An NTM Snapshot: Utility culture change, grid evolution and customer engagement emerge as key themes of SEPA conference

By K Kaufmann and SEPA Staff

The following blog is a bit of an experiment.

Basically, I asked my colleagues at the Smart Electric Power Alliance (SEPA) to each write briefly, 100-200 words, about their experiences at the recent National Town Meeting on Demand Response and Smart Grid in Washington, D.C.

“Tell me about a moment or workshop or quote that you found most striking or significant — and why,” I told them, “like you’re writing a letter.”

SEPA President and CEO Julia Hamm welcomes attendees to the National Town Meeting.

This year’s event marked the first time the National Town Meeting (NTM) was hosted by SEPA, which last year joined forces with former organizer, the Association for Demand Response and Smart Grid. I hoped these vignettes would provide a range of insights into our organization’s expanded scope and the evolving energy sector, each from a slightly different perspective.

The resulting contributions do indeed capture the conference’s mix of high-level visions and nuts-and-bolts discussions, although the individual authors came up with widely different interpretations of my instructions.

SEPA President and CEO Julia Hamm

Hamm zeroed in on one of the key takeaways emerging from the conference’s plenary sessions: the need for utilities to change their internal cultures.

“When you ask people to list attributes they associate with electric utilities, rarely will you hear the word ‘innovative.’ For many very good reasons, utilities historically have been conservative and risk averse. But with all of the changes happening around them related to distributed energy resources, that’s changing, too.

“It was evident throughout numerous sessions at the National Town Meeting that utilities across the country are creating platforms for innovation within their structures, and multiple models are emerging.

“CPS Energy, the nation’s largest electric and gas municipal utility, for example, has helped stand up the Energy Partnerships Innovation Center, or EPIcenter, which is governed and managed independently from the utility.

“In another model, Southern Company has created the Energy Innovation Center, which is managed within the utility structure but is physically located in Atlanta’s Technology Square, a hub for innovation within Georgia.

“Numerous other utilities, including Commonwealth Edison, have established specialized innovation teams, empowered to think differently, within their organizational structures.

“Regardless of the model deployed, it’s clear we are seeing the beginnings of a trend toward utilities proactively seeking to encourage a new innovative mindset within a historically traditional industry.”

Tanuj Deora

Deora, SEPA’s Executive Vice President and Chief Strategy Officer, provided an even more concentrated synthesis of the shift in thinking that is occurring across the energy sector.

SEPA’s Executive Vice President Tanuj Deora talks with Phil Moeller, former FERC Commissioner and now a Senior Vice President at Edison Electric Institute.

“What struck me most is how quickly the industry — both technology providers and utilities — is recognizing three things. First, distributed energy resources (DERs) will play a larger role in the electric power sector — and that transition is emerging more quickly — than we’ve previously acknowledged. Second, as highlighted in a presentation by EnergyHub CEO Seth Frader-Thompson, the key to success in this new environment will be effective partnerships between technology providers, developers, and utilities. And third, while individual technologies are important, what we are seeing on the grid is a convergence of many distributed energy technologies — from advanced metering infrastructure (AMI) to smart thermostats, electric vehicles and rooftop solar. The more immediate challenge and opportunity lies in how we will handle this convergence.”

Nick Esch and Ryan Edge

Esch, a Research Associate, and Edge, a Research Analyst, both went more granular, with striking quotes from their conference notes.

For Esch, the focus was on insights about the current state of grid evolution and modernization, and the potential impact on system efficiency, along with what will be needed as new technologies and players are integrated into the system.

“The industry has been optimizing the single-flow, utility-centric, central-station grid network for more than a century now. We are only five years into optimizing the grid for the two-way flow of power. ” — Allen Mosher, Vice President for Policy Analysis, American Public Power Association

“Microgrids are the key for success of the grid . . . acting as building-block replacements in the transformation from an analog grid to a digital one. This transformation to a digital grid will begin to wring out the remaining inefficiencies of the system.” — Mike Champley, former Commissioner, Hawaii Public Utilities Commission

“The participation of new commercial and industrial players in the market will require long-term consistency and transparency . . . and not just hardware but also software solutions. The combination of confidence in the market and solutions will give them the incentives to install these systems.” — Matt Owens, Director of Business Development, STEM

Edge’s quotes dug into the practicalities of rate reform and the current shift toward time-varying or time-of-use rates.

