Framework for Utilities Smart Solutions Deployment
Consumer is the most important stakeholder in smart metering program and consumer engagement is utmost important for successful value delivery.
The operational efficiency in a utility company has gained much importance in recent times. Customers have become more demanding without compromising the reliability and quality of service. Competition among utilities companies is reaching its peak. Lots of programs are underway to provide near real time information to the customer and improve operational efficiency of a utility company. Utility companies are looking into smart solutions. The question over here is whether these solutions will serve the utility companies or there is something for the consumers too.
Customer engagement is going to be the key focus for the utility company executives. The prime focus is to enable and involve its customer base for the new smart programs by leveraging multiple communication channels - social media, webinars, postal services etc. This will also build better awareness among customers to adapt to the new experience with utilities smart solutions and use it to their advantage. On the contrary the utilities have to accept loss of control in the social media space and the possibility of public criticism. Regardless of the potential benefits of smart solutions, utilities may still struggle to sell the whole concept to their consumers.
Traditionally distribution utilities have high volume of assets. Today utilities are looking for a better return on their investments by means of assets consolidation and optimization.
Utilities today are undertaking various smart solutions to improve customer satisfaction and increase their operational efficiencies. In this paper we will talk on framework for deployment of these smart solutions.
Smart metering is one of the solutions adopted by the utility companies to move towards smarter operations but consumers may consider it as a means of exploitation.
With deployment of smart meters, utilities will save costs on meter-reading workforce, remote disconnect and reconnect. The benefits of smart metering from a utility perspective are relatively solid but it is on the consumer side these are far more doubtful and contingent: consumers will only gain if they change their consumption pattern and reduce their overall consumption based on the information available to them by the new technology.
The below cases aptly show the importance of consumer education and awareness to realize the actual benefits of smart meter deployments.
- Pacific Gas & Electric (PG&E) in California which has not focused on up-front consumer engagement while deploying smart meters in the consumer premises had over 600 complaints filed with the California Public Utilities Commission (CPUC) regarding unexpectedly high bills in its service area by the autumn of 2009. An independent investigation later found out that there were no faults with PG&E's smart meters. This consumer backlash resulted in increase in PG&E's expenses from $2.50 -3.0 per meter to $7.6 per meter.
- Three largest transmission and distribution service providers in Texas (i.e. Oncor, CenterPoint and AEP Texas) noted an increase in the customer complaints related to higher electricity bills. The increase in complaints was originally attributed to new smart meter installations by media and public but the real reason was abnormally cold winter in Texas. The whole episode has impacted the reputation of the utility leading to financial losses due to unavoidable damage-control cost.
- San Diego Gas & Electric's (SDG&E) used proper communications plan and built forward thinking relationship with consumers and was able to achieve desired benefit from smart meter deployments. The communications plan for smart meter deployment was designed to keep customers and stakeholders informed every step of the way and were set in motion to deliver maximum transparency to the customer. This helped SDG&E to build brand loyalty and implement the full range of technological advances.
- Austin Energy, a small utility based in the state capital of Texas through its customer outreach program using a number of communication channels has demonstrated how gaining early customer acceptance can impact the overall success of smart meter deployment. Austin Energy used website, television and newspaper media to disseminate information about the deployment; postcards were sent to each customer prior to an installation visit. By engaging consumers early, pre-empting customer complaints, and dealing with concerns efficiently, Austin Energy avoided the lawsuits and other damage-control cost.
In this paper we will try to put across framework for below listed three important areas of solution deployment:
- Stakeholder Analysis
- Technology Adoption
- Resource Allocation
Firstly we will use stakeholder analysis to identify key stakeholders and will use it for their effective engagement. In the later sections we will explore the technology maturity of the program elements for its adoption. We will also demonstrate how aggregate project planning can be used for effective resource allocation across smart programs envisaged for utilities.
Various stakeholders involved in utilities smart solution deployment include but not limited to the following:
- Federal Government
- IT Partners
- Hardware Suppliers
- Senior Management
- Standard Bodies and Consortiums
In our study we tried to analyze the various stakeholders involved in these smart programs on below defined perspectives:
1. Potential for threat and cooperation to the program.
2. Degree of understanding and commitment to the program.
1. Diagnosing the potential for threat and cooperation to the program
The two dimensions - potential for threat and potential for cooperation as depicted in Figure 1 permit us to classify the stakeholders into four types:
Type 1: The Supportive Stakeholder
The ideal stakeholder supports the organizations' goals and actions. Such a stakeholder is low on potential threat but high on potential for cooperation. The utilities' senior executives, the environmentalist, IT partners, Standard defining bodies and hardware suppliers will be supportive during initial kick-off and all through the smart solution deployment stages. The best strategy for the success of the program is to involve the supportive stakeholders in all relevant issues and encourage their cooperative potential.
