Connecting the Dots between the Energy Efficiency and the Smart Grid

Posted on June 25th, 2012 by

We are on the cusp of another transformation in energy efficiency as the smart grid takes hold. Energy efficiency is now considered a valuable resource that utilities are including in their integrated resource plans to offset new power plant requirements and in many cases earn a favorable return on these investments. Consumers are getting their first glimpse into the smart grid and how information about their usage patterns can help increase the efficiency of their homes. Utilities are making great progress in connecting consumers with their energy data, but there is still an opportunity to strengthen the connection.

To truly transform a utility’s relationship with their customer and optimize energy efficiency as a resource, we need to connect the dots to provide personalized solutions that make it easy for consumers to turn information into action. Our solutions should give consumers complete control of their energy use – when they use it, how they use it and how much they pay for it. We need to create what I call an energy management ecosystem – a Home Area Network that makes energy management easy and accessible to consumers via online sites and mobile apps, while enabling home appliances, lights and cars to use the right amount of energy when it’s the cheapest. This strategy will empower consumers for a new era of energy efficiency. Something as simple as a home/away button on your phone could capture energy that is wasted today.  For example, even if a consumer has full command of their programmable thermostat, which research suggests is highly unlikely, the thermostat does not adjust when they attend their children’s soccer game for 3 hours. A simple push of a button on your phone would capture this wasted energy.  And yes, the energy ecosystem will be fully integrated with security and other home systems to provide integrated solutions that automatically set the thermostat when I engage my security system.  Make no mistake, it will take time for the ecosystem to become reality and it is important for utilities and service providers to help consumers navigate the transformation.

So how do we move from the current state of affairs to this energy management ecosystem? Right now, we are in the first phase of this journey, and vendors and consumers face three challenges that are slowing the development of the smart grid and preventing consumers from taking control (we’ll continue to explore each in greater depth in upcoming articles).

The three basic challenges are 1) creating effective marketing efforts that drive action and engagement over time, 2) providing consumers with access to data and 3) translating information into actionable, personalized solutions. These points are not new to energy efficiency. As a starting point for overcoming these challenges, we should bring forward some important successes and combine them with new processes for partnering with consumers. Homeowners typically don’t focus on energy efficiency during their daily lives, so they need highly tailored recommendations to understand how energy savings relate directly to the appliances in – and characteristics of – their household. We need to close the gap between energy information and energy efficiency action, and providing the next level of personalized solutions is part of the answer.

Visibility into the effectiveness of energy efficiency marketing efforts is critical to our success. If we can gain a greater understanding of the cost of finding customers to participate in energy efficiency programs,  how different marketing tactics compare to each other across different efficiency programs consumer segments, and the lifetime savings value to a customer, we’ll be able to more effectively market to consumers and increase engagement and adoption. Other industries employ marketing best practices to help them understand their customers better and increase their effectiveness in targeting consumers; our industry needs to mirror those models. The ideal will be when our ability to target consumers effectively with the tactics that drive the most response is coupled with meter data and recommendations – that’s when collective effort starts to become more effective and powerful.

There are still large opportunities in marketing basics of good segmentation and outreach through traditional direct mail and telemarketing channels. Ecova has been able to target consumers who cost-effectively cut their energy bills in half when presented a complete, painless solution. At the same time, consumers are interacting with social media, email and mobile information in new ways. This is a huge opportunity and area of growth for utilities – the next frontier of customer engagement. According to Pike Research, approximately 57 million customers worldwide used social media to engage utilities in 2011, a number expected to rise to 624 million customers by the end of 2017. Just as we’re modernizing the delivery of energy with the smart grid, we also need to rethink how we engage consumers and bring them actionable information. Effective real-time marketing will encourage more people to participate at greater levels, providing proof points and further incentives to get late adopters on board faster.

When it comes to data, the smart grid is an information machine: It gathers, distributes and acts on energy consumption information, creating a continuous stream of data available to consumers and utilities. In North America, smart meters have penetration rates now approaching 35 percent. And usage will continue to grow, with a projected install rate of nearly 50 percent by 2015 according to a recent study by the Institute for Electric Efficiency (IEE). However, the data is not easily accessible to consumers. Utilities have made great strides in this area – typically, after they install smart meters, they embark on a campaign to ensure customers understand how to read utility bills and even provide access to interval information online. In addition, this barrier is beginning to be addressed through important initiatives such as Green Button. Recent programs designed to spur innovation in this area also have the potential to create new applications to help solve this challenge.

But data alone is not enough. To make a real move toward energy efficiency, consumers need a solution that can analyze data and provide pertinent recommendations. Consumers will choose from these recommendations to dial in their desired level of comfort and convenience for a given cost. Plenty of products on the market crunch numbers and recommend energy reduction strategies, but the challenge lies in leveraging the data and providing real solutions. Currently, the majority of recommendations are not customized. Instead, they are based on averages and generalities derived from interval meter data and publicly available information. These recommendations – such as “buy CFLs,” “upgrade to an Energy Star refrigerator” or “insulate your home” – do not provide enough insight to prioritize action in a household. Worse, the savings projected frequently fail to live up to expectations, creating consumer frustration and skepticism about the power of energy efficiency.

In this series, I’ll be dedicating an article to each of the three challenges outlined above as these are key roadblocks to completing the first phase of the demand side smart grid. The data is starting to come; now the responsibility lies in how we get consumers to take action. Technology and customer analytics will play a huge role in helping utilities drive high-touch, actionable energy efficiency campaigns.

If we can connect the potential of the smart grid to truly actionable solutions and take our marketing understanding to the next level, we can help households save money and energy, and we will take the first big step toward the ultimate vision for the smart grid. After that, it’s on to phase two and a step closer to a complete energy management ecosystem over the next 10+ years.

The opinions expressed in this article are solely those of the author Ted Schultz, Senior Vice President of Strategy and Innovation at Ecova. Ted leads the Ecova Utility Solutions team in strategic business development, cultivating innovative, end-to-end products and solutions for utilities to better serve their customers.

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