Navigant Research Blog

Natural Gas Demand Response – Current Utility Programs: Part 3

— July 25, 2017

Coauthored by Paul Moran

As we discussed in our last blog, demand response (DR) in the natural gas sector has been less prevalent in the natural gas industry than in the electricity industry due to the lack of clear market signals that otherwise would enable market participants to put a price on deferred natural gas consumption. However, changing market factors are leading to increased interest in the practice. There are several utilities currently running innovative natural gas DR programs to discern the value of it alleviating system constraints.

Rebates for Home Heating

This year, Southern California Gas (SoCalGas) launched a natural gas DR program called the SoCalGas Advisory Thermostat Program, partially in response to supply concerns related to a leak at its Aliso Canyon natural gas storage facility. It offers program participants up to $50 in rebates while helping them reduce natural gas costs for home heating. To be eligible for the rebate, program participants agree to allow minor adjustments to their smart thermostat settings on days when a SoCalGas Advisory conservation event is called. SoCalGas manages the ecobee thermostats and makes adjustments remotely, using a software platform developed by EnergyHub. Participants are notified before any adjustments occur. This represents the first rebate program of this type offered by a natural gas utility for gas heating.

Interruptible Gas Has Its Perks

Xcel Energy has an interruptible gas program for large commercial and industrial customers that does not include physical control of the gas supply by the utility. It is used to allay pipeline or distribution constraints as well as economic concerns when gas prices increase or spike. Customers get a notice one hour prior to the need and then it is up to them to decide what to curtail or whether to go on a backup fuel supply. It can be isolated to certain geographic areas on the system rather than an all-or-nothing approach.

Pilot Programs in New England

The New England region is at the literal end of the gas pipeline infrastructure and is at risk of experiencing more supply shortages than other areas of the country. Even before the polar vortex, the Independent System Operator of New England instituted a winter fuel supply program, including winter DR. Some of the Massachusetts utilities have undertaken pilot programs with smart thermostat vendors like Nest to test the natural gas DR theory with residential customers by changing heating setpoints. The programs have not yet moved beyond the pilot stage.

Although the absence of a clear price signal is a significant impediment to the adoption of natural gas DR, these innovative programs demonstrate that utilities have a strong interest in exploring its promise to provide a less expensive means of alleviating pipeline constraints. In our final blog of this series, we will discuss how National Grid is exploring new applications for natural gas DR to reduce peak load and improve system efficiency across its service territory.

 

The Future of Analytics in the Utilities Industry Lies in Strong Partnerships

— July 18, 2017

The utilities industry presents some unique issues for analytics specialist SAS, as I witnessed during a recent analyst event. The industry is no stranger to large volumes of data or analytics, and as it undergoes a digital transformation, it should present a huge opportunity. However, the industry’s approach to the procurement of analytics means that there are few low hanging fruit, and SAS must work hard if it is to dominate utility-focused analytics.

In its favor, SAS is unquestionably a market leader and continues to remain one step ahead of its competition. It is investing heavily in four areas, all of which will resonate with utilities’ changing requirements:

  • Platforms: In a similar vein to virtually every other enterprise data vendor, SAS is making a big bet on data platforms. While many will struggle to differentiate, SAS’ strength comes from its experience in data preparation, an area that many fail to discuss in detail. SAS’ strategy for its Viya product is to provide different types of user access to any type of data, from any source, using the most appropriate user interface.
  • Harness artificial intelligence (AI) and machine learning: Over the last couple of years, during which AI hype has hit peak volume, SAS has been relatively conservative. It is focusing more on machine learning and the benefits of massive compute—how analysts can interface with SAS in new ways, on new devices, using the most up-to-date algorithms.
  • Internet of Things (IoT). SAS wants companies to be smarter about their IoT data analytics. It discussed at length its partnership with Cisco—to embed SAS analytics within smart routers—which will take analytics to “the edge” much closer to the devices where the data is stored. It also promoted its event stream processing tool and announced the recent addition of Event Stream Manager.
  • Cloud analytics: Finally, SAS is investing heavily in cloud-based analytics, which will be increasingly important for utilities as their digital journeys mature. It is also important to note that SAS wants to offer a flexible approach to where analytics is performed. Cloud is just one option, among on-premise, in-database, in-stream, or in Hadoop.

SAS has a market-leading set of analytics products, it is investing in all of the areas utilities would want, and is not shy about discussing the issue of data governance. These are all messages that should resonate well with utilities. But should it expect a rich harvest of low hanging fruit in the utility orchard? In short, no. The biggest barrier SAS will face is utilities’ historic approach to analytics procurement, which is heavily siloed and task-specific.

Future Opportunities Lie in Partnerships

Many of the future opportunities for analytics within utilities lie in operations, where SAS has not historically had a strength. Operations typically procure analytics for a specific task, from a vendor with deep knowledge of the technical issues, but lacking the robust analytics engine SAS brings.

