Wish lists come in many forms. This time of year, the most prevalent ones are delivered to Santa Claus from children all over the world. But as we close in on the end of the year, now is the time to think big about what promise 2013 could hold.
We’re not talking about a renewed commitment to the treadmill, but rather what could come in the utility and smart grid industry. With a market shifting from just smart meters to increasing deep analytics and distributed intelligence on the grid, now is the time to sit back and dream big.
A wish list is just that, wishful thinking. Some of these wants might be delivered; others could never see the light of day. But that doesn’t stop us from dreaming.
10. Robust Privacy Rules for Consumers
There is a lot of data coming off of smart meters when they are fully turned on. There are a lot of companies that would like to get their hands on that data to design products and offerings to Americans -- as well as others who would look to do harm with that data.
For the millions of Americans that have smart meters bolted to the side of their house, it should come with robust privacy rules that ensure that the information is not given to anyone without their permission.
Some utilities and states, with California leading the way, focused on privacy, with rules to give confidence to consumers in 2012. San Diego Gas & Electric joined Ontario province earlier this year in making “Privacy by Design” the basis for its smart grid deployment.
The issue is not just critical in the U.S., but also in Europe, where privacy concerns are impacting smart meter rollouts. Some would argue that consumers happily log into their bank accounts via a smart phone, and that similar privacy measures are in place on smart meters.
But in many states, privacy rules are not spelled out the way they are in Ontario or California. In 2013, we hope many states will look to early adopters and other industries for robust rules. In some cases, third parties are leading the way with their own privacy rules.
It’s not enough to say that privacy is top of mind; it must be demonstrable. It’s not enough to attempt to be a leader within the utility industry in this area; utilities should strive to lead when compared against other industries. While it will likely continue to be a state-by-state issue, the real wish is that the feds -- and the White House -- put some effort in to ensure that utilities are investing in consumer privacy.
9. Demand Response Moves to Demand Optimization
The demand response market got a lot of good news in 2011, when the Federal Energy Regulatory Commission allowed demand response to receive the same payment as generation resources in wholesale markets.
That critical decision has already led to far more demand response being installed in PJM’s capacity markets, but most of the markets are still figuring out the details of implementing the order.
Some argue the ruling was not the right way to incent the market, because it does not optimize demand response in a digital, dynamic way. During a webinar this fall, Paul Centolella, VP of Analysis Group and former commissioner of the Public Utilities Commission of Ohio, argued that Order 745 is a somewhat distracting market mechanism when the real effort should be in enabling demand response in every facet of our lives, rather than a system that only reduces demand during peak.
Earlier this month, there were some glimmers that some of that is moving forward. California’s three big utilities are getting behind OpenADR 2.0, the latest version of an open standard for turning buildings, motors, microgrids and other distributed forms of “demand” into grid assets.
Of course, demand response can do more than play in capacity markets, although rules need to be in place for load shedding to take a bigger role in ancillary markets. OpenADR is working on its 2.0b standard, which will allow for fast-response times that would work for spin and non-spin markets. None of this will be totally implemented in 2013, but we are wishful for more action -- and not just in California -- and meaningful pilots.
8. Regulatory Innovation
While on a panel at the National Town Meeting on Demand Response and Smart Grid, this journalist noted that it’d be great to see a little regulatory innovation to match -- or spur -- utility innovation and move the entire industry into the 21st century.
One of the other panelists noted it was sorely needed, but urged me to not hold my breath.
At conference after conference, there’s a serious conversation about moving utilities into the 21st century. Year after year, there is a nebulous agreement that regulation -- which varies across the 50 states -- needs to change too.
And there the conversation stops. At a conference at the end of 2011 that hosted a panel of regulatory commissioners, there were few tangible suggestions on how or when we would see a complete overhaul of the regulatory structure, although there was a palpable feeling in the room that everyone is craving it -- even the regulators themselves.
To encourage efficiency within utilities, decoupling kilowatts from earnings is still necessary in some states. One group that is working on this issue, Utilities 2020, notes that there doesn’t have to be deregulation, like the Texas market, to move the industry forward. Others argue that legislation needs to drive regulation, as it is doing in California’s smart grid market. Of course, in Illinois, it’s been messier.
