Navigant Research Blog

Turning Point for MDM

— July 30, 2012

“When you come to a fork in the road, take it.”

That sublime Yogi-ism mirrors where meter data management (MDM) vendors find themselves.  Will MDM become the data analytics of choice for utilities, or will it become a piece of critical yet mundane middleware, relegated to managing meters?  And will MDM vendors have any say in their destiny?  Understandably, they would like to believe that they do.  So they are not hanging about, waiting to see what happens.

One year ago, Pike Research published its report, Meter Data Management.  In researching the forthcoming 2012 version of this report, I’ve found quite a bit of movement since last year – much of it aimed toward the vendors’ continued existence.  The two most obvious trends are:

  • Acquisition: Nearly all of the major MDM vendors have been acquired.  Headlines include Siemens acquiring eMeter and Landis+Gyr acquiring Ecologic Analytics.
  • Data Analytics: Everywhere one looks, MDM vendors have repositioned themselves as data analytics vendors.  Some have stopped talking about MDM and instead offer MDA – Meter Data Analytics.  A year ago this was a green shoot; now it is in full bloom.

This near-unanimous repositioning of MDM vendors as data analytics vendors is understandable.  My favorite hype indicator is webinar announcements.  Today nearly every webinar invite talks about some version of “unlocking value through data analytics.”  If you’re an MDM vendor and your alternatives are to stay the course or to surf the analytics wave, the decision is obvious.

Unfortunately, the path from transaction-based MDM to analytics engine is much less obvious.  In extreme situations it may not be possible at all.  My colleague Carol Stimmel has recently blogged that utilities may make use of a great deal of data – some quite lacking in structure – to understand and influence markets.  (For more detail see her forthcoming report, Smart Grid Data Analytics).  It’s tough to imagine how an MDM system could digest unstructured data such as demographics and weather.

On the other hand, there is a middle ground where clever analysis creatively correlates transactional data only.  Survey results often do this.  Either MDM or an analytics engine could make those correlations.  But which will prevail?  I suspect that MDM will get those tasks, for two obvious reasons.  First, utilities are notoriously conservative and are likely to prefer the existing known quantity called MDM to something new and unknown.  Second, using MDM requires no new, expensive, and possibly disruptive software deployments.  However, MDM vendors may overreach into the world of unstructured data analysis.  Such a move could consume enormous amounts of resources for a low probability of success.

No matter what happens, there are certain features of MDM that will remain indispensable.  Validation, estimation, and editing (VEE) is essential for creating a high quality system of record for metering data.  VEE must process complex business rules over a massive data set, quickly.  This is where the transactional orientation of MDM remains an asset.  Likewise, utilities depend upon MDM to create ever-more complex billing determinants.  Such computations are not appropriate for an analytical engine.  No matter how much turf analytics ultimately capture, MDM will remain essential at every utility.

Perhaps the most logical summary of where MDM will end up vis-à-vis analytics is “horses for courses.”  MDM systems do lots of things that analytics engines cannot do, and vice versa.   And regardless, MDM vendors have survived years of being thrown into AMI deals as a no-cost extra.  Fighting off upstart analytical engines should be child’s play!


In India, 370 Million People in the Dark

— July 30, 2012

Early on the morning of July 30th, India experienced its worst power outage in nearly a decade as electricity supply was down for more than 8 hours to more than 370 million people, a number greater than the population of the United States.  The consequences of rising electricity demand and weak electricity infrastructure are now fully on display, as India attempts to identify the cause of the outage and develop a solution to prevent future widespread outages.  There are myriad technical solutions in development across the globe – smart energy, smart grid, and smart industry technologies and strategies – that India may now feel a more pressing need to adopt.

The power industry’s role in supporting economic development is unparalleled.  In India, the power outage in the north affected agricultural operations in Punjab, telecommunications and commuter services in New Delhi, military operations in Kashmir, and water treatment services in Uttar Pradesh, one of the most densely populated regions in the world.  What’s at stake are the food and water supplies to millions of people, the security of those people, and millions of dollars in gross domestic product.