The answer for SAS lies in partnerships. SAS will never compete with large engineering companies for industry knowledge; likewise, these companies will never compete with SAS in terms of analytic capability. Unsurprisingly, SAS has begun conversations with all the global engineering companies. However, these conversations are at an early stage. Digitization and analytics will help utilities address their most pressing concerns: to improve operational efficiency, maximize customer experience and develop new products. The market needs a robust analytics platforms and algorithms designed by industry specialists. The market needs these partnerships sooner rather than later.

 

The Role of Analytics in Enabling Smarter Homes

— July 13, 2017

The Internet of Things (IoT) has begun to move beyond the hype and is slowly but surely delivering on its promises with more Internet-connected devices than ever before. It reached an estimated penetration rate of 5.3% of homes in North America in 2016. These IoT devices are generating growing volumes of valuable data, which has led to the need for analytics solutions.

Means for Actionable Insights

Analytics solutions are software platforms embedded with algorithms that can identify patterns in data to provide actionable insights. In the residential sector, analytics software can crunch data transmitted from devices within the home. It can also be used with publicly available and third-party data sources on weather, demographics, and home infrastructure to enable a variety of applications, including customer engagement, energy management, monitoring and control, and automation.

Currently, analytics are mostly focused on customer engagement. In the energy industry, utilities are analyzing smart meter data to provide customers with more information about their energy consumption and specific ways in which they can reduce use and save on energy bills. However, customer engagement is only the beginning of what can be done with residential analytics solutions. Stakeholders in this space have only begun to scratch the surface of the available opportunity data has to offer.

Increasing Whole Home Efficiency

Navigant Research expects analytics to foster whole home integration of various connected devices by increasing awareness across multiple facets of the home, from thermostats to door locks to refrigerators to solar panels. Having insight from various devices across the entire home can enable machine learning and artificial intelligence technologies to create comprehensive ecosystems of connected home technologies. Ecosystems like these can act intuitively and think independently of the homeowner, creating smarter and more efficient homes.

This concept of more comprehensive and integrated ecosystems is the key to the success of the smart home, as smarter, more connected, and intuitive homes are expected to play a vital role in the Energy Cloud. Smart homes are expected to act as dynamic grid assets that sell energy back to the grid through distributed energy resources, shed and shift load demand through system optimization, and generally support a more reliable grid. All of this can be done by transitioning the market from a focus on individual purchased connected devices to devices supported by more intelligent technologies, starting with analytics solutions. To learn more about the role analytics play in the smart home, see Navigant Research’s report on Smart Home Data Analytics.

 

Key Hurdle Stifling Smart Home Adoption Starts to Crumble

— July 11, 2017

New signs for the potential of enhanced harmony and interoperability among smart Internet of things (IoT) devices and platforms have emerged. If true, a key hurdle slowing smart home adoption would begin to crumble.

Alphabet, Apple, and Amazon

At the heart of the interoperability movement are two important market players—Alphabet’s Nest and Apple. Both actions and words indicate a willingness to make it easier for disparate devices to work together. First, Apple recently announced it will no longer require a chip called MFi to be installed in a device for the device to work with Apple’s HomeKit platform. Then, Nest followed up by telling the website 9TO5Mac that it is at least considering support for HomeKit in the wake of Apple’s newly announced iOS 11 features (that makes supporting HomeKit easier) and the fact that Apple is dropping the MFi chip requirement.

Though it is not a done deal between these two tech giants, it looks like interoperability is closer than we expected. This could help unleash a market growth phase, as buyers will not have to choose only devices that work on a single platform, but will be able to more easily mix and match from multiple vendors.

Meanwhile, a competing IoT platform, the Amazon Echo (Alexa), keeps adding important device manufacturers willing to integrate with the leading voice-activated assistant. Bosch and Kenmore have announced some products will work with Alexa. Bosch will soon sell Alexa-enabled major appliances, and a new line of Kenmore Wi-Fi-ready smart air conditioners will work with Alexa, as well.

The Future of Interoperability

The need for enhanced interoperability has been a constant theme in Navigant Research’s IoT market reports, including the one titled Market Data: IoT Devices for Energy Management, which noted the issue. These interoperability steps by key market players are encouraging, and stakeholders should take note if they want to reap benefits from a widening market.

Nonetheless, consumers have some ways to go before committing to IoT smart home technology. A recent survey among American respondents shows 85% would prefer products from a single brand, indicating they understand the problems associated with a lack of products from diverse vendors that do not interoperate. The survey, sponsored by the UK brand Hive, also highlighted two other barriers: higher prices for products and the difficulty involved when it comes to installing the latest gear that leads to the potential need for professionals to lend a hand.

As my colleague Paige Leuschner pointed out in a recent blog, the need is evident for interoperability among products from the same vendor. Manufacturers need to keep this notion in mind as people integrate older versions of devices by making the devices backwardly compatible when at all possible.

Despite the market friction, there is reason for optimism given these signs of greater IoT or smart home product interoperability. For several years, I’ve been saying devices and systems need to play nicer together, and the message seems to be sinking in, at least among some product vendors. However, market stakeholders need to pay attention to consumer thinking. The Hive survey tells us many potential buyers are not convinced the technology is ready and affordable for them to adopt—and that’s a problem.

 

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