Navigant Research Blog

Data Analytics for the Distractible

— August 28, 2012

The massive rivers of data streaming off of the smart grid can be used for multiple purposes.  They can lead to more effective business, customer, and operational decision-making.  But information graphics are often misused by visual enthusiasts who combine complex data with ornamentation.   If those tendencies penetrate the utility industry, we may be in for infrastructure challenges of epic proportions.

In his seminal work, The Visual Display of Quantitative Information, Edward Tufte described what he called “chartjunk”:

The interior decoration of graphics generates a lot of ink that does not tell the viewer anything new.  The purpose of decoration varies — to make the graphic appear more scientific and precise, to enliven the display, to give the designer an opportunity to exercise artistic skills.  Regardless of its cause, it is all non-data-ink or redundant data-ink, and it is often “chartjunk.”

The biggest danger with chartjunk is not only that it is often downright silly, but that what is trying to be informative may instead be misleading or totally devoid of meaning.

In an earlier blog on SmartGridNews.com, titled “Smart grid data analytics in the real world,” I talked about the dangers for operational decision-making and fatigue if mental models don’t align with the information that is being conveyed.  But smart grid data analytics holds hazards for business stakeholders as well.  In a related example, the Harvard Business Review recently described marketing-oriented “data hounds” as dangerously distractible.

Helping consumers save energy, with targeted programs based on consumption information combined with detailed marketing information, could be among the biggest wins for utilities in driving ROI from their smart meter investments.  With consumer behavior changing so quickly, though, manipulating dials and chasing bright shiny lights could divert utilities from their key strategic goals.   The analyst who buries her head in a data dashboard is likely to miss the big picture, erratically changing direction and wreaking havoc in the organization by zigzagging from decision point to decision point.

Utilities have new opportunities to use advanced analytics to help secure our energy supply by personalizing the delivery of energy.  But it’s critical to remember that the people who use the systems matter as much, if not more, than the systems themselves.  New opportunities in data analysis will drive better decision making, but the business goals must be paramount.  In fact, most program managers will likely underuse data in creating new programs in the initial stages of data availability.  Utilities looking to improve their data analytics capabilities are advised to consider that top performers are those who not only own a statistics book, but are able to filter out the noise that might prevent them from accomplishing their strategic goals.

 

Are Investments in Changing Energy Consumers’ Behavior Worth it?

— July 26, 2012

There’s been lots of dissecting of the slide in venture capital investments in the smart grid sector recently.  According to the “Q2 2012 Smart Grid Funding and M&A” report from Mercom Capital Group, worldwide smart grid investments are weak, with just nine funding deals at $66 million.  The Mercom study notes, “Funding levels continue to be extremely weak in the smart grid sector, a reflection of shifting business models as the industry continues to struggle to understand customers [sic] needs and address customer misconceptions along with security concerns among other issues.”  The average deal size has diminished as well, from $25.4 million in Q2 2010 to $7.3 million in Q2 2012.

However, a closer look at the investments makes me wonder if someone forgot to tell the venture capitalists that it’s too hard to figure out these customers.  Investments in consumer energy management companies Tendril, Navetas, and GreenPocket totaled $23.7 million – almost 36% of the overall investment dollars.

A single point of commonality exists in these companies’ products: the application of behavioral science.  Behavioral science attempts to understand an organism’s (in this case, a human’s) activities and interactions in their natural environment in order to understand their decision processes.  If the natural environment is the home, behavioral science examines the behaviors related to the human use of energy along with the activities that lead to its usage, and draws conclusions about how to help the energy consumer change their energy use.

Inducing consumers to adopt new behavior is never easy, especially when they have anxieties and worries about things like privacy and security.  Many companies are trying, and some seem to be gaining traction.  For the sake of this discussion, let’s consider these recent investments.  What makes investors think that Tendril, Navetas, and GreenPocket have something worthy of millions of dollars?

