Three steps to a smarter grid
- Posted on May 21, 2012
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Like many journalists who venture opinions, I fall into the category of "pundit." Though the term's original meaning was "learned," it has been debased such that it's used today to mean the opposite. That suits me. I'm free to argue ideas without having to test them and it automatically disqualifies me from running anything more complicated than a kitchen blender, let alone a utility.
But we've heard from various sources over the past year or so about how utilities should be facing the future. So I'll just stitch together the musings of experts we've interviewed into a three-step formula for success in grid modernization. And I swear I'll stop using the term "smart" (except in headlines, where Google spiders find it attractive, helping readers find us).
Step One, craft a (future) business model.
It seems I've been hearing this for some time, but when I scoured our archives all that turned up was our recent piece on Greg Guthridge, Accenture's global managing director of retail and business services for utilities, in "Utilities Must Pick a Business Model."
Guthridge also touched upon four basic models in his blog from December titled "Four Potential Business Models for Utility Customer and Retail Operations."
The four models, according to Guthridge, include the "standard provider," the "specialty provider," the "market advisor" and the "full-service provider." The first relies on the simple delivery of inexpensive, reliable electrons. The second includes value-added products and services, but not high-touch consumer interaction. The third aims to retain ownership of the customer, perhaps by partnering with third-party, customer-oriented entities, and assumes the role of trusted advisor for retail services beyond electrons. The fourth model takes an aggressive approach to control all energy-related products and services entering the home.
It shouldn't be difficult to envision your organization fitting into one of these models, though with multi-million dollar investments on the line, shaping your future is easier said than done.
Step Two, a policy towards customers/consumers. (See Step One.)
I seem to be leaning on Guthridge here, but he does a great job of articulating why a utility's stance toward the consumer may determine its best future business model or why that consumer stance might flow from a chosen business model. In his blog from last November, "What Is the Business Model of the Energy Provider of the Future?," Guthridge wrote:
"Many utilities are evolving in a market context that will encourage using less of their `product' and will see rising consumer demands as well as wider spread adoption of emerging micro generation and smart technologies. With power being generated in a more distributed manner, the century-long model of centralized electricity production may be significantly disrupted and with it, utility customer operations.
"The one-way market in which utilities operate as a hub will transform into multiple two-way interactions among consumers, utilities and other new entrants into the space such as traditional retailers, appliance producers and other home service providers.. No one company will own energy consumers, and there is no longer any guarantee that, just because you own the commodity provider relationship, you will also own the value of the energy consumer as well."
The organizational changes resulting from these first two steps can be radical and would appear to require careful, deliberate processes. That's harder to envision at an investor-owned utility, but municipal and cooperative utilities are perhaps best positioned, based on their business models, to transform themselves into customer-centric service organizations. As Paul Lau, assistant general manager at the Sacramento Municipal Utility District (SMUD) recently told me, SMUD pursued this transformation and it involves arduous and time-consuming "process re-engineering."
"We are re-aligning our organization again to optimize the customer experience and operational excellence," Lau told me recently.
When Lau added that organizations that do this need to assess their own "appetite for change" because "pushback" is inevitable, one senses the distance, measured in sweat equity, between ideas that sound great on paper and what it takes to implement them.
Step Three, a technology roadmap. (See Steps Two and Three.)
So far, in reporting on grid modernization issues, I've been struck by two options that might be said to precede a technology roadmap: One is to take no action, because deploying interval meters, for instance, does not fit a sensible business case.
We've written about how Dayton Power & Light (DP&L) examined the business case for advanced metering infrastructure (AMI) and found it lacking and, thus, has held off on upgrading its analog meters. (See "Dayton Power & Light: An Exception Worth Considering.") Ironically, DP&L was immediately dinged by local media for not pursuing AMI to improve storm-related restoration times.
The second option is to ensure that you are pulling the most value from your legacy systems, and integrating your existing technology with whatever you add on. That might be called the "You Are Here" spot on the roadmap; it's your point of origin, which may dictate what technology you add and how you add it.
As for the roadmap itself, I recall another Accenture executive, Sharon Allan, sharing some insights on achieving an "operational steady state" that you envision as a result of grid modernization steps. See "Accenture's Sharon Allan: After Smart Meters, What's Next?"
To achieve an operational steady-state, review your business processes, Allan suggested. Envision where you're going to end up, to avoid designing too narrowly.
Allan emphasized three factors in designing a technology roadmap: account for scale, understand the impacts on people and processes and know how to measure and track data to extract business value.
From there, actual roadmaps come in many flavors from many familiar players.
Step Four, stop piloting and go to phased deployments. (See psychiatrist.)
I said there were three steps, but I'm adding a fourth. (Hey, it's my column and I'll lie if I want to, to paraphrase Leslie Gore. If you know who that is, you should be retiring soon.) Moving from pilot-scale experiments to deployment at scale might indeed require a little counseling. Or just read the thought piece on this topic by Lisa Wood, executive director of the Institute for Electric Efficiency: "Time to Move Beyond Pilots."
Wood argued that pilots are best undertaken if they are considered the first step in "phased deployments," a use of language but also a mindset that creates the opportunity for incremental steps rather than endless dithering. Sure you need to know whether the technology works, but if that's the goal, you also need to know whether it serves your customers and fits your business model - which should be the first steps, according to my punditry.
Wood didn't actually say that last part, I did. Hey, I'm a pundit, free to sling ideas without delivering a single electron. Good work, if you can get it.
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