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From Distributing to Connecting: Utilities’ Evolving Role in a Smart Grid World By Guest Editorial Jul 6, 2010 - 2:52:54 PM
. By Michael Shames
Most utilities are quite uncomfortable with this pending metamorphosis. They are generally a risk-averse group; understandable as they have no competition to push them to reinvent themselves and cranky regulators to answer to if anything goes amiss. Moreover, they generally want neatly mapped-out answers before they act. In the Smart Grid world such answers simply aren't available at the moment. Thus, they are resistant to being forced to transform into a new entity whose shape is still amorphous.
Indeed, the phrase “only connect” has been used to describe a key aspect of the Internet as well as other advanced communications technologies. If it isn’t inscribed in the doors to telecom company offices, it should be. But it should also be inscribed into doors of all energy utilities’ offices. The Smart Grid opens a door to the ability of the energy utility to connect to its customers, to connect its customers to new and promising energy and other technologies, to connect third-party companies to energy users, to connect its customers to other customers as well as to connect customers to the realities and ramifications of their energy usage.
Among the answers sought by utilities is how the Smart Grid will be used and what killer apps will emerge. The answers won't be forthcoming anytime soon. Instead, utilities will need to look to the experiences of Internet pioneers like Len Kleinrock (packet switching), Radia Perlman (tree algorithms allowing bridging between separate networks ), Vint Cerf (TCP) or Tim Berners-Lee (World Wide Web) to glean clues about how to design and utilize this new connectivity.
At the San Jose conference, Cerf pointed out a few key elements that any interconnecting system – including the Smart Grid – should have. They include:
1. Adaptability – no one communication medium will be feasible
2. Longevity – assume devices will last for decades
3. Consumer friendliness ("plug and play") – functions must be transparent to the user
4. Robust security – privacy protections and strong authentication must be built into the fabric of the system
5. Feedback – develop systems that provide strong feedback capabilities
As to the killer app question, neither Cerf nor I can predict that outcome. But I regularly tell utilities that it doesn't really matter; they have to assume and design a system that will permit a large variety of potential killer apps. It may be to facilitate negative energy (which is what used to be called conservation). It may be electric cars. It may be greater distribution operational efficiencies. It may be microgrids. And it will assuredly be a lot of things they can’t know today.
They also must begin to grasp that energy utilities will no longer be selling kilowatts any more than AT&T sells megabytes. They'll be selling convenience, lifestyle, improved service quality and better value. That will be among the key changes for energy utilities in the coming years. Their ratepayers will become customers. Their product will evolve from kilowatts to connectivity.
One particularly tough challenge before them will be the tricky tightrope walk of serving as a protector at the same time they are a connector. In becoming the connector, they'll also need to continue to be the protector. Many utilities viscerally err towards protecting customers because they know that if they slip up, they'll be subject to punishment by those cranky regulators as well as opportunistic media (PG&E is learning the hard way with its smart meter debacles). So they tend to be overly conservative and overly incremental in their thinking about exposing their customers to new services or service providers.
This cautiousness could be disastrous. Overemphasis upon protecting their customers could lead them to becoming a roadblock to those propositions that customers want. So how do they walk that tightrope? For one, DON’T LOOK DOWN, LOOK FORWARD OR BACKWARD. Understanding the strategies of the Internet pioneers mentioned above will assist in the forward looking.
The energy utilities should also look back to the experiences of the banking and telecom industries where technological innovations and new services were introduced to customers. These large retailers did a lot of things right. They did a lot of things wrong. A casual perusal of Internet complaint web sites or consumer sites will detail the parade of horrors committed by the both industries. In reviewing these models, utilities will need to resist building a business model based upon lots of fees and penalties. And they'll need to find that balance in which they protect their customers while also promoting connection with other market participants.
Michael Shames is Executive Director and co-founder of the Utility Consumers' Action Network (UCAN), a non-profit consumer watchdog group made up of 31,000 San Diego households and small businesses. UCAN represents the interests of San Diegans in energy, telecommunication and Internet matters before the state and federal regulatory bodies. He also serves as an expert witness and attorney on behalf of UCAN and an adjunct professor at University of San Diego School of Business.
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