Collaboration or Competition Between Utilities and Tech Firms?
The Future Grid
The 2018 GridFWD conference, hosted by Smart Grid Northwest, convened around 250 energy service professionals in Vancouver, British Columbia. In a series of articles, Cadmus presents some key themes that emerged regarding grid modernization and the different pathways, priorities, and solutions discussed as next steps in moving this process forward.
By Ryan Fulleman
You walk into your home—the dim lights brighten as you step inside. Your smart thermostat has predicted your arrival and optimally precooled your space based on personal preference data. Your electric vehicle sits plugged-in in the garage. It’s currently a peak demand hour, so the two-way charger pushes extra electrons left in your EV’s battery back to the grid. Later tonight, it will automatically begin its charging cycle during off-peak hours and ideal grid conditions. Suddenly, an auto alert pops up across connected devices in your home—this month’s bill is predicted to be higher than normal. “Assistant, why is my bill so high?” you ask your smart speaker. “A heat wave this month is causing higher bills across the neighborhood,” responds the virtual assistant. “You could save $200 a year with an AC tune-up and insulation retrofit rebated by your electricity provider. Do you want me to call the utility and schedule one now?”
Although this might seem like a scene from the distant future, the relationship between consumers, power companies, and technology is already evolving today. At the 2018 GridFWD conference, a presentation by Google’s energy team revealed one of these future-facing technologies—an artificial intelligence (AI)-enabled platform that could replace current customer-to-utility communications. The discussion that followed highlighted roles that numerous entities already have taken, or could take, to influence how energy consumers interact with the grid.
While their goals may differ, tech companies and utilities will need to follow similar paths to achieving them. Not only will technology transform the relationships between these entities and their customers, they will yield unprecedented quantities of data with potential applications that are still being explored. Actionable use of these data will also power the future grid, with technology developers and system operators working off the same principles: collecting and mining data to identify patterns, rapidly predicting future behaviors or events, and providing customized personal solutions to consumers. Greater integration of technology that employs AI and machine learning to process and analyze that data is leading to greater overlap in the players’ goals, capabilities, and data needs.
In the future, consumers, smart devices, tech companies, and utilities will increasingly interact in new ways that promote stronger connection and customized experience between all involved. In this post, we explore where this paradigm will lead: increased collaboration or die-hard competition between utilities and tech companies?
Utilities: the old guard evolves
Along with their core values of providing safe, reliable, and affordable energy to customers, utilities are increasing their efforts in areas like customer service and marketability to remain competitive in a changing energy landscape. Customers are now able to choose providers and distributed energy technologies based on satisfaction as well as the utility offerings available, such as advanced metering infrastructure, price structures, renewable rebates and integration, and efficiency options. Furthermore, customers are interacting with the grid more than ever before by shifting, reducing, and generating load dynamically through utility programs or with independent consumer technologies (like smart thermostats, solar panels, and electric vehicles). Utilities have recognized the value of customer participation in strategic initiatives and are encouraging involvement through educational outreach and incentive efforts. Like any modern customer facing business in the age of Twitter, YouTube, and Facebook, utilities are active on all forms of social media and have staff dedicated to this role.
In this new landscape of growing customer choice, utility energy efficiency and demand response program administrators rely on customer data collection and analysis to align efficiency and demand reduction goals with the overall utility business strategy. Systematic data collection and infrastructure efforts are being used in combination with forward-looking analytics to improve customer service, align program offerings with customer needs, and advance strategic resource allocation. Energy usage analytics are helping utilities build and plan grid modernization according to patterns of behavior, new technologies in the home, and adoption of demand-side distributed energy resources. Market segmentation analysis based on increased volumes of purchased, surveyed, and mined customer data is being used to target program offerings and better tailor utility initiatives with customer desires. As data continues to proliferate, AI integration into system operations could improve traditional operations and even become necessary to manage an increasingly complex variety of distributed energy resources with traditional generation. This growth in data intensive infrastructure also changes the logistics of internal business operations. As Brett Henderson of FortisBC noted in the GridFWD session, “How To Finance Grid Modernization,” concepts of cloud-based resources redefine the approach utilities have had to consider with financing hardware and software investments (historically rate-based as a firm capital asset).
New data for a new era
Utilities are not the only companies to see potential in the data new technologies yield. Tech giants like Google and Amazon; product innovators like Tesla, Ring, Sense, and ecobee; and energy analytics firms like Bidgely and Tendril are all seeking to integrate themselves into the daily lives of average utility consumers. Google operates a business group focused on providing services for utilities and utility customers, and the customer-facing utility voice assistant Bidgely and Google displayed at GridFWD further highlights this dynamic.
These developments capitalize on feedback loops: innovative products and services blur the line between entertainment and product to hook the average consumer and created interest for tasks that previously would have been impossible (or impossibly tedious), ranging from bill pay and home comfort settings to advanced behavioral response and integration in the greater marketplace with interactive, easy, and enjoyable offerings. Gadgets that were seen as cutting edge not long ago, like smart thermostats, WiFi lighting, electric and autonomous vehicles, battery storage, and smart speakers, are quickly becoming part of the landscape of the average consumer’s life. In turn, such devices are generating ever-greater volumes of data about customer behaviors, preferences, and interests.
Collaboration or competition?
In an industry typically bound by regulation and long-term planning, utilities could find aspects of their services threatened by faster, more agile newcomers. Functions like generation and customer relations are already being replaced by companies that have been able to find areas to operate within the existing utility power model, and the relationship and expectation that customers have with products they purchase has changed.
Utilities, however, maintain distinct advantages over their tech counterparts. Regulation provides insulation from changes in the marketplace to ensure secure and reliable power delivery. With deep subject matter expertise and established operations, utilities can leverage longstanding relationships with customers and organizations in their service territories that new arrivals on the scene lack.
