smart grid projects that, according to Energy Secretary Steven Chu, will be a down payment on our nation’s clean energy economy. The money’s No. 1 purpose is to preserve and create jobs, but Chu and other industry experts have said the funding will jump-start needed modernization of the nation’s electricity grid, helping the United States reach DOE goals of a clean energy economy.

Since the stimulus funding was created and announced in February, utilities have been feverishly working with vendors and consultants to complete the stimulus applications and raise the matching funds required of companies that are awarded stimulus funds. By the Aug. 6 deadline for the first round of funding applications, more than 45 utility companies had applied for about $4 billion. Much of the money is planned for smart metering or advanced metering infrastructure (AMI) projects aimed at enabling customers to better manage their energy use.

Once implemented, these AMI projects are expected to result in a substantial reduction in peak electricity demand. Reduced demand should reduce the need to build more generation, resulting in a reduction in the country’s greenhouse gas emissions and the impacts of global warming.

In addition to the work associated with completing the applications, utilities, vendors, government agencies and other stakeholders have been working with the U.S. Commerce Department’s (DOC’s) National Institute of Standards and Technologies (NIST) to develop smart grid standards. They have made significant progress. Six months after beginning the standards development process, the DOC released in September a draft report, NIST Framework and Roadmap for Smart Grid Interoperability Standards, which identifies about 80 initial standards. Work on standards is continuing.

Much work also is being done to assure that a smart grid will be secure from cyberattacks. And, utilities and lawmakers are discussing new policies and regulations that will allow utilities to realign their business models to achieve the smart grid goals and still create revenue for stockholders.

One critical area, however, that might not be getting the attention it needs is convincing utilities’ customers to embrace the programs that will be made available with a smart grid. As I mentioned, much of the stimulus money requested is planned for AMI projects. If these projects are approved for stimulus funding, millions of residential smart meters will be installed, and with these installations will come numerous energy efficiency and demand response programs for utility customers. At least initially, most of these programs will require customer buy-in and behavior changes. To cut peak demand to the degree it will be needed, utilities must create and customers must participate in new programs. Gaining customer participation will not be easy. Someone who works in the customer service area of a large investor-owned utility told me recently that her company is having little success persuading customers to enroll in electronic bill payment. She said that less than 5 percent of the utility’s residential customers pay their bills electronically. Compare that with the credit card industry in which more than half of all credit card bills are paid electronically, and eight out of 10 credit card holders said being able to view their bills online was important to them. The credit card industry has had much more success connecting with its customers. If utilities can’t convince customers to try electronic billing, will they be successful at convincing them to change their behavior?

The smart grid’s success at lowering electricity demand depends on customer behavior. If residential customers do not respond to utilities’ programs aimed at reducing electricity usage, a lot of money is going to be wasted.

Improving the power grid’s efficiency and reducing the need for more generating makes much more sense economically and environmentally than building new power plants. A few hurdles must be cleared, and customer participation is probably the biggest. Utilities are used to tackling technology issues and dealing with regulatory issues. For many, however, developing a range of products and services that will please different customers is new. Recruiting product and service development expertise from banks and credit card companies might be a good strategy.

Teresa Hansen, editor in chief

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