Demand Response - Quantifying the Impact on the Customer
- Posted on July 29, 2010
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Standard methodologies for quantifying the benefit of Demand Response always must first consider the impact upon energy price and reliability. There is always an easily quantifiable benefit from curtailing electric load that is of a much lesser value than the price of electricity on the spot market, along with a similarly quantifiable reduction in the capacity needed to meet reserve adequacy requirements. Additional benefits that may be somewhat harder to quantify are usually considered as well in an attempt to arrive at the most comprehensive evaluation possible. (impact of reduced market price volatility, impact of deferred T&D investment, insurance against extreme events).
However policy makers and utility executives may be short-changing themselves by not considering the opportunity to further quantify DR's benefit, in terms of a successful program's ability to positively impact the overall customer experience, and thus the potential for stimulating opportunities for ongoing and increased customer engagement.
Research on utility customer's needs, especially on Commercial and Industrial (C&I) energy user's, and impressions of their overall relationship with a utility, often indicates the customer is influenced by three primary drivers: 1) The need to reduce energy costs, 2) the need for reliable and quality power service, and 3) the need for accurate and/or flexible billing and service options. The complexities of energy management, the lack of sufficient industry knowledge or resources, the need for more personalized advice on various energy savings options, and the need for enabling technologies to facilitate the delivery of new service options are various obstacles to satisfying these customer objectives.
Demand Response and Smart Grid enabling technologies are fast evolving to address these issues and help meet these customer needs and today can provide: (1) An Integrated Framework for delivering both Demand Response & Energy Efficiency information and savings opportunities (2) a "proactive" response-oriented customer communications mechanism (DR) for establishing a more active connection with the customer, and (3) an underlying communications medium (new "Smart" meters) that allows for more personalized dialogue and pricing with the customer. All of this can be combined deliver a dramatically different level of perceived service for a utility's customer.
The opportunity therefore is now to also use software and analytics to capture and measure this customer experience, so as to quantify and better understand DR's impact on customer satisfaction and behavior. Thus a measurable and structured framework should be considered for collecting and analyzing data regarding customer interactions from DR programs, in addition to the energy usage and load profile data that is captured.
Data on customer interactions with DR programs may soon include analysis of areas such as the following:
- Does the proactive savings communication element of DR provide a driver for increased customer responsiveness?
- By initiating proactive savings dialogue with the customer does the utility generate a "connection" with the customer, that can be used to stimulate on-going involvement and thus increase the likelihood of buying into future programs and services offered?
- Does the experience of participating in DR programs link to increased customer satisfaction scores?
- Which program attributes and profiles of customers & participants are linked to the highest customer service ratings?
- What types of DR notifications, enabling technologies, pricing plans and customer segmentation led to highest take rates & customer service scores?
- What is the value to the utility over an investment-term consideration (5 years), i.e., what is the "Lifetime Customer Value" of a more involved relationship with the customer from the utility's perspective
A broader consideration and analysis of the data regarding the DR customer experience will thus provide better insight into understanding customer behavior, including the "why" and "how" of customer behavior. Analysis of the "Customer Service ROI" with Demand Response in the mind of both the customer and the utility, may also in time help lead to an even more comprehensive evaluation of DR, a more comprehensive and accelerated business case for adoption of smart-meters and faster adoption & buy-in by customers to future utility programs and service offerings.