Monday, September 9, 2013

Will Consumers Pay the Cost?

By Patty Durand, Executive Director, SGCC

On July 31 we hosted another webinar in our Thought Leadership Series, “Are Consumers Willing to Pay the Cost?”   We wanted to call attention to the value of consumer engagement and the role of costs in persuading consumers to support smart grid investments. Our thoughts leaders were Chris King, global chief regulatory officer, Smart Grid Solutions at SiemensSmart Grid, and Wilson Gonzalez, senior energy policy advisor, Office of the Ohio Consumers’ Counsel.

In an effort to continue to learn from what we learned, I want to highlight a few things we learned from Chris and Wilson last month, and I want to tie that together with an effort SGCC is making to create a consumer value proposition for a smarter grid that everyone understands and agrees with. So here is a summary of what we learned:

Chris noted that consumer benefits are largely driven by consumer behaviors in the categories of energy efficiency (i.e., lower energy usage), the integration of renewable energy and electric vehicles, and peak load reductions. In fact, in a slide that captured the costs and benefits of grid modernization, Chris pointed out that customer-driven efforts at energy efficiency also present the largest societal benefits in terms of dollars.

The consumer reaps the benefits of his/her own actions when it comes to efforts to reduce their electricity usage. To my mind, that means that SGCC efforts to connect the dots for consumers – essentially, that individuals can benefit themselves and society by participating in these programs and helping them understand the transformation underway is well worth the effort and can build support for this transformation to grid modernization and consumer empowerment.

Chris reported that pilot programs show that energy use feedback, enabled by granular data on each household’s use, leads to 5.1 percent to 8.7 percent savings on monthly bills. The notion is that simple awareness of usage leads to more conscious and more prudent use of energy. According to Chris’ data (from VaasaETT, a global energy think tank), here is the breakdown: web portals lead to 5.1 percent savings, a detailed invoice leads to 5.9 percent savings, “other” methods provide 6 percent savings and in-home devices lead to 8.7 percent savings.

While that data is welcome and may be useful generally, I think SGCC research on customer segmentation can be applied to this issue for a more nuanced picture that links customer segments with their preferred means of energy use feedback. Such a linkage will help utilities and their partners more effectively market energy use feedback by offering each segment its preferred method, and therefore save money not marketing to everyone exactly the same.

We would probably also find that while some segments might scoff at 5 percent savings on their monthly bill, other segments who place a higher value on being green will link their efforts to societal savings and lower environmental impacts and fully participate.

That’s the principle behind the encouraging fact I remarked on in my last blog that Chris called out in the webinar: only 10 percent customer participation in peak load reduction is needed for system-wide (and therefore societal) benefits. I can imagine campaigns that ask something akin to “Have You Joined the Ten Percent Club?” I’m not the world’s best sloganeer, obviously, but you see my point.

Our second panelist, Wilson Gonzalez, senior energy policy advisor, Office of the Ohio Consumers’ Counsel, also presented some encouraging information. His office has found that willingness to pay is linked to the specific utility and to the consumer’s locale, education and the information available on the value proposition.

Wilson’s office has pushed for accountability in utility proposals for smart grid projects in several forms. One is shared risk between consumers and the shareholders of investor-owned utilities. He cited a few others: robust cost/benefit analyses, performance-based cost recovery, front-loaded consumer benefits, a third-party audit to establish operational savings and a requirement that utilities make annual improvements in their traditional reliability metrics.

Wilson’s presentation encouraged me to think that the interactions of consumers, consumer counsels, utilities and regulators can result in building public confidence for the smart grid business case and, by extension, the consumer value proposition.

Speaking of that, please join us for our annual member’s meeting on Tuesday and Wednesday September 24 and 25 in Washington, DC. On the second day we will review and edit a draft consumer value proposition document, work to gain consensus and understanding around the value proposition, and then create an action plan so that consumers hear and understand common messages when they hear about the smart grid.

Please mark your calendars to join and register on Friday, Sept. 27 at 1 p.m. EST for SGCC’s next Research Brief Webinar: Smart Grid Environmental & Economic Benefits.

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