As the real consequences of this power outage continue to emerge, this debacle is likely to become an impetus for Indian politicians to more aggressively pursue energy infrastructure development.  India faces the problems characteristic of other emerging economies – particularly power theft, heavy dependence on coal and other thermal resources, and a fragile power grid.  In the case of this power outage, rising electricity demand and coal shortages proved to be too stressful for the existing infrastructure.  With India’s electricity demand expected to rise five-fold to six-fold in the coming decades, according to the International Energy Agency (IEA), and GDP growth rate forecast to stay above 6% in the coming years, this is increasingly a liability for a country that has never been known for building and maintaining state-of-the-art infrastructure.  India needs a flexible grid infrastructure that can accommodate growth and encourage resource diversity.  Solutions such as advanced battery storage, distributed solar, and microgrids (India is already home to 17 microgrid installations) can provide such flexibility and diversity.  In the coming years, India will be a hotbed for such technologies.  Pike Research forecasts strong growth in many emerging sectors (solar, energy storage, and electrified transportation) in emerging markets, including India.

The power outage in India is a reminder that cleantech market development is not just about the growth and advancement of new technologies and markets; it’s also about new energy development strategies for emerging economies.  The distinct conditions and challenges faced by emerging markets such as India, China, and Brazil provide lessons for the broader market and may ultimately drive cleantech market expansion.


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.


Quantifying the Benefits of Microgrids

— July 26, 2012

The value proposition for microgrids at the residential community level is becoming increasingly clear to companies such as Gen110, a power purchase agreement (PPA) solar company based in San Francisco.  The company sees dollar signs that increase in direct proportion to proposed utility rate increases.  The company’s ultimate goal: funding microgrids through the PPA model that has driven down the price of solar photovoltaics (PV), whose price has plunged over the last three years.

Who is Gen110’s top target?  Pacific Gas & Electric, which has proposed a series of rate increases to cover upgrades costs to its transmission and distribution (T&D) system for electricity as well as its much maligned natural gas network.  All told, the investor-owned utility claims ratepayers could see an increase of an average of 15.6% by 2016 if the PG&E proposal is adopted by the California Public Utilities Commission (CPUC).

The pitch companies such as Gen110 make is, Why not skip out on paying for these utility upgrades to the T&D system, and just lock into steadily declining solar photovoltaic (PV) technologies?  These costs make up roughly two-thirds of the typical residential customer bill.  By locking in price certainty with a solar PV PPA today, one can skip out on the inevitable rate increases that ratepayers will face as our aging grid infrastructure is upgraded into the 21st century.

From a societal benefits point of view, one could argue about the efficacy of such a sales pitch, particularly if one works for a regulated utility.  If widely successful, the Gen110 model could lead to a death spiral for utilities, as a shrinking customer base incurs higher and higher fees to pay for a grid infrastructure that ultimately serves us all.

Yet, there’s also a radically different point of view on microgrids.  Instead of viewing microgrids as the enemy, a few brave utilities – among them San Diego Gas & Electric, American Electric Power, and the Sacramento Municipal Utility District – are developing their own microgrids.  Interestingly enough, a recent analysis by Lawrence Berkeley National Laboratories (LBNL) sheds some light on why.

According to LBNL, the features of a microgrid that have the largest impacts on economic benefits for all stakeholders (including utilities) include the following: whether combined heat and power (CHP) is included in the generation mix; what specific combination of distributed energy resources (DER) sources were integrated (i.e., fossil fuels versus renewables); the mixture of loads (including whether loads were dispatchable or critical loads); power market characteristics (ancillary services, time-of-use pricing, etc.); grid-connected or remote application; and the capability of seamless transfer to island mode.

Who Benefits?

In order to calculate stakeholder economic benefits, LBNL assumed a typical, large, Canadian, semirural feeder, with 10 MW peak load and 6.2 MW average load.  Three scenarios were analyzed: 1) base case (in which no distributed resources or microgrid was installed in an existing distribution feeder); 2) DER only (with no microgrid functionality); and 3) full microgrid, in which DER and microgrid hardware are both installed, with full islanding capacity.  The outcomes examined and quantified by LBNL were the following:

  • Reduced electricity purchased
  • Investment deferral
  • Reduced greenhouse gas emissions
  • Increased reliability

DER Only & Full Microgrid Scenario Stakeholder Benefit Tallies

(Source: LBNL)

The distribution network operator – i.e., the distribution utility – received the smallest benefit of microgrids deployed on a feeder line among primary stakeholders; however, its economic benefits increased with a microgrid overlay if compared to the pure distributed energy resource base case scenario.  It’s noteworthy that the microgrid case increases overall stakeholder benefits by more than $100,000 annually and boosts utility benefits by more than 50%.

In the final analysis, microgrids – whether developed by utilities or customers or independent developers – may be the end goal of what a smart grid is all about.  A forthcoming Pike Research report on utility distribution microgrids will reveal some surprising trends in this dynamic space.


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