Figure 1: Stakeholder Analysis in Utilities Smart Meter Program Deployment
Source: Academy of Management Executives, 1991 Vol. 5 No. 2
Type 2: The Marginal Stakeholder
Marginal stakeholders are neither highly threatening nor especially cooperative. Although they potentially have a stake in the organization and its decisions, they are generally not concerned about most of the issues. Stakeholders of this kind may include stockholders and professional associations for employees. The effective strategy over here is to continuously monitor these marginal stakeholders. If the issues involved in the decisions are likely to be salient to these stakeholders then utility companies should try to increase their support or to deflect their opposition.
Type 3: The Nonsupportive Stakeholder
This type of stakeholder with high on potential threat but low on potential cooperation is the most distressing for an organization. Typical nonsupportive stakeholders include competing organizations, employee unions, possibly news media, and local government. The best suited strategy over here is to defend against them and try to reduce the dependence that forms the basis for the stakeholders' interest in the organization.
Type 4: The Mixed Blessing Stakeholder
The mixed blessing stakeholder with high on potential threat and cooperation plays a major role. Stakeholders of this type would include employees, consumers, and other organizations with complementary products or services. The most influencing mixed blessing type of stakeholder for a utility is its consumers. They can be best managed through collaboration and participation.
Customer engagement is going to be a top concern among utilities executives and we have to make sure the customers are educated and brought on board from the start.
Traditionally consumers interact with utility across channels like phone, emails and call centers etc. - in essence somewhat controlled interaction but now a days the interaction no longer remains controlled as consumer can express himself and his complaints over social networking sites putting across various review comments and complaints. Moreover the concerns on data privacy and security among customer watch groups are also hindering the smart program rollout.
Utilities should generate interest among consumers in changing the consumption behavior. This can be achieved by offering financial incentives and implementing diverse marketing programs catering to various segments of consumers.
To succeed in smart programs deployment, utilities must build a new core competence in consumer centricity that addresses the below specific points:
- Consumer Interest - Understand consumer preferences, build consumer education program and generate interest among consumers.
- Consumer Reach - Use multiple channels for enhancing and improving consumer reach - including in-home visits, social networking, consumer portals, mailing services - for effective engagement with consumers.
2. Diagnosing the degree of understanding and commitment to the program
Figure 2: Consensus - Understanding vs. Commitment
Source: Academy of Management Executives, 1992 Vol. 6 No. 4
Combining dimensions of consensus based on the degree of understanding and degree of commitment results in four general possibilities as depicted in Figure 2. When stakeholders have common understanding and common commitment strong consensus exist. If they are highly committed to something, well-intentioned but ill-informed blind devotion result, if stakeholder is well informed but unwilling to act we call this condition informed skepticism and finally when neither shared understanding nor commitment is high, weak consensus exists.
There are basically two fundamental considerations which will decide what type of consensus is appropriate: (1) degree or magnitude of change and (2) role of the various stakeholders in the decision making process. While each situation can be unique, utilities should try to bring in strong consensus by improving the understanding and enhancing the commitment from the various stakeholders.
- Improving Understanding - Increase the formal opportunities for communications among stakeholders. Regular workshops on shared understanding of the program should be planned.
- Enhancing Commitment - Stakeholders will be committed to program if it serves their interest. Incentives and reward systems should be designed so that it serves stakeholders self-interest. Like in case of consumers, financial incentive program should be designed to encourage participation in demand management.
We should understand the stakeholder diagnosis is an ongoing activity. We constantly need to assess stakeholders' interests, capabilities and needs. Like for example consumers who were initially falling into the mixed blessing type of stakeholders can eventually move to non - supportive type during the course of the program based on the events related to billing discrepancies and lack of understanding of the program. Although the top management in the organizations knows the importance of smart program but there will be concerns among employees related to security of their job. The field force might believe that smart technologies will introduce a high level of supervision into their day to day operations and this may lead to organizational resistance and non-cooperation from employees.
Figure 3: Need vs. Technology Maturity Analysis
We need to understand if the mixed blessing type of stakeholder is not effectively managed, using a collaborative strategy; it can easily become a non- supportive stakeholder.
As mentioned in above paragraphs various mechanisms that utilities can put in place to not only limit the mixed blessing type stakeholders to move to non-supportive stakeholders but change their relationship from a less favorable category to a more favorable category include the following:
- Customer education drives
- Webinars on smart program benefits
- Relationship building using social networking
- Segmented consumer marketing programs
- Use television and newspaper media to disseminate information
- Financial incentives to participate in demand management
- Trusted advisory for security and data privacy
TECHNOLOGY MATURITY AND ADOPTION
The maturity level of the technology is very important for deciding its adoption. Most technologies progress through the lifecycle in which early adopters use the technology when it is new and additional users begin to use if it addresses their needs. As quoted by Geoffrey Moore, "a market is a set of actual or potential customers for a given set of products or services who have a common set of needs or wants, and who reference each other when making a decision. A condition of need is the result of a specific want or requirement from similar well defined set of buyers."
