It’s time to talk about energy consumer 2.0 and changing the rules of the game

By K Kaufmann

Editorial note: The following blog represents the author’s personal views, not those of the Smart Electric Power Alliance (SEPA).

I was recently reading an article about the ongoing debates over reform to net energy metering — the compensation solar customers get for the energy they feed into the grid — when I was struck by a sentence. Talking about a change to retail-rate net metering for customers who had installed their systems expecting a certain payback, a solar advocate said, any cut in that compensation would be like “changing the rules in the middle of the game.”

Like many Americans, I have an immediate, emotional reaction to such words. Changing rules in the middle of a game is inherently unfair, and we recognize it as wrong and something we don’t want to do.

But, as a former energy reporter and now communications manager for an energy industry nonprofit, I also know that sports metaphors do not provide an accurate picture of what’s going on in the U.S. energy sector. We are in the midst of an energy transition, which, by its very nature, is being propelled by disruptive technologies that absolutely do change the rules in the middle of the game. Solar, storage, electric vehicles, and each new technological advance associated with them are routinely heralded as “game changers.”

They not only change the rules, they change the game itself and all players are affected.

It’s an extremely complex situation, which many reporters and editors, by their very nature, tend to simplify. Thus, media accounts often frame debates over net metering and rate reform in general as a conflict between utilities and solar companies, based on economic self-interest and a need for new regulatory and industry business models that can keep up with technology. Headlines and stories are focused on utility 2.0, grid 2.0 and, occasionally, even net metering 2.0, but rarely, if ever energy consumer 2.0.

What got me thinking about all this is a book called “Routes of Power” by Christopher F. Jones, a history of energy transitions in the United States from the early 1800s to 1930. The book maps out the social, economic and political dynamics that have driven all energy transitions in this country — and are currently being played out in the changes underway in our energy system.

Historically, consumers have always been pivotal players in energy transitions, Jones writes, targeted by “boosters” of each new fuel — from coal and oil to electricity — to change how they think about and use energy. When anthracite coal was first introduced in the 19th century, consumers had to be taught how to light it, using specially designed stoves. Similarly, in the early 20th century, utilities built demand for electric power by selling home appliances and showing consumers how to use them.

Since that time, consumers have been encouraged to think about energy as little as possible, to take for granted that it will be there — safe, reliable and affordable — whenever they flick a switch or plug in a device. Their only role in the process has been to pay their electric bills on time,

But the net metering debates are occurring at a point in time when both the solar market and consumers’ awareness and active engagement with energy are shifting, driven yet again by disruptive technologies that are changing the rules in the middle of the game.

The second-stage solar market

The first stage of solar adoption has been supported by incentives — the federal investment tax credit and various state and utility rebates — that cut payback periods for consumers. While early adopters may have been motivated by environmental concerns, the main appeal of solar adoption for customers today is economic. Panel and installation prices have dropped; people want to go solar to save money.

We are now moving into a second stage of the energy transition in which the success of those first-phase incentives has changed the internal dynamics of the energy system — both technological and economic. For example, increasing levels of solar on the grid are, in some places, producing a surplus of power in the middle of the day, when residential demand is down, and a steep ramp in demand in the late afternoon and evening — aka, the duck curve.

The focus now is moving toward partnerships between utilities and solar firms, and combinations of technologies — solar, storage, demand response and other distributed energy resources — that can address these challenges and provide a range of benefits to customers and the grid. Changes in rate design will likely be a part of this evolution, as is a shift in customers’ thinking about their role in energy production and consumption.

Customers considering solar will need to think about it and other distributed technologies not only in terms of the impact on their electric bills, but as a resource to improve reliability and resiliency of electricity supply in their communities. Electric rates and incentives will need to be restructured to send price signals that encourage that shift.

Changing the orientation of rooftop panels is one simple example. Installing solar panels facing west, rather than south, means a consumer’s rooftop array may produce less power overall, which could lengthen payback periods under net metering. But west-facing panels can generate electricity later in the afternoon when it has more value to the distribution grid, providing power during times of peak demand, when supply is scarcer and therefore more expensive.

Customers with west-facing panels might be better compensated through time-varying rates that first, encourage them to use more power at mid-day, when it is cheapest, and pay back more at times of peak demand. The storyline here is direct and engaging: they can save money and contribute something of value to their community.

My intent in writing this piece is not to endorse any one policy approach to net metering or rate reform. Solutions must be tailored to local markets and be based on input from all stakeholders. Still, broad and proactive customer outreach and education will be needed as part of a holistic approach to industry change that includes new approaches to both resource planning, and industry business and operating models.

Changing rules: the new normal

What can be said with some confidence, however, is that like most aspects of the energy transition, the shift in customer attitudes and engagement may occur much faster than most people expect. A few examples that the rules are already changing include:

• A growing number of researchers are finding that while consumers may not spend much time looking at their utility bills, they are interested and engaged with energy issues.
• A recent report from management consulting firm Accenture on the shifting interests of millennial energy consumers found that more than 50 percent would be likely to sign up for services that allow them to monitor and control their home energy use. Forty percent expressed interest in a system that would allow them to automatically adjust appliances and home energy use based on real-time changes in energy prices.
• A fact sheet on adding storage to existing solar installations, issued by the City University of New York’s Solar Smart Distributed Generation Hub, lays out various system-design options, based on the different customer and grid benefits such a system can provide.

Traditional arguments against electricity rate and policy transition often center on customer resistance — most customers, skeptics say, just want to keep the status quo. That statement may be true for a certain demographic, whose interests and concerns must, legitimately, be factored into ongoing changes.

But for the energy consumers of the future, the concept of changing rules in the middle of the game may elicit less of a knee-jerk, negative reaction. Rather they may see it as part of a normal process of innovation and social and economic transformation in which they expect to be active players.

The possibilities of such a scenario for all energy industry stakeholders could be exhilarating and exciting, and we better start getting ready for it now.

K Kaufmann is Communications Manager for the Smart Electric Power Alliance. She can be reached at [email protected].