Navigant Research Blog

The IoT Gets a Model (and Perhaps the Needed Catalyst for Market Growth)

— August 25, 2016

CodeWith little fanfare, the first Internet of Things (IoT) model I am aware of has been published by the National Institute of Standards and Technology (NIST), the folks who set the standards for smart grid interoperability in recent years. This new model is an important step in defining exactly what the IoT is and outlining the necessary security standards that go along with it. Could this be the catalyst needed to help drive the emerging IoT market? It sure doesn’t hurt.

Up until now, there has been a vacuum of standards and uncertainty around the buzzy IoT. The new model, called Network of Things (NoT), was created by Jeff Voas, a NIST computer scientist, and was announced in late July. Voas based the model on a traditional idea of distributed computing. It should be noted that the model uses two acronyms—IoT and NoT—extensively and interchangeably, and the relationship between the two is subtle, according to the published document.

The NoT model features four fundamental elements: sensing, computing, communication, and actuation. The model goes on to describe five primitives, or building blocks, which are:

  • Sensor: An electronic utility that measures physical properties such as temperature, acceleration, weight, sound, location, presence, identity, etc.
  • Aggregator: A software implementation based on a mathematical function(s) that transforms groups of raw data into intermediate, aggregated data.
  • Communication Channel: A medium by which data is transmitted (e.g., physical via USB, wireless, wired, verbal, etc.).
  • External Utility (eUtility): A software or hardware product or service. The current definition of an eUtility is deliberately broad to allow for unforeseen future services and products that will be incorporated in future types of NoTs yet to be defined.
  • Decision trigger: A trigger that creates the final result(s) needed to satisfy the purpose, specification, and requirements of a specific NoT.

The model describes more technical aspects of the IoT/NoT, and anyone who is working on the engineering end of this trend should study the details. To the less technical, the model might appear too abstract. Nonetheless, having some basic building blocks delineated does everyone a service by establishing standards that can be employed, particularly for security and interoperability reasons.

NoT Model Primitives

NIST IoT(Source: National Institute of Standards and Technology)

The NIST model is a strong first step in creating an easy-to-grasp IoT framework. It might appear simple at first to some, but it also has a certain elegance in that simplicity. Given its lack of complexity or specificity, it is more likely to gain wider acceptance for further development by stakeholders, since it sets a relatively clean starting point on which to iterate as the technologies and market mature. In fact, Voas encourages others to build upon his foundational model, even as he and his colleagues continue to explore reliability and security issues going forward. Members of the Navigant Research team will join industry experts from Silver Spring Networks and Lynxspring to explore key facets of emerging IoT technologies and the security and interoperability issues surrounding the IoT market in an upcoming webinar.


U.S. Electric Utility Customers Are Satisfied Overall, But Details Tell a Mixed Story

— August 3, 2016

AnalyticsU.S. customers have spoken, and the verdict is they are generally satisfied with their electric utility. But according to the latest J.D. Power survey, there is some downside: the business is still not on par with other industries, and communicating about outages takes a hit.

The latest data on customer attitudes holds mostly positive news for utilities:

  • Overall satisfaction improved for the fourth consecutive year, averaging 680 (based on a 1,000-point scale), which is up 12 points from last year.
  • Average frequency of brief power outages (5 minutes or less) reported by customers declined once again, as it has each year since 2010; the percentage of customers experiencing perfect power—no brief or long outages—was 41%, up from 37% in 2010.
  • When it comes to informing customers about scheduled utility work, there was improvement, too, with 73% of respondents saying they were notified ahead of time, up from 71% from last year.

Cost Declines Driving Satisfaction

One of the key drivers of satisfaction has to be the continued cost decline in monthly bills. Customers who took part in the latest survey report their monthly bills are the lowest in 10 years, averaging $129 in 2016, down from $132 in 2015. There is nothing like prices going down to help drive up satisfaction, particularly for a commodity like electricity.

Nonetheless, the utility industry lags when compared with others in overall satisfaction: auto insurance averages 811, retail banking averages 793, and airlines average 726. As the study notes, just 11 of the 137 utility brands included in the survey outperform the airline industry average. In addition, telling customers about outages took a step backward, with 40% of this year’s survey respondents saying they were informed about an outage, down from 42% in 2015.

Utility Scores by Region

Among the largest utilities by region, PPL Electric ranked highest in customer satisfaction in the eastern United States for the fifth straight year with a score of 705. MidAmerican Energy was tops in the Midwest for the ninth straight year with a score of 713. In the south, Florida Power & Light ranked highest with a score of 724. In the west, Salt River Project took the top honors for the 15th consecutive year with a score of 730. Among all cooperative utilities, SECO Energy ranked highest in this newly designated segment with a score of 769.

On the whole, this survey should give utility managers some comfort about how they perform in the eyes of residential customers, though there is obvious room for improvement. These results also mirror a similar survey from earlier this year that showed business customers with an overall satisfaction score of 704, which was a sizable jump from 677 last year and the highest level in 8 years. However, as newer technologies gain more traction in the utility business, maintaining or increasing customer satisfaction will be challenging, as noted in the Navigant Research reports Bring Your Own Thermostat Demand Response and IoT Enabled Managed Services. These reports highlight how utilities can leverage the latest technologies and drive up customer satisfaction while acknowledging the risks from poorly planned or poorly executed programs.


The IoT Makes Inroads around the Globe

— July 25, 2016

AnalyticsThe Internet of Things (IoT) trend continues to make inroads among companies around the globe, according to new data from telecom giant Vodafone. Its latest survey on the topic finds more than a quarter (28%) of responding companies are already using IoT in their operations, and three-quarters (76%) say the IoT will be critical for the future success of any organization in their sector.