GTM Research smart grid analysts were particularly keen on regulatory innovation. “We need clearer risk management policies from public utility commissions regarding proactive replacement of assets versus either continued run to failure or online monitoring solutions,” said smart grid analyst Ben Kellison.
In fact, the entire issue of how investment is recovered, and how benefits are calculated, is sorely in need of innovation. Whether it’s more favorable treatment for ongoing services such as cloud-based solutions that can reduce operating costs or integrating societal benefits into smart grid investments, there are a lot of areas to improve.
We’re wishing for some out-of-the-box thinking from at least a few state regulators in 2013, but we’re not holding our breath.
7. Dynamic Pricing Training Wheels
Just like a childhood Christmas list, it’s important to have a few things on your wish list that you’re pretty sure you’re going to get. It can’t be all unicorns and trips to Hawaii. There has to be a new book or pair of slippers on there to hedge your bets.
Many utilities talk in hushed tones about the desire to move customers to different pricing plans. If this wish is spoken too loudly, backlash ensues from regulators, community organizations and lobbying groups.
Backing away from the fight, utilities are instead offering retooled peak time rebate programs as smart meters are installed. The programs are all carrot and no stick, and allow customers to get a feel for just how much energy they can shift.
Pepco, San Diego Gas & Electric and Baltimore Gas & Electric are just some of the big-name utilities using two-way thermostats and/or smart meters to enable new peak time rebate programs going into next summer.
The utilities also offer customers access to their energy information via a web portal or paper reports. Companies like Opower, Silver Spring Networks and EnergyHub are also beefing up analytics to manage pricing programs.
Eventually, the programs could help inform other types of pricing schemes that could be beneficial to customers. It doesn’t have to go from all carrot to all stick, either. Time-of-use pricing, for example, could come with multi-year price guarantees, argues Ahmad Faruqui, principal of The Brattle Group. The idea of bill protections would certainly soften the blow as customers become more comfortable with the idea of new ways of paying for electricity.
Oh, but then there’s a little issue of regulatory innovation to allow for major changes to pricing options for the residential sector. (See No. 8.)
6. Big Data Analytics
While we’re on the issue of industry advancements already in motion, let’s put big data analytics on our wish list.
We’re not alone; software companies large and small are chomping at the bit for utilities to embrace big data opportunities. Oracle laid out the promise, and shortcomings, in a report over the summer. The survey of 151 North American utility executives found all kinds of interesting disconnects between the intelligence being embedded into the grid and how that is being translated and analyzed in back offices.
Many utilities are collecting data from smart meters and grid devices, but not all of those collecting it are using it. When Greentech Media reported on the survey, Linda Jackman, group vice president for Oracle’s utilities global business unit, noted that as some deployments are further along, utilities will turn on more capabilities.
That means that, by default, 2013 will see more utilities doing interesting things with the data they’re getting. But it’s just the beginning. Many utilities with smart meters don’t have meter data management platforms. Some can’t afford them.
The move to more cloud-based services could help drop the cost in 2013. Vendors are also increasingly focused on offering enterprise-level data services, which touch various parts of the utility, rather than just billing or operations, for instance.
This is one area where M&A will also likely continue in 2013. At the end of last year, Siemens picked up eMeter. Just after that move, Landis+Gyr picked up Ecologic Analytics. Oracle recently snagged DataRaker. With distribution automation projects along with meters from stimulus funds still being installed, the acceleration of the big data analytics market is not just a wish for 2013, but a pretty sure bet. Silver Spring Networks, which offers a complete smart grid network -- from communications to software to meters -- is the biggest target in 2013.
How sure of a bet? A new report by GTM Research estimates that the global spend on power utility data analytics will grow steadily in the next decade, increasing from $700 million in 2012 to $1.1 billion in 2013. By 2020, that figure will be closing in on $4 billion.
5. Opt-Out Policies
For every smart meter deployment, there are critics. Some criticisms are valid, while other are based on more dubious assertions. Utility workers in some areas have stories of being physically attacked when doing their job of installing the new meters. One woman pulled a gun on an electric company worker.
Utilities, which already suffer from a lack of trust with customers, have been responding in different ways. Most recently, DTE Energy sued a customer for $25,000 for removing his smart meter and replacing it with an unauthorized analog meter.
