Shrinking bills: a smart grid misnomer?
We touched a nerve on Monday when I asked a basic question in a column titled "Is `Saving Money' the Right Smart Grid Pitch?"
The occasion was a couple newspaper articles on Commonwealth Edison's grid modernization work in Chicagoland.
I based my premise, essentially, on the lead sentence of one article from the Joliet Herald-News, which said: "If all goes as planned, ComEd customers should see their bills shrinking and their lights staying on more often over the next decade."
So my question was simple and apt: "shrinking bills" have been touted since Adam and Eve and have yet to occur in this solar system, while storm-related outages in the Northeast last fall led to resignations, investigations and accusations—not "lights staying on more often." (Understood, many implementation of systems designed to give consumers energy management options and quicker outage restoration remain in pilot stage. My thesis was more around touting expected benefits.)
Has hype outrun reality? Have smart grid projects over-promised and under-delivered? Is the power industry putting its credibility at stake with ratepayers and regulators?
Our readers had some comments on this topic. They were not directly related to my question but that's the beauty of a diverse readership—you get new, related lines of thinking.
"Utilities make improvements all the time to their generation and distribution systems," observed Milton Scritsmier of Boulder, Colo. "Some work, some don't, but eventually the industry figures out what does. But this is all done behind the scenes. For example, how many people know about the increase in energy efficiency at nuclear plants over the past decades? Outside the industry, who really cares? So I don't see why smart grid should be any different. Rather than treating it as one big fully birthed concept, it might be better to move gradually with less fanfare. It's only the pressure of generating Green PR that causes this massive confusion at the consumer level."
Longtime reader and consulting engineer Jack Ellis of Tahoe City, Calif. had this to say:
"While I think there needs to be a value proposition behind investments made under the rubric of `smart Grid,' it has to be tempered with some realism. In California, many proponents of restructuring made the same claim, that bills would be lower. That's an absurd promise because under the `regulatory compact,' bills could rise if fuel prices and other costs went up, and in fact they did, allegations of manipulation aside.
"However, there's another insidious effect few people seem to really understand," Ellis continued. "Under current law, vertically integrated utilities are entitled to recover all of their reasonably incurred costs, which means initiatives that reduce demand and/or energy use won't necessarily lead to any meaningful change in consumer bills. The aggregate impacts can be large, but the impact on individual consumers, especially in the residential class, can be almost too small to notice.
"I still think interval meters are a good idea, albeit with the ability to record consumption on much smaller intervals than an hour," Ellis concluded. But I also think there needs to be more focus on consumer education and simple, intelligent pricing that recognizes the time-varying cost of electric production. But of course, it's much easier to make somewhat extravagant promises that are supposed to unfold over a long period of time and hope folks forget those promises before the reckoning comes."
John Cooper, co-author of The Advanced Smart Grid and partner in NextWatt Solutions, posited a few fundamental challenges for the power industry in conveying value propositions.
"Lost in the focus on technology and smart grid are two key challenges facing utilities: their historically poor marketing and their lack of innovation," Cooper wrote on our forum. "True, [utilities] haven't been asked to do that, but their woes today can be directly tied to those two deficits.
"The supreme irony ... is that consumers don't value [electricity] more than they do," Cooper continued. "What utilities deliver daily to households and businesses has become as essential as oxygen and water, and yet the relative price one pays still barely amounts to how much one spends monthly on discretionary entertainment or consumer goods—two great successes! Electricity remains the bargain of the century, when one reflects on what we do with it. But people remain fickle, indifferent to electricity as long as it works, then lashing out at utilities in the context of a rate case ('monopolistic money grabbers') or outage ('incompetent bureaucrats'). Ignorance and conditioning over time have led consumers to devalue electricity and the utility that delivers it.
"The good news is that it's not too late to turn the ship ...," Cooper concluded. "We'll need to imagine a new business model more in line with today's economy, oriented around tailored services, compelling value, innovative applications and customer satisfaction. When utilities start thinking of the grid as one tool of many to deliver energy services, when they start leading the regulators and consumers to a value-driven paradigm, then we will know we are on the path. We have a long way to go as a society to reconsider the role and value of electricity, but the goal is certainly within our means to achieve. The first step is recognizing the problem."
Finally, a researcher described a journey that may pay dividends in this area.
"A research consultant recently traveled around the U.S. ... on behalf of the Smart Grid Consumer Collaborative (SGCC) to ... listen to consumers talk about their reactions and perception toward smart grid and smart meters and their interest in new smart grid-enabled programs," our correspondent wrote.
"What we heard: consumers want more from the smart grid than just `bill savings.' Consumers find many smart grid benefits important. Some are considered so important that consumers are willing to pay for them. Prominent among them are: `Improved reliability and restoration,' `increased access to renewable energy' and `availability of better usage information and new pricing options.' Yet, no two consumers are alike, even though they all consume electricity.
"Our research findings have also shown that the benefit or set of benefits to be stressed in communications should vary by consumer segment," our correspondent concluded. "The `willing to pay for' benefits varied from segment to segment."
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