Building the New SG 2.0 Infrastructure (IV) – “Where Are My Customer Benefits?”

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Dominic Geraghty

 

This dialog discusses the sixth success condition for SG 2.0 – the electricity customer.

Customer’s electricity bills will continue to increase because SG 2.0 needs new iX.

Since the NPVs of AMI investments are less than zero, they cannot reduce customers’ bills. It is the SG 2.0 applications that create NPVs greater than zero.

If the current AMI infrastructure were capable of enabling SG 2.0, then the deployment of SG 2.0 applications would gradually lead to reductions in customers’ bills, everything else remaining constant.

However, new iX is needed to support the roll-out of SG 2.0 applications.  Customers’ bills will increase to pay for it. The increases will be offset, over time, by the reduced operating (short-term) and capital (long-term) costs enabled by SG 2.0 applications sitting on top of the new iX (iX 2.0 in our standard definition). Generally speaking, these applications have the potential to provide good returns to most SG stake-holders.

Of course there are other non-SG 2.0 reasons why customers’ bills will likely increase – but that’s a topic for another dialog.

Don’t we need to distinguish between residential, commercial, and industrial customers’ interests/needs for SG 2.0 applications?

There’s a great book by Neal Stephenson, “The Diamond Age”, set in the near future, in which essential utility services, the Internet, and chemicals essential to compiling matter are delivered through a “pipe” called “The Feed”. The services are viewed as commodities with price proportional to quantity used. No other thinking or action is required on the part of the consumer.

Isn’t that what residential electricity customers really want? “Don’t bug me – I’m too busy living and making a living -- automate your services so as to give me a price optimized around the resources and assets required to deliver, and use, electricity (“The Feed”) – isn’t it an essential public good? I'm entitled to receive it at least cost, tailored to my particular behavioral choices.” Don’t residential consumers want a bill-optimized commodity? With the help of social networking today, i.e., mass individualization, this tailored billing should be possible to achieve in an SG 2.0 environment.

The sustained value of a hands’-on residential energy management system is questionable when a small amount of learning (about an individual’s energy needs and behavior) coupled with real-time capability can enable a permanently-automated system that minimizes the electricity bill.

We have to do a better job educating the electricity customer about the benefits of SG 1.0 and SG 2.0

To engineers, educating customers is what writing a users’ manual is to software engineers -- boring/tedious work -- the fun is in the technology development, but putting it in writing is sheer drudgery (!).

If this is a generally true assertion, it has ominous implications because, to date, the AMI and the Smart Grid initiatives have been mostly driven by technologists. Utility engineers pride themselves on delivering reliable service, and demonstrating and implementing beneficial new technologies.

Customer-focused communications and education have been given nowhere near the same level of attention. The SG 1.0 deployment to date has hardly been a customer-needs-driven activity.

A compounding factor is that the SG development and deployment engineers are not responsible for business case analyses of SG 2.0 applications. As we’ve said time and again, the AMI and SG 1.0 business cases have turned out to be over-optimistic, and promised benefits have not been delivered, because they couldn’t have been.

The absence of tangible benefits, exacerbated by insufficient education about the workings and potential benefits of the SG, have been creating rising electricity customer opposition to the SG as a whole.

To be successful, SG 2.0 applications need to be more customer-needs driven, electricity customers need to be better educated, and vendors and utilities have to deliver on promises made.

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