In the mid-1990’s, while serving as the General Marketing Manager for Georgia Power, I had the honor of managing the team of exceptionally bright people that designed an industry-pioneering meter-linked, integrated real time pricing/demand side management program. Today, I understand this legacy system now bills $2 billion annually on the Southern Company system, a utility recognized for its high customer satisfaction.
A key factor in the success of this campaign was an outreach program that identified barriers to implementation across the fullest range of stakeholders. This process was used to create a systems-thinking model that allowed all participants to exercise their point of view to assess its implications for impacting their goals and the expectations of all other stakeholders. This was both a learning and reconciliation process that enabled pricing, program and information system design, and acceptance of the designs by the consumer.
I highlight this experience as a reference point for reporting on the GreenBeat 2009 Smart Grid Conference and my perception that the smart grid is now entering turbulent waters created not by the technology, but by the marketing of the technology.
The GreenBeat 2009 Smart Grid Conference was a great opportunity to hear presentations from the leaders in the smart grid’s development, from Vice President Al Gore, to Duke Power’s CEO Jim Rogers to a litany of experts in information technologies, including senior officers from Oracle, Google and Cisco.
The vision of inserting the software and technology offered by the Information Age to create a smart grid was obvious to all attendees. But this is an industry in search of its “cost less, mean more” business model. The utilities were conflicted over how they were going to make money if their customers used the smart grid to use less electricity (or use electricity supplied from a roof top solar system) versus their excitement over a potential “killer app” of new revenue generated from plug-in electric cars. And the technology companies were both excited about the huge dollars tied to installing a smart grid and sanguine over the slow and uneven pace of change inherent in a regulated industry.
The 800 pound gorilla in the room that kept inserting itself during the Q&A period was the residential consumer. In a regulated industry the residential consumer is also a motivated voter when the lights go out or when they receive an unexpectedly high monthly bill. What has the industry on edge is a lawsuit in Bakersfield, California, filed on behalf of customers who received higher bills after the installation of smart meters.
Market research I have participated in concluded that after about three days of exceptional summer heat a residential customer will crank-up their air conditioner to their satisfaction. Utilities call this peak demand and it is their highest incremental cost of operation. Smart metering enables a utility to charge for this demand on an hourly basis. As an economist I support this type of pricing to maximize efficiency. As an electric utility veteran, I also know that just dropping time based pricing upon residential customers without a very compelling high-bill mitigation path that enables them to enjoy both a comfortable home and reasonable electric bills is the recipe for a consumer revolt.
And that is where the smart grid now stands. I have a smart meter. The brochure that the utility placed on my front door after installing the meter does not have the word “price” anywhere in it! It talks about how, in the future, I will be provided improved information that I can use to better manage my electric bill. That is not a “cost less, mean more” solution. It is a time bomb waiting to explode, if I learn via my electric bill that I have to pay more to continue using electricity the way I have historically used it.
I would STRONGLY suggest those promoting the smart grid read my book The Secret Green Sauce. The book does not mention smart grids but it does outline the best practices being used by actual business for growing green revenues. These best practices suggest consumers will embrace the smart grid if it is a path to “cost less, mean more” solutions and if they are supplied with “Know it, Embrace it” marketing outreach that engages them in the technology’s design and implementation. Otherwise, the smart grid may end up being more of a consumer revolt than a technology revolution.