Understanding and Connecting Smart Meters, Smart Grids, and Smart Markets.
- Lynne Kiesling
September 16th, 2010
Via GigaOm, an interesting report on the power and potential of deploying demand response programs via an Opt-Out program. The article below lays out the arguments in a cogent fashion; however, from our viewpoint, such a decision would not be necessary if smart markets gave consumers a compelling financial reason and value proposition to participate in smart meter- and smart grid-enhanced demand response programs. In short, give consumers a real reason to opt in to smart grids and you won’t have to worry about using Opt-Out programs to drive participation. Nonetheless, as the article notes:
What if the most successful home energy-saving technology ends up being the one people have to opt out of? Unlike companies using phone service, broadband, home entertainment, security systems and other commercial inroads into the home to promote energy management technology, utilities can sign customers up for programs automatically, unless they actively choose not to join. Startups and green IT giants alike targeting the home energy management space should remember this powerful tool.
Take OPOWER (formerly Positive Energy). The Arlington, Va.-based home energy software startup crunches household and neighborhood energy use and other information to deliver personalized energy-saving tips. It has an online portal, like many in the home energy space. But its primary connection with the consumer is a monthly energy efficiency report that arrives in a utility-addressed envelope — and, critically, customers automatically get this report, unless they tell the utility they don’t want it.
“I think that’s fundamental,” OPOWER’s Ogi Kavazovic told me earlier this month. Only 5 percent or so of utility customers tend to actively engage in home energy management pilots, he said. But opt-out can yield a 98 percent participation rate, since it requires a conscious effort to reject the chance to save on power bills. Starting from this far broader, if potentially far less engaged, customer base, OPOWER can get people to cut energy use by 2 percent or so. That’s low, compared to the 10 to 15 percent energy reductions promised by more high-tech systems — but those higher numbers haven’t really been proven yet in commercial deployments.
Utilities also like opt-out’s increased control — an important factor when customers can’t be relied on to predictably lower their energy use. A recent survey by Honeywell showed two-thirds of customers chose comfort (i.e. air conditioning) over saving money during this summer’s heat wave. Smart meters and home energy platforms can help, but only if they’re hands-off. One such pilot, the PowerCentsDC program, found that customers prefer plans with up-front savings and narrow “critical peak” price windows, rather than those asking them to monitor energy use every day.
Redwood City, Calif.-based EcoFactor is taking this fact into account. The startup has software that balances home comfort and power savings without homeowner involvement, and is teaming up with Texas utility Oncor to cut AC loads during hot summer afternoons, much like Comverge and others residential demand response providers do. Those programs are all opt-in, however — whether technology can make the process invisible enough for opt-out remains to be seen.
In the home energy networking space, startups Consert and Sequentric are aimed at giving utilities direct control over household energy loads. Consert recently raised money from General Electric, Qualcomm and Verizon, suggesting potential strategic partnerships. Sequentric is working with Itron and several utility projects, including Duke Energy’s Charlotte, N.C. “virtual power plant” project to directly manage household loads — though both companies have declined to comment on the relationship.
CEO Jim Rogers has said that Duke wants to “own every piece” of its smart grid, including systems in customers’ homes, though some “consumer-first” comments from CTO David Mohler somewhat contradict that. Duke is also working with Cisco, which launched its Home Energy Controller this summer. It will be interesting to see if Duke chooses to use an opt-out model to deploy it.”
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Based on decades of experience and interest in conservation, Monty Simus believes that a truly “smart” grid must be a “transactive” grid, unshackled from its current status as a so-called “natural monopoly.”
In short, an unlocked grid must adopt and harness the power of markets to incentivize individual users, linked to each other on a large scale, who change consumptive behavior in creative ways that drive efficiency and bring equity to use of the planet's finite and increasingly scarce resources.