The Power of Community

Tendril, based in the United States, picked up an $11.3 million investment in Q2.  The company has developed a suite of consumer engagement programs based on its Connect platform that emphasizes an interactive web portal connected to the smart meter and in-home devices.  The platform provides personalized consumer information and recommendations, goal-setting incentives, and social media that include gaming and collaboration with peers.  Customers can take actions, such as choosing savings goals, and receive feedback along with personalized recommendations, expert advice, and social recognition.  Using the power of the social community, the system’s recommendations can be validated and discussed through a dynamic forum.

Navetas, headquartered in the United Kingdom, took on an $8 million strategic investment from Sensus.  Navetas’ product allows consumers to monitor their energy habits through a variety of devices and delivery mechanisms.  The goal is to help consumers understand how their home environment uses energy and how their behavior affects this environment, by providing in-context, highly granular information about energy use in the home.  The technology monitors in-home appliance activity over a period of time, and automatically disaggregates the energy consumption by the appliances in real-time.  Disaggregation is especially powerful, as it enables the consumer to avoid the tedious, inconvenient (and sometimes inaccurate) process of turning their appliances on and off to identify the usage profiles of their energy loads.  Navetas leverages its algorithms to fully integrate the energy management experience into the consumer’s everyday activities.

GreenPocket, based in Cologne, Germany, gained $4.4 million from a Series B funding round.  GreenPocket has developed what it calls the Energy Expert Engine, which interprets and visualizes smart meter data for both residential and business consumers.  Inputs into the analytical engine include weather data, purchasing information, consumption data, and household size.  Energy consumers can control their chosen actuators or sensors through tablets, smartphones or a web portal.  Part of the solution is an application that provides social media linkages, including “social metering” contests that are designed to motivate users to reduce their energy consumption.  Instead of just providing consumption feedback, GreenPocket incorporates interpreted information that is designed to engage the consumer at a personalized level.

Without remarking on the successful likelihood of any of these ventures, I do believe that companies that care about the quality of the interactions between consumers and their understanding of energy use can deliver products that will truly engage consumers in making sustainable choices about their energy use.  Energy management products that help people align their goals, beliefs, values, ideas, and desires will drive action.  Behavioral science may be the bridge that closes the gap between customer intention and sustainable customer action.

 

Nudging Users Toward Smart Energy Choices

— July 18, 2012

In writing the update to Pike Research’s smart grid data analytics report for 2012, I became simultaneously enthralled and spooked.  After all, big data and predictive analytics are not a new phenomenon.  The marketing department at Target can already figure out if I’m pregnant (I’m not) and send me money-saving coupons for diapers.  Surely, with the precision of the data being collected from smart meters, the utility should be able to help consumers understand their energy use to make better decisions.  The power of the human intellect combined with machine-driven pattern recognition has possibilities limited only by the imagination, and can provide significant value to the modernized utility and to society at large.

As technology advances and big data piles up, though, ethical questions frequently arise regarding the importance of data privacy.  What about the acceptable use of smart meter data to influence our actions?

All of a sudden, changing habits and behaviors seems like a complicated business.  Behavioral economists believe that emotions play a significant role in how we make decisions, that often those decisions aren’t in our best interests, and that perhaps it doesn’t help that we’re a little bit lazy.  These same economists explore “nudge theories” that employ suggestions and positive reinforcement that encourage us to alter our decision-making in beneficial ways, often below the level of our awareness.  It’s no surprise that politicians (the United Kingdom even has a “nudge unit”) and corporate culture managers love these theories.  With effective nudging, it should be possible to move individuals away from what many would see as inept decision-making (like overeating, not saving for retirement, wasting energy) toward those that support desirable policy goals (choosing healthy foods, saving money, and turning off the space heater).

Through advanced analytical techniques and predictive analysis, utilities and their service providers now have the potential to not only know who you are and when and how much energy you consume, but also to create a virtual fingerprint of consumption behaviors to discover how likely it is that you’ll be effectively nudged, how best to nudge you, and how hard.  Utilities can provide a consumer with information, tools, techniques, and customized money-saving pricing programs that will help save money and energy, without paying a big cost in comfort.  This is extremely encouraging from the perspective of realizing meaningful energy efficiency gains, but these techniques undeniably raise the specter of ethical acceptability and the overall smart meter creepy factor.  If the utility can tell I’m a restless sleeper because I toast a bagel at 2:00 a.m., is it going to nudge me to go to a doctor and get a sleep aid, armed with a coupon for Ambien?