One way to diffuse this situation is to have an opt-out policy. Many states already require them. Often, the opt-out involves an extra cost for people who, for whatever reason, demand to hold on to their analog technology.
Utilities that have opt-out policies on the book often find that the opt-out rates are lower than expected. Sometimes people just want a choice. The utility industry isn’t known for delivering consumer choice, so in this case, it makes sense to just offer an alternative.
In some states, it’s a small group of outsiders from other states who are raising concerns about smart meters. So allow the opt-out, and let customers that are genuinely concerned choose not have a smart meter. Ideally, utilities will get savvier about anticipating customer concerns (read: anger) and we hope in 2013, the opt-out issue is so pervasive we don’t even have to think about it.
4. Advanced Outage Management
October snowstorms, derechos, hurricanes, superstorms, hot summers -- the list of weather-related grid strains seems to only increase in scope with each passing season.
One solution is just some old-fashioned grid management, like trimming trees around wires.
But with two-way digital communications and increasingly sophisticated smart grids, there are glimpses into the future, and it brings more sophistication to outage management than has ever been available in the past.
So far, those glimpses haven’t resulted in wholesale changes in storm responses. One reason is that some storms -- like Superstorm Sandy -- were just so large that even the most innovative utilities would have suffered huge damages. The other reason is most utilities just don’t have the whole package of bells and whistles.
The package consists of four key systems, according to John McDonald, director of technical strategy and policy development at GE Digital Energy. Utilities need a distribution management system, an outage management system, a geographic information system and smart metering. Any one of the systems offers some benefits, but taken together, they offer enhanced modeling and response capability.
General Electric even helped one utility incorporate Twitter feeds into its OMS, although we’re not expecting to see that sort of functionality widely deployed in 2013. Instead, we’re wishing that the large storms are followed up by big action from lawmakers -- ideally, demands for the systems above and not just fines. More stringent power quality and outage standards are a few easy steps that would create incentives for utilities to invest in this area.
At the very least, we hope to hear more stories in the new year of how smart grid investments reduced outage times, or prevented them all together.
Let’s go from studies and reports on how insecure the grid is to concrete action on utility cybersecurity on every level.
We are wishing that 2013 isn’t the year where it takes a major attack for this to happen.
2. Home Area Networks, 2.0
We still think that the concept of home area networks, or HAN, is a little off. With the introduction of everyone and his brother into the market (big-box stores, telecoms, alarm companies), the connected home is not just some wonky utility concept.
The connected home, replete with smart appliances and intelligent devices, is still mostly a Jetsons fantasy. But the utility industry has installed a lot of smart meters, about 30 million in the U.S. Everyone loves talking about the Green Button. With the groundwork laid down, we hope 2013 is the year we see some real movement on the home front.
As noted with dynamic pricing, there’s some headway there too. With so many other players getting into the game, 2013 could be the year where we see a new wave of HAN products -- and maybe even new companies -- with innovative offerings.
Some of those new companies will certainly be apps developers. For the Green Button to become something that average people actually use, it’s going to take a clearinghouse (lets call it an apps store) in which developers can showcase their wares.
We’re wishing for some updated standards too.
1. Smart Water Grid
Why does electricity get all of the attention? We saw glimmers of talk about the smart grid for water in 2012, with some water meter contracts and startups with innovative offerings to bring intelligence to water infrastructure, mostly to reduce loss.
It’s a tricky industry, with mostly cash-strapped municipalities in charge of water. But the market is huge and it’s very likely that it won’t be the U.S. that catalyzes this market.
The GTM Scott AMI Market Tracker predicts 2012 will see 5.5 million smart water meters networked, up slightly from 5.3 million in 2011, about a third of the amount of smart electric meters that were shipped in the U.S. in 2011.
But metering is just one technology. The total cost of infrastructure upgrades for drinking water in just the U.S. between now and 2035 is estimated at $1 trillion, according to the American Water Works Association, meaning water companies will have to work smarter. China and India combined will soon spend more than $450 billion in water infrastructure, which includes irrigation, as laid out in both countries’ current five-year plans.
The investment needed is huge; the focus on water is just gaining momentum. We wish that 2013 will be the year that everyone jumps in.