While this trend continues to be transformative for many businesses, one of the remaining barriers to IoT adoption is security, or the lack thereof. Nearly one in five (18%) survey respondents say the concern about security breaches is a potential barrier to wider IoT adoption within their companies. From an energy industry perspective, robust security is still key, of course, given the critical nature of the infrastructure and data. The survey indicates some positive moves in this regard, with nearly six in ten (59%) energy and utility companies working on IoT security guidelines and roughly half (52%) working with a specialist security provider. I choose to see this glass as half full, but the emphasis on the security piece could use some improvement.

Wireless Networks in Europe

Elsewhere, there is further evidence of the expanding IoT trend. In the Netherlands, telecom provider KPN has recently announced the completion of its nationwide wireless IoT network. The company also notes it has signed contracts to connect 1.5 million devices so far, and that potential customers include governments seeking to link sensors on critical infrastructure, companies that specialize in lighting and traffic control, and consumers with fobs on bicycles for monitoring location. In addition to KPN, French startup Sigfox is building a similar IoT network and is currently deploying its service in 20 countries.

One other clear sign of the growing IoT trend was the recent huge deal by Japan’s SoftBank, which is acquiring British chip designer ARM Holdings for $32 billion. The deal is the largest acquisition by a Japanese firm in Europe. The big bet by SoftBank is that ARM can become a leader in the design of chips that power IoT devices, similar to how ARM’s designs are key to the success of smartphones and tablets.

A Rising Tide

For utilities and other energy-related firms, it is hard to ignore this rising global IoT tide. The emerging technology is altering business processes, and stakeholders need to pay attention and make strategic plans. This is something my colleague Casey Talon and I point out in our Navigant Research report titled IoT Enabled Managed Services. By seizing on the opportunities of an array of IoT devices and combining the data with analytics and bundling services, utilities can improve their own operations and increase customer satisfaction. It’s a trend worthy of investment.


Are We Approaching the Energy Singularity? Counter Point

— June 27, 2016

Cloud ComputingThe energy singularity sounds awesome, but bring your doubts. Who doesn’t appreciate the thought and effort it takes to make scientific breakthroughs? Exploring possibilities, creating new scenarios, and imagining the unimaginable. Ray Kurzweil’s singularity idea is one such notion, proposing “an era in which our intelligence will become increasingly non-biological and trillions of times more powerful than it is today—the dawning of a new civilization that will enable us to transcend our biological limitations and amplify our creativity.” Artificial intelligence (AI) taking over at an explosive rate—it sounds amazing. My colleague Mackinnon Lawrence suggests this breakthrough is possible for the energy sector within the next couple decades. Maybe.

A Different Grid of Tomorrow

To be sure, the future grid will differ from today’s grid. It might not even be a grid as we know it in 2045, the estimated year of Kurzweil’s singularity vision. Furthermore, changes are already taking place quickly, with the decline of coal-powered plants, the rise of solar power, and the promise of affordable storage technologies, to name a few. Navigant’s Energy Cloud vision already foresees an energy world full of profound changes and decentralized structures, a system more dynamic and responsive than today’s.

It is tantalizing to imagine the future power grid (or ecosystem) with blazing efficiency, unparalleled reliability, and widespread availability. My colleague cites the rapid advancements around self-driving cars and Google processing billions of search queries a day to enable deeper understanding of human thought as examples of the pace of change from machine learning. Machines are getting smarter, but there are also setbacks, particularly where grid assets, old and new, have failed, including:

  • The Fukushima Daiichi nuclear disaster in 2011
  • The San Bruno pipeline explosion in 2010
  • The Ivanpah solar power facility fire in May of this year

Even Google’s vaunted driverless car has collided with a bus. These negative events do not mean the problems can’t be overcome with powerful machines. Perhaps future super-intelligent systems will prevent or reduce the chances of such calamities. But these events do illustrate the downside of technology and the limits of machines.

In the energy sector, there is also the human constraint of regulation and business models. Even if technology breakthroughs take place, will regulators and politicians hold to the past and not allow transformations to emerge? Some are open to change. In California and New York, regulators and politicians have shown a willingness to embrace new ways of thinking about energy and new models. But others are likely to be more stubborn. Nevada regulators approved a price hike for solar customers, and SolarCity and Sunrun promptly pulled their operations from the state. In Montana and Wyoming, coal is still a powerful force for economic and political reasons.

Skepticism Abound

Among leading technology thinkers, respected names have trouble accepting Kurzweil’s future vision. Gordon Moore, cofounder of Intel and namesake of Moore’s Law, says the singularity is not likely to happen, at least not for a long time. Jeff Hawkins, cofounder of Numenta, a company developing a computer memory system based on the human neocortex and founder of Palm and Handspring, expects we will build machines that are more intelligent than humans, but there will be no singularity or runaway growth in intelligence. And Microsoft cofounder Paul Allen, who has devoted resources to his Allen Institute of Brain Science, has expressed serious doubts about the singularity occurring.

Count me among these skeptics. Predictions about breakthroughs often don’t pan out, or take way longer than expected. We were supposed to be commuting in flying cars, living in underwater cities, and colonizing other planets by now. We can imagine such things, but the future is difficult to see clearly. Some of what is imagined for the grid and energy is quite possible—I’m all for the wonderful magic, positive advancements, and geeky possibilities. Kurzweil is someone I respect. But the future also holds potential darkness, shadows, and unintended consequences. Man has a propensity to screw things up (wars), and his machines break down (think Space Shuttle Challenger or Chernobyl). Perhaps I’m stuck in a 2016 mindset, but my bet is the singularity moment is a long way off, if even possible. Moreover, the Kurzweil idea is too Panglossian. Machines will definitely grow smarter and the energy sector will benefit. But the process will be bumpy, unpredictable, and we will see a singular failure, or two, or three.


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