“Customers do respond to price, and electricity demand is not perfectly inelastic. Utilities using time-of-use rates should do so confidently and with a large difference in price between on-peak and off. Fifty-percent higher rates for on-peak is a start, but they should be set even higher if the purpose is to drive a change in behavior for when customers use energy. Additionally, vulnerable customers are not that different from any other customer with respect to time-of-use rates; they are roughly as responsive to prices.” — Ahmad Faruqui, Principal, The Brattle Group

Edge also highlighted another point made by more than one speaker — the shift in customer education time of use rates may involve.

“In California, for example, utilities have so effectively impressed on customers that noon to 6 p.m. is peak time that now, as the peak has crept later into the evening, they have to undo their previous good work educating customers.”

Erika Myers

Myers is SEPA’s Senior Manager for Research, and you can practically see the outlines of future reports in her focus on unresolved conflicts and issues in the industry.

“A recurring theme at several sessions during the conference was the conflict between state and federal government policies, which some see as preventing coherent energy market evolution. Phil Moeller, former Commissioner at the Federal Energy Regulatory Commission (FERC), and now a Senior Vice President at Edison Electric Institute, noted that state subsidies for power plant construction, energy efficiency, demand response and DERs are impacting wholesale power prices. FERC is looking into this conflict, but, Moeller said, he does not expect any quick resolution. The challenge for the commission is how to respect individual state policies — which can have the effect of ‘picking winners’ — while advancing policies aimed at getting better price formation across interstate, wholesale markets.

“Another critical unresolved issue is developing standard methodologies for DER valuation. James Bradbury, Senior Policy Advisor at the U.S. Department of Energy, suggested that many DER-related services and their benefits — for example, ancillary grid support, energy efficiency, reliability and flexibility — are not adequately valued due to lack of consistent valuation methodologies. Much work is being done in this area; for example, according to Steve Cowell, President of E4 The Future, the National Efficiency Screening Project is about to release a new standard practices manual for valuing energy efficiency programs. But, Cowell said, valuation methodologies still vary widely, often because some benefits of solar and other DERs haven’t been proven, and additional research is needed to guarantee measurements of costs and benefits.”

Daisy Chung

For Chung, a SEPA Research Manager, another big theme threading through a number of sessions was utilities’ expanding efforts around “customer engagement.” The term is something of an industry buzzword that covers both better research on customer interests and attitudes, and programs aimed at greater consumer awareness and behavioral change. But implementing such efforts, once again, requires a culture shift within utilities themselves.

“During the ‘Leapfrog to Advanced Customer Engagement’ session,* we heard success stories from Southern Company, National Grid, and the Eugene Water & Electric Board. Each utility has fully implemented demand response offerings for its residential customers. But successfully standing up these programs meant leveraging the companies’ institutional knowledge across their organizations. Some of the takeaways from the session include:

“Know your neighbor: Take the time to align the needs and wants of management as well as different departments, even doing one-on-one interviews with coworkers.

“Break down silos: Promote transparency and information sharing, and seek input across departments to bring collective ideas and thoughts together.

“Build on past success: Determine your definitions of success — including special terms and language — so they can be used, whether internally or externally, to build the organizational vision and promote new programs.”

Bob Gibson

Customer engagement is also tied to another NTM theme of increasing interest to utilities, said Bob Gibson, Vice President of Knowledge — consumer-driven adoption of distributed technologies. He provided a quick report on a panel discussion on the topic.

“What inspires residential customers to invest in new energy technology? Marc Romito of Arizona Public Service (APS), drawing on lessons from an APS pilot studying customer adoption of utility-provided products and services, boils it down to three simple elements. Customers are drawn to technology, he said, ‘if it’s sexy, magical or it saves (them) money.’”

“Thor Hinckley, a senior consultant on demand response at CLEAResult, who formerly worked at Portland General Electric, said that new technology adoption starts with those who can afford it. If that adoption begins to change customer purchases of electricity from the utility, “there is an opportunity for distributed energy resources to cause cost-shifting, and [negatively] impact low-income customers,” he said.

“But that doesn’t have to be the end of the story. Hinckley cited the “arc of adoption of the cellphone,” from a luxury option for the wealthy to its current ubiquitous status as the technology that is an engine of wealth creation and communication throughout both the developed and developing world.

“Graham, who works in the Energy Department’s EV Everywhere Challenge, argued that “the smartest device in the home today is the car.’ The autonomous — in essence, self-driving — electric vehicle is his choice for ‘next big thing’ in electric technology.

“‘Think of all the money we will save in health care costs alone with autonomous cars, from reduced traffic accidents to getting more people to the doctor’s office for check-ups,’ he said.

“And all the data collected and used by electric vehicles will provide an enormous opportunity, he said, because ‘the only entity in the world that can manage that data is the utility.’”

K Kaufmann is SEPA’s communications manager. She can be reached at [email protected].