A recent article in the Smart Grid library asked whether utilities will thrive as trusted advisors or survive as infrastructure? I think this is a particularly interesting article as I have long wondered whether utilities will become the “banks” of the future, i.e. slow moving but necessary parts of the economy, or more like “Fidelities” of the future, i.e. highly profitable, consumer oriented market enablers. Of course, we believe that successful players will become more like the latter, but here is another view on the situation:
The Smart Grid delivers disruptive technologies and services that will impact the entire electricity value chain of generation, transmission, distribution and consumption- meaning utilities and consumers. Utility operations in generation, transmission, and distribution will be disrupted as work processes, business models, and service expectations change. Overall, these disruptions are beneficial. For instance, utilities know that Smart Grid technologies that automate distribution operations will save money, improve grid reliability, and may extend equipment life through improved maintenance.
But when it comes to consumers, this link in the electricity value chain is lacking in knowledge about the benefits that the Smart Grid delivers. This knowledge gap has profound implications for utilities. A recent study from EcoAlign shows that consumer awareness has the potential to go a long way in reducing energy consumption and reducing energy bills (with a concomitant reduction in CO2 emissions). In fact, the EcoAlign study reveals that a stunning 87% of the respondents would like utilities to suggest ways to reduce their bills. This is the opportunity and the challenge for utilities.
Utilities can play a distinctly new role with their commercial, industrial, and most especially residential consumers. Utilities can take on the role of “trusted advisors” with consumers to educate and enlighten them on products, services, and simple behavior changes that reduce energy consumption without impact to lifestyles, comfort, or health. Trusted advisors can build interactions or engagement with consumers and move beyond the traditional delivery of electrons. Why is this important? Historically, the lifetime value of a consumer used to mean that utilities supplied electricity, gas, and/or water, and consumers reliably purchased it, at steadily growing rates of consumption year over year. However, with consumers expecting utilities to suggest ways to reduce their bills, which means reducing their consumption, lifetime value would be a diminishing number. That’s not exactly a thriving business model or one that excites a lot of investors.
Utilities that become trusted advisors will have a portfolio of different services beyond the safe and reliable delivery of electricity. These new services go well beyond the rollout of Demand Response (DR) programs to residential consumers. New services may include Home Energy Management Systems (HEMS), home health or wellness, or water management services. Services like these offer intriguing possibilities for utilities to increase the lifetime value of consumers. And even services that utilities are more accustomed to offering, such as energy efficiency and DR, benefit from utilities taking a more active educational role with consumers.
A 2010 report from the Department of Energy’s Lawrence Berkeley National Lab titled “Coordination of Energy Efficiency and Demand Response” studied opportunities for utilities to offer both energy efficiency and demand response programs as a powerful combination to reduce overall and peak demand. The conclusion was that the payoffs are substantial, but since these are complicated topics, program participation will require consumer education. Utilities structured to operate as trusted advisors can provide that education, and will be the organizations that thrive in the future Smart Grid. Otherwise, utilities may simply deliver electricity, gas, or water and watch other businesses sell services to help consumers manage consumption and other home and business-based activities.
Utilities will have to reorient their operations to take on the trusted advisor role. Part of the transition includes a thorough communications strategy for internal and external constituencies. This will be one of the discussion topics in an upcoming webinar on June 21 titled How to Deliver Communications and Education about Smart Grid Benefits to Utility Customers. Join us to learn more about Smart Grid transformations.
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