If you ask a utility executive with a few decades of experience under his/her belt what s/he thinks about the current state of our industry, chances are you’ll hear them say that this is one of the most transformational times in its history. The traditional utility value chain, which once placed customers at the edge of the grid, has been completely redrawn with customers squarely in the center. What’s fueling this change is a steep rise in customer expectations, the accelerated customer adoption of Distributed Energy Resources (DERs), and the recognition of new opportunities to monetize grid resources. In some cases, customer investments in energy efficiency and DERs are even expected to eclipse utility spending in those same areas over the next few years¹. 

With the growth of technology investments also comes a deluge of new data about customer energy consumption and behaviors, which has amplified the impact of demand side management (DSM) programs. As the Smart Electric Power Alliance (SEPA) illustrated in its 2017 Utility Demand Response Market Snapshot, there are several efforts underway to better coordinate energy efficiency (EE) and demand response (DR) programs at the utility level through combined program offerings, incentives, marketing, and services². Undoubtedly this level of alignment will have many positive outcomes, but we believe it’s the convergence of grid-side and customer-side resources that will truly shape the future of DSM.

In order to capitalize on this opportunity, we have developed three key guidelines for utilities to consider:

• DER programs can be designed and deployed to deepen customer engagement and expand value-added services
   
• Customer programs that are flexible in time, scale, and location can serve as non-wire alternatives to help balance increasingly volatile distribution networks
   
• Utilities with an open-minded approach toward new roles and best practices will benefit from new ways to generate returns from grid and customer investments
   

First, utilities will need to recognize DER programs as prime channels through which to engage and empower customers to take control of their energy use. Once perceived as threats to the utility ecosystem, DERs are now viewed as assets that can be centrally modeled and leveraged for the betterment of the grid. Whether it’s smart thermostats, solar panels, electric vehicles or storage solutions, utilities have an important role to play in the management of these assets, the insights that they provide, and the customer experience that they enable. For example, PG&E, whose utility website was ranked as the best energy company website in North America in 2017 by E Source³, recently launched a set of web widgets to provide solar customers with greater visibility into their net electricity generation and consumption along with their net energy metering credits and charges. This offering enhances the overall solar user experience and fortifies the utility position within that relationship.

Second, utilities should leverage more customer programs that can be deployed on demand, at scale, and in targeted locations to help balance the grid. As Navigant noted in its 2018 research report Utility Customer Engagement Through DSM, “Grid management is expected to increasingly rely on customer interactions to manage multiple aspects of electricity generation, distribution and consumption including the when of electricity consumption”⁴. One utility that has embraced this construct is National Grid, whose innovative behavioral demand response program in the town of Clifton Park, NY called Peak Time Rewards, allows the utility to alert customers of upcoming peak events through emails and social media. These notifications, which are sent out to eligible customers within the territory, provide tips for shedding and shifting load and utilize behavioral science to encourage participation. After each peak event, customers receive information on their load curtailment and that performance is translated into points, which can be exchanged for gift cards. In the first season of the program, 58 percent of National Grid Clifton Park customers used less energy in at least one peak event when compared to a predictive model. This ability to manage customer behavior within the context of load balancing, and to do it without expensive programs that require installed measures, is critically important to the future of DSM.

Third, utilities will need to be open to working with new partners, breaking down traditional silos between grid-side and customer-side teams, and ultimately rewriting best practices for the industry. For example, SDG&E has taken a proactive approach to the proliferation of new rooftop solar and other utility scale DERs that feed into its distribution grid by creating real-time forecast models. Given the potential impact of these resources on operations, SDG&E has built multi-dimensional profiles that incorporate the location, weather, solar incidence, condition of use and other attributes that may be unique to DER assets. This allows the utility to account for “hidden load” and create optimal switching plans, which results in more reliable distribution operations and a better customer experience.

A key enabling technology that allows utilities to find and deliver value from grid and customer investments is data analytics. Best practices applied from other industries – whether on the consumer side by companies like Amazon and Lyft, or on the operational side – offer a great head start for how to deploy these established capabilities quickly. The returns from these applications are very quick compared to more traditional investments. For example, utilities may leverage data analytics in revenue protection, which employ machine learning algorithms to identify repetitive and evolving theft behaviors. This enables utilities to discern theft from meter malfunctions, shorten investigation cycles, and improve efficiency with limited resources.

This evolution of DSM, particularly the embrace of DERs, will involve redefining industry terms and writing new standards to reflect modern day applications. At this year’s DistribuTECH conference in San Antonio, SEPA hosted a session with 200 industry experts, all focused on developing new standards for Distributed Energy Resource Management Systems (DERMS), and some of the most intense conversations of the day were between smaller stakeholder groups trying to nail down more precise definitions for common terms. SEPA’s Chief Innovation Officer, Sharon Allan, described this challenge, “As we begin to change our grid and have much more distributed energy connected on the system, it changes the way we operate and it changes the demands on the system, and it changes, really, the design points... We recognize that implementing standards — and ensuring they keep up with technology — is an ongoing enterprise”⁵.

We see tremendous potential in emerging technologies and a more customer-centric approach to the grid. The utilities that can seamlessly integrate customer-side and grid-side resources while effectively engaging customers will lead the evolution of DSM and lay the foundation for a new century of growth.
 

References

1. Myers, Erika; Bartholomy, Obadiah; Leveraging Customer-Side DERs to Benefit All Utility Customers, Smart Electric Power Alliance, June 2016

2. Chew, Brenda; Feldman, Brett; Esch, Nick; Lynch, Madison; 2017 Utility Demand Response Market Snapshot, Smart Electric Power Alliance, October 2017

3. Wootton, Kym, Utility Websites Are Becoming More User-Friendly, Mobile-Optimized According to an E Source Study, E Source, August 2017

4. Leuschner, Paige; Talon, Casey; Navigant Research Leaderboard: Home Energy Management, Navigant Research, 2Q 2018

5. Cotter, Andrew, DERMS at DistribuTECH: Getting Down to the Nitty-Gritty of Managing More DERs on the Grid, Smart Electric Power Alliance, January 2018