Navigant Research Blog

ComEd Takes Next Step toward Becoming a Utility of the Future

— December 9, 2016

Computer and TabletUtilities have a reputation for being stodgy and slow to change, but not all of them fall into this trap. ComEd in Illinois is among those adopting new technologies and is striving to be a trailblazer in how it conducts its business. Currently, ComEd is roughly halfway finished with a systemwide smart meter deployment, having installed some 2.4 million meters in its territory since September 2013. Beyond smart meters, the utility has taken another step in its aim to be what it calls a utility of the future, having just launched an online website to sell energy management tools so its customers can buy products to help lower their bills and save energy.

Changing Business

Dubbed ComEd Marketplace, the site enables customers to educate themselves about energy management tools and buy related products such as LED light bulbs, smart thermostats, water conservation devices, and connected home products like advanced smoke alarms, smart door locks, and security cameras. The site is powered by Simple Energy, a Colorado-based firm that specializes in customer engagement.

ComEd officials envision their new online marketplace evolving as “a cornerstone of our utility where our customers can transact with us and other parties for a wide range of energy-related products and services,” according to Anne Pramaggiore, president and CEO of ComEd.

The idea for the marketplace sprang from one of the utility’s employee hubs that was designed to foster innovation, and officials envision this platform will enable added products and services in the future. The launch of the marketplace is the latest example of how the utility strives to deliver innovative and convenient customer solutions. Earlier in 2016, ComEd introduced a new method by which customers can report service outages via Twitter, which the utility claims is a first in the industry.

Other Innovators

ComEd is not alone in the effort by utilities to embrace new technologies that offer customers the kind of digital experience they have come to expect in the connected world. For example, Pacific Gas & Electric in California has a pilot program in place with BMW that involves a small sample of EV owners to better understand their habits and needs; the BMW i ChargeForward program also aims to reduce the overall cost of EV ownership. In Vermont, Green Mountain Power has taken a flexible and holistic approach in offering its eHome energy management program, which integrates a variety of new technologies, including smart thermostats, plugs, solar PV, EV charging, and Tesla’s Powerwall. DTE Energy in Michigan is another utility at the technology forefront, having launched its Insight mobile app that can help customers conveniently manage their energy use from a smartphone and lower their energy bills.

These offerings demonstrate that some utilities are willing to embrace and deploy new technologies for the benefit of their customers. It is a wonder more utilities have not taken similar steps to move beyond stodgy.

 

What the Reaction to Toll Road Congestion Pricing Means for the Future of Energy Dynamic Pricing

— November 2, 2016

Electric Vehicle 2In my home state, the Massachusetts Turnpike is moving from manned toll booths to open-road tolling, known as gantries. While this change in itself has the potential to disrupt the status quo, local news investigators discovered some hidden ideas that could be rolled out in the future. These disclosures caused such an uproar that the governor publicly announced that the ideas are not being considered now but may be in the distant future.

One of those ideas, congestion pricing, is that toll prices would be higher during rush hour to encourage people to avoid those times, thereby reducing traffic. Sound familiar to those in the energy industry? Terms like dynamic pricing, time-of-use rates, and critical peak pricing are used to describe such mechanisms. There has been a lot of interest in these concepts since advanced metering infrastructure has made them possible. More people are installing smart thermostats, solar, and energy storage, which give customers a greater ability to respond and take advantage of such rates.

A Cautionary Tale

The reaction to the congestion pricing revelation should prove a somewhat cautionary tale for enthusiasts of dynamic pricing for electricity. In general, people were outraged that the government would consider enacting this type of scheme and assumed there was some ulterior motive. Some people felt that tolls should be lower during rush hour since those drivers are the most frequent travelers and a lot of workers can’t control their work schedules to avoid those times. Other people were just concerned about the government knowing that much about their travel habits and how that type of data could be used.

The point is, despite all the logic that can be used to explain the benefits and economic purity of such designs, human nature is the biggest obstacle to be overcome to ensure mass adoption. Many people will always mistrust the government or utilities trying to enact new structures, assuming that said structures must have some kind of advantage for those entities. Others will feel that it is unfair to charge the biggest users of a resource (electricity, roads) more, since for many other goods and services there are cheaper prices for more consumption. The concern for those who cannot control when they use the resource (those with 9-5 jobs, the elderly, or low-income residents for energy) must be successfully countered, particularly for the political establishment to get onboard. Finally, data privacy concerns must be addressed, although 100% of the users will never be satisfied with solutions in that regard.

Of course, the cases of electric dynamic pricing and automotive congestion pricing aren’t an exact comparison, but energy industry dynamic pricing proponents may face the same fate if they fail to consider the human side of the equation.

 

In New Utility Era, Energy Must Be Optimized

— October 26, 2012

At the Itron Utility Week conference in San Antonio, Texas, LeRoy Nosbaum, President and CEO of Itron, described the forces of regulatory mandates, technological innovation, and customer relationships as “colliding with each other.”  In the United States, energy providers are grappling with mandates while working to improve operational efficiency, protect revenue, deliver reliable service, and conserve energy.  As one of the world’s leading providers of smart meters, control technology, communications systems, and software, Nosbaum asserts that Itron is well poised to help utilities meet these formidable changes.  If Itron’s solutions can help utilities change their habits, he may be right.

Just 5 years ago, when the first iPhone had just been released, the realities of the economic slowdown were not yet upon us, and very few knew who Barack Obama was, dead reckoning on reliable energy delivery made sense.  But today, in the haze of grid modernization and changing industry conditions, utilities must become optimizers of energy in order to survive.  At the Itron event, Lloyd Yates, executive vice president of customer relations at Duke Energy, said this means that utilities must fruitfully partner with customers beyond the meter and empower them to have energy “experiences.”  This requires rethinking fundamental business models and recognizing that more than a century of reliable power delivery guarantees nothing for the future.

In the United States, especially, new patterns in energy supply and demand are emerging.  While many areas of the globe will see rising demand, growth in the United States is expected to be just 0.3% until 2035 (as reported by the EIA).  Compound this with rising rates of domestic oil production and an increase in energy efficiency, and it is clear that utilities face difficult decisions.  Yates articulated the choices a utility will have to make:

  • Continue with business as usual, adapt to anemic growth, and lower expectations among investors
  • Refuse to accept that the industry is in decline, raise rates regularly, and risk angering customers until they are driven to off-grid resources
  • Transform the utility by changing the way energy is generated, while working with regulators and customers to optimize the consumption of energy

Yates believes that for utilities to stay on their current path is a perilous mistake.  Modernizing the grid with technologies that smarten the delivery of power is not enough; the customer must now be part of the equation.  The transformation of the grid also necessitates the transformation of the utility – right to the core of how business gets done.

Vendors that understand these changing conditions, as well as the dynamics and uncertainties facing their utility customers, can help drive the innovation that is required.  Strategic alliances and partnerships will be an important part of delivering comprehensive solutions that can create “energy experiences.”  Itron has made convincing moves that demonstrate its understanding of these forces, including a partnership with Cisco to provide an open infrastructure and, most recently, a strategic alliance with C3 to deliver energy management services directly to consumers.  These partnerships will help the utility evolve and adapt to a new era where the energy relationships are fully optimized.

 

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