Figure 3 depicts graphical representation based on need diversity and technology maturity of some of the major initiatives (meter data management, electric vehicle, self-service portal, demand side management and mobile work management). Below is the illustration of the various scenarios:
Scenario 1: Low Need Diversity, Low Technology Maturity
Mobile work management falls in this category. Field force in utilities has almost common set of needs for work and fault management but the mobile technologies are still evolving with technology standards like code division multiple access (CDMA), global system for mobile communications (GSM), 1G, 2G, 3G and 4G.
Scenario 2: Low Need Diversity, High Technology Maturity
Self-service portal and demand side management fall in this category. Web self-service has standard set of requirements like online bill payment, account summary, etc. and this is tried and tested in other sectors like telecom, retail and finance. Demand side management by flatting the demand and reducing the energy spikes is very common need among utilities and saves them from procuring power from power market in high price to meet their peak demands. The current energy efficiency programs using demand management are based on set of standards defined by the regulators in the utility market.
Scenario 3: High Need Diversity, Low Technology Maturity
Meter data management (MDM) and plug-in hybrid electric vehicle fall in this category. Utilities have diverse set of requirements for meter data management varying from plain vanilla capabilities to advanced analytics capabilities. The vanilla requirements include functions like cleansing, calculating, data persistency and dissemination of the energy consumption data while advanced analytics requirements include functions like business intelligence, revenue protection analysis, distribution planning, and support for demand response and energy efficiency initiatives.
We also know that commercial-off-the-shelf (COTS) MDM products are yet to achieve an appropriate level of configurability and require extensive customization. Similarly plug-in hybrid electric vehicle is an evolving concept with diverse requirements and technologies varying from battery operated vehicle to hybrid model.
There is always a dilemma between adopting a more mature technology to meet utilities business and technical requirements despite the risks of earlier obsolescence or go with adoption of less mature technology and allow for future expansion of features and functionality. But utilities generally prefer to adopt the more mature technologies so that they do not have major impact on their business as usual operations. Utilities should actively participate in the standard developing organizations, related user groups and technology alliances during the early phases of technology development so as to align the technology solution to meet real needs on the ground.
Within utility market the ability to reference other examples of successful implementation is very important.
AGGREGATE PROJECT PLANNING FOR RESOURCE ALLOCATION
For utilities consumer indexing and asset mapping are the baseline requirements for any smart programs. CIS and GIS are the main supporting systems for consumer indexing and asset mapping. CIS represents a core investment focused on supporting a "run the business" strategy. CIS can account for up to one-third of a utility CIO's IT application operations and maintenance budget.
Figure 4: Aggregate Project Profiles for Smart Programs
SCADA is an integral part of industrial control system and used by utilities to control dispersed assets using centralized data acquisition and supervisory control. The enhancements in existing outage management system and work and asset management system will provide the improved benefits over the traditional functions.
The advanced metering infrastructure (AMI) with enablement of interval level metering data using smart meters will help utilities to drive the various demand side management and customer self service capabilities in utilities. The meter data management system will process the large volume of data generated by AMI and will provide the billing determinants to customer information system.
Mobile workforce management (MWM) using automatic vehicle locator (AVL) will provide new benefits for the field forces. Utilities can enhance the customer service by mobile enablement of work and fault management. Home appliance network management, distributed energy resources and plug-in hybrid electric vehicle (PHEV) are the next big things for utilities.
Utilities can classify the projects as support, derivative, platform and breakthrough as shown in Figure 4 and decide on what type of resources each of the projects require, determine the total amount of money available to spend on projects in each of the above categories and how many do they have the capacity to execute. This will help the utilities in prioritizing the projects based on the strategic needs and business requirements.
The aggregate project planning will help the utilities to decide the appropriate resource allocation across the various development projects under the smart programs.
Utilities should identify the key stakeholders who are going to influence the smart program deployment. Utilities must do the critical assessment of these stakeholders: (1) their potential to threaten the program and (2) their potential to cooperate with it. Utilities should try to change their relationship from a less favorable category to a more favorable category.
As demonstrated above the consumers are going to be the key stakeholders in the deployment of the smart programs and collaborating with them will be a key to ending consumer backlash for smart metering programs. Building consumer centricity by addressing their interest and reach will decide the sustained value realization of all smart programs.
Moreover utilities should take up projects under smart programs step-by-step based on the aggregate project profile and availability of the budget and key resources for allocation to these projects. Utilities will be able to set aside the pool of resources for each type of project through use of aggregate project planning (APP) mechanism, derivative project ideas will compete for funding against other derivative project ideas, but will never compete for funds with breakthrough or platform ideas. Using aggregate project planning we can introduce discipline, structure and consistency to the judgments that executives need to make.
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