Next Step for the Smart Grid: Winning Over Consumers

“The smart grid means many things to many people,” said Mark Farber, co-founder of Evergreen Solar and now a consultant with Photon Consulting, at the Ceres Conference in San Francisco, Calif., last week. Indeed, and given that Uncle Sam plans to spend $4.5 billion developing and constructing one, it’s time to start bridging some of the gaps between what it means to utilities, technology companies and grid wonks — and what it means to plain old energy users. Making the smart grid’s most basic elements — two-way communication between utilities and energy users, advanced control systems and smart devices — appealing to consumers could be key to its success. So how can smart grid backers make the investment look more like a boon, and less like a boondoggle for those on the other side of the meter?

For many utilities, adding information technology and two-way controls to electronic devices and appliances represents a potential gold mine of efficiency and a workaround for building expensive new power plants. As Farber put it, “A button is as close to a dispatchable power plant that you can imagine.”

For consumers, however, the benefits of the smart grid have proven to be less obvious, despite promises that it will offer more insight and control over their energy use (and spending). “It turns out customers don’t actually want utilities to turn off their appliances,” said Farber, referring to the two-way control technology that would allowing a utility to cut power use when demand strains supply.

This two-way control of appliances is part of what Michael Hindus, a Pillsbury Law partner and energy regulation expert, has called “the essence of the smart grid,” as it could help eliminate the need for more power plants by reducing peak demand. (Utilities currently need to have enough generating capacity to accommodate spikes in demand during hot summer days, for example. Lower spikes let them get by with less overall capacity.) But if utility control of home appliances represents the most tangible effect of the smart grid buildout for consumers, then the Big Brother and inconvenience factors — even if they can override the utility — could outweigh consumer interest in saving energy, doing right by the environment and maybe shrinking electricity bills.

A pilot project launched just over a year ago in the town of Marshfield, Mass., suggests integrating smart grid controls with other technologies that have more consumer appeal may help bridge the gap. As Farber, a member of the investment review committee for the Massachusetts Green Energy Fund, explained it, Massachusetts utility NSTAR decided to use the 25,000-person town as a testing ground for achieving zero load growth. Rather than building new power plants to meet rising demand, NSTAR is working to put a ceiling on demand — mostly through incentives for efficiency upgrades, plus Commonwealth-wide rebates for solar panel installations “to get people on board.”

With an integrated approach, NSTAR has also managed to woo some customers into giving the utility control over their thermostats. The utility installed about 500 direct load control, or DLC, thermostats, Farber said. Some 200 of those customers, or 40 percent, signed up to have utilities control those devices — a penetration rate Farber considers good. In the last year, he said Marshfield residents have installed significantly more photovoltaic systems and opted for more energy audits (NSTAR offered them for free) than any other town in the state.

NSTAR’s approach in Marshfield — putting out an array of options, including some more glamorous ones (in this case, solar panels), along with the utility favorites — offers a start. The next step is to track the success of the program based, at least in part, on tangible customer benefits: savings, convenience, and yeah, the green factor. When it comes to designing and deploying the smart grid, “Customer benefit should be top line,” said Richard Sedano of the Regulatory Assistance Project, who also sat on the Ceres panel. “Then figure out how to make it a sustainable business for the utility.”

This article also appeared on BusinessWeek.com.

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