Although tech firms are changing the way consumers use energy, utilities may also benefit from the uptake of tech-based products and services. Integration of devices and greater customer awareness of their own consumption could be leveraged by utilities. Understanding timing and patterns in energy consumption, identifying customers for demand response programs, and enhancing customer engagement could positively impact grid operations. At GridFWD, Google discussed how algorithms can be used to optimize commercial data center energy efficiency and energy usage.
Okay Google, pay my electric bill
Smart speakers, in particular, have developed as an example of utility-tech collaboration. According to Nielsen, roughly a quarter U.S. homes owned a smart speaker in the second quarter of 2018. This number is estimated to have doubled since the 2018 holiday season, suggesting that around 50 percent of consumers currently own a smart speaker. Both studies found that listening to music is the most popular use at this point, but the proliferation of this technology into this volume of homes creates an opportunity for utilities to develop customer-friendly applications that can be accessed on-demand via the speakers.
At GridFWD, Bidgely shared findings from a recent survey of smart speaker owners that found more than half of customers surveyed want their utility to offer a voice assistant for typical utility interactions and roughly a quarter would prefer using a smart speaker over an online portal.
During the presentation, Bidgely and Google discussed their partnership in developing a utility voice assistant that will allow utilities to tap into smart speaker technology to better serve customers. In this collaboration, Bidgely’s experience with residential customer products combines with Google’s hardware and AI expertise to develop a product that enables utility customers to interact with their smart speaker assistant to contact their utility, manage preferences, and access their energy usage analytics. Google leverages its platform and smart speaker technology already in the customer home, while energy analytics companies specialize in customer behavior, energy analytics insights, and utility relationships.
With the additional data generated by the interactions between customers and other smart speaker applications, utilities could combine historical energy use with customer behavior to identify patterns and better predict customer requests, decrease response times, and increase customer satisfaction. Decreased volumes of call-center traffic and modern customer engagement platforms, increased customer awareness of personal energy usage, products, and services are possible utility benefits from this new customer interface.
Below are some of the products and services that showcase the evolving interaction between utility, tech, and customers. Third Party Online Energy Services and Products Marketplace Smart Thermostats Demand Side Management Marketplace and Aggregators Electric Vehicles Third Party Online Energy Services and Products Marketplace
A partnership between Amazon and Arcadia Power, a non-utility energy services company, offers bundles of home automation and energy efficiency products. Arcadia Power acts as an intermediate party between utilities and customers, charging a flat monthly fee in exchange for renewable energy credits, bill pay, price plan optimization, and a phone application to view energy use. Arcadia Power customers are able to purchase home automation and energy efficiency kits through Amazon, which also provides technicians to install the products. Payment is incorporated into monthly installments through Arcadia’s payment plan. This business model challenges traditional utility and customer relations, as well as renewable and energy efficiency programs. Smart Thermostats
Demonstrated by Nest (Google), ecobee, and others, smart thermostats involve prominent tech and utility interaction. This technology employs machine learning to optimize temperature on learned customer preferences or for energy savings. Algorithms within the thermostat use customer data accumulated with use of the thermostat. As heating and cooling loads often drive residential electricity peaks, utilities and manufacturers have developed customer programs such as Nest’s Rush Hour Rewards program to reduce electrical loads during system peak events. Smart thermostats are also a channel for utilities to offer energy efficiency programs and messaging. Demand Side Management Marketplace and Aggregators
While utilities have historically held sole custody of power planning and management, energy service providers, tech, implementors, and aggregators are increasingly involved. In many territories performance-based contracts for power supply and demand reduction now replace traditional utility solutions. Tech and data products like advanced analytics and targeted outreach bolster traditional utility programs. Energy storage and management systems, using algorithms and data to predict, arbitrage, and respond in real time are also taking part in power management efforts. Electric Vehicles
Electric vehicle (EV) adoption provides new opportunities and challenges for utility power management. For utilities, EVs could be a means of accelerating sales to increase off-peak loads. If not properly managed, however, charging could strain existing infrastructure and increase costs. Collaboration between utilities, auto companies, government, and tech will determine utility impacts. Charging data analysis can inform planning of impacts and capacity needs, while integration of smart charging helps support real-time pricing efforts and better aligns usage with cost. Vehicle-to-grid discharge and adoption of automated vehicle technology are also opportunities for collaboration between tech and utilities.
Finally, like many other segments of the information-based economy, utilities and tech firms alike will need to work together to navigate the still-murky waters of data privacy, sharing, and ownership. While both industries possess their own servers full of collected data, the combination of both is needed to maximize potential usefulness. Defining responsible and ethical data ownership and sharing standards is a larger societal debate which will inevitably take place in the energy sector. To ensure data is obtained and used ethically, and not at the expense of customers from whom it originates, utilities and tech companies will need to find new solutions and practices.
To gain increased traction with consumers, utilities and technology businesses will each need the data and relationships the other possesses. A changing and more dynamic grid of the future, like the one discussed at GridFWD, will be fueled by data and actionable insights of system level, AMI, customer behavior, competition and collaboration. New for many utility jurisdictions, these collaborations and competitive pressures can lead to improvements from business as usual. Competition is driving private industry to offer high-quality and efficient goods and services which have remained outside of traditional utility operations. The opportunity exists now for utilities, as experts in the grid and providing power, to recognize these areas of competition, create opportunities for collaboration, and chart a future that best serves their mission, service territory, and customers. For both utilities and tech companies, questions of data ownership and privacy will find more attention, as optimal regulation and the ethics of data privacy are being shaped. The future grid will depend on collaboration, competition, and ultimately a mix of both.
