Message from “the edge” – SmartGrid and the consumer

This is my fifth article relating directly to SmartGrid. This is where the message FROM “the edge” also becomes a message ABOUT “the edge.” As I learned at GridWeek, the grid industry calls the electricity user community at the far end of the system “The Edge”. Graphically the system is frequently depicted that way with a central power producing entity surrounded by the web of transmission and distribution lines terminating in the end user community.

But “The Edge” does not imply “The End”. The whole purpose of the grid is to get electricity out there to drive industry, commercial endeavors, and our residential pursuits. In fact, the presence of our stable and reliable grid and an abundance of electricity has driven the modern economy and society in the United States.

In order to make sense of all of the initiatives relating to Smart Grid, out here at The Edge, we need to separate these consumers into two categories. The divide is not a sharp line, but roughly considers large consumers and small consumers independently. Large consumers would include industrial applications, large commercial users, perhaps large educational and government facilities. Small consumers could be thought of as residential, small retail and office facilities.

Large consumers have been leading the way when it comes to conservation, load leveling, and end-user generation facilities largely because businesses and other large institutions have been seeking ways to lower any and all costs associated with the operation of their facility. While electricity is relatively low cost, it is not free and in a capitalist market like the US, any reduction in cost can be a direct benefit to the bottom line. Many large facilities have put in sophisticated monitoring devices that automatically turn-off lights, HVAC, and other devices when such equipment is not in use. Some of these facilities have even explored the possibilities of co-generation with solar panel, wind mills or gas turbines on their property. When power is not being used by the facility itself, it is made available to the rest of the grid with some cost benefit to the owner.

Because large consumers have already moved much of the way down the path of conservation, efficiency and load leveling, and the solutions are considered to be well understood, there is considerable interest in how to engage and capture the small consumer potential in this area. Three types of small consumers were actively identified, but a fourth soon emerged as well. The first three were classed as:

• those that want to save the planet – who will reduce  or shift usage without financial incentive given a means to do so
• those that want to save money – who will reduce or shift usage if sufficient financial incentive is provided
• those that want to “beat their neighbors” – who will reduce or shift usage in response to some competitive incentive

The elephant in the room, however, was the fourth class. Fully 90% of all small consumers in the US are indifferent to any incentives. In fact, the heavily touted “SmartGrid City” of Boulder, CO has had only limited direct participation from the small consumers in the community. Even so, significant benefits have been demonstrated with the improvements in transmission and distribution as well as large consumer participation. There was significant discussion about how to increase consumer willingness to participate.

First, why don’t consumers care? What’s up with the 90% that are indifferent and what can be done to capture their attention, or at least more of their attention.

Show Me the Money?

Electricity bills form a fairly small fraction of most households budgets. A report from the Bureau of Labor Statistics shows that household energy costs (natural gas and electricity) were less than 4.25% of typical household spending. If a homeowner is trying to reduce household costs numerous other areas are more costly: rent/mortgage (28%), car payments (10%), food (8.%), restaurants (6%),  and recreation (6%). Energy costs are roughly equivalent to what a family spends on clothing. Consumers are far more likely to reduce in areas where little or no additional investment is required to lower costs. Eating out less often, reducing the number of cable channels, and spending less on new clothes are likely to save more money with less upfront hassle than blowing more insulation into the attic, or even upgrading a thermostat.

Trying to hit a consumer in the pocket book to get their attention would require significant increases in electricity costs. This technique will not improve what is already a tenuous relationship between government, utility, and consumer regarding electricity rates. One need only look at the reactions of consumers during the electricity price spikes in California in 2001, or more recently when gasoline went to $4/gallon.

Another concept is to introduce variable energy pricing that rises and falls with the actual costs of generating electricity. However, in order to this to work for the consumer, equipment must be installed at each home to allow the consumer to see, and manage these costs. Once again, the problem that a cost conscious consumer will look to other, more profitable ways to reduce costs will tend to limit participation in such a program.

Save the world?

So monetary incentives are unlikely to be successful. How about appealing to the altruistic nature of people? After all, much of what we’re talking about are ways to reduce greenhouse gases and other pollutants as well. Great idea! Problem? The industry is sending a very mixed message to consumers. Utilities have mixed motives as well.

Utilities make money by selling electrons. Convincing their customers to buy less electrons to save the planet makes little sense to the electricity generators. They’d LIKE to see consumers using MORE electrons, just doing it a little more consistently. In addition, the utilities want to sell themselves as good guys. Afterall, they are eventually going to want rate increases to pay for all the good things they are doing. So, most utilities are spending a great deal of time and money convincing the public (and the rate-setting commissions) that they are spending a great deal of time and money investing in methods of generating electricity that are GREEN and CLEAN.

If the same people then try to turn around and convince consumers that REDUCING their usage of electricity is going to reduce the generation of nasty pollutants, the consumer is left with a mixed bag of stuff. Many will simple ignore all of the messages.

Beat the Joneses?

OK, let’s add people to that third group, the competitors. The U.S. is famous (or infamous) for its one-upmanship culture. If my neighbor has two cars, I need two cars AND a motorcycle. It is part of the problem with the excesses in our culture today. We don’t buy what we need, we buy what we perceive we need to KEEP UP with our neighbors and friends.

Once again, the ability to sell this concept falls apart. Part of the fun of the whole one-upmanship is the ability to show off. Unless we put outside indicators of electricity usage on houses to allow the occupants to “show-off” their really LOW consumption, there is little likelihood of success. Some folks will enjoy beating the curve on the Internet and demonstrating their electricity skills, but the kick of “show and tell” just isn’t there.

So what to do? That, my friends, is another blog.