You’re Free to Make Bad Choices

Malevolence is not necessarily inherent in a nudge.  In fact, critics point out that there is really nothing new with nudges.  Advertisers and public figures have long understood the power of emotional manipulation to alter our choices, without sacrificing our freedom of choice.  For example, social programs attempt to manipulate us by providing more information to improve decision making, such as with the extremely effective Meth Project designed to discourage drug use.  The choice to use drugs is still available, but the societal and individual value of such campaigns is undisputed.  Are you going to complain if your favorite grocery story puts oranges instead of chocolate bars in the checkout line of the grocery story to encourage more healthful food choices? And more to the point, what about information that helps consumers use less energy?  If consumers can freely choose to become more energy efficient and learn to conserve that can lead to lower energy prices and reduced carbon loading, that has clear value, to society, to the utility, and to the consumers themselves.  By contrast, New York City Mayor Michael Bloomberg’s proposal to ban the sales of large-size sugar-laden drinks was a shove, not a nudge.

One effective nudging technique is to provide people with clear details about their choices, and insight into what other people are doing with the same information (peer comparisons).  Many energy analytics companies provide techniques to deliver this nudge in different ways.  They can correlate utility information with various forms of third party data attributes (energy consumption patterns with Facebook posts, income and home characteristics) to help refine messaging that can help consumers make energy-savings choices.  For example, with a personalized home energy report, Opower reports seasonal savings as high as 3.5% achieved through providing information, neighborhood comparisons, and action steps to residential energy consumers.   This approach is a clear departure from traditional means of encouraging energy efficiency, and consumers respond positively to it.

At the same time, complete transparency into how we are being influenced is the key to maintaining freedom of choice.  As Spiderman’s Uncle Ben said, “With great power comes great responsibility.” Amazing things will doubtless come from the ethical use of big data to help promote new social norms, including reducing our carbon footprint and using energy wisely, but we bear the difficult task of balancing the forces between the preservation of personal freedoms and technological capability to influence behavior.  And that dichotomy must be respected.

 

Building a Foundation for the Next Phase of Smart Grid Deployments

— July 9, 2012

In June PennEnergy announced that the Cisco Connected Grid Field Area Network (FAN) solution won top honors at the Utilities Telecom Council 2012 conference in the Smart Grid/Smart Meter Product & Services category.  According to Cisco, the solution is the first multiservice communications infrastructure for utility field area networks.  Using a common network platform, it can deliver advanced metering infrastructure (AMI), distribution automation (DA), and protection and control applications.

Why is this more than just an industry pat on the back?

Thought leaders focused on grid modernization have been talking about the importance of interoperability for years, and for just as long, standards bodies have been working to drive progress.  The concept is simple: As every architectural engineer knows, without a solid foundation, most structures will eventually collapse.  And as every utility stakeholder knows, no single vendor can deliver everything to the enterprise; mixed vendor environments are virtually assured, and without true interoperability the risk of stranding investments is high.  Interoperability defines the foundation upon which the smart grid must stand, avoiding rapid obsolescence of grid components, driving down costs, and providing the ability to securely leverage technological advances.

Itron and Cisco have been working since 2010 on a delivering a secure, scalable, open, interoperable architecture that can support the monitoring and control of distribution networks.  Itron announced earlier this year that it has brought this system to market with a deployment at BC Hydro, marking a move away from purpose-built systems in utility environments.  If the project is successful, BC Hydro will be able to drive down operational expenses and achieve a long-standing industry goal – a true plug-and-play smart grid.  BC Hydro is anticipating that it will be able to save customers $1.6 billion over the next 20 years, having a flexible system that can evolve with new utility applications.

Cisco’s award at UTC 2012 serves as a valuable reminder for smart grid vendors and implementers: Standards and interoperable systems delivered on open standards are still fundamentally important to the vision of the utility grid.  And it’s just getting started.  Industry partnerships that focus on the functional integration of applications that support the more efficient use of energy from the power plant to the customer, like the one between Cisco and Itron, are the key to moving beyond frameworks to reality.

 

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