It Takes an Ecosystem: Successful Residential DR Requires Stakeholder Cooperation
Philosopher George Santayana in his Reason in Common Sense, The Life of Reason famously observed: “Those who cannot remember the past are condemned to repeat it.” Although residential demand response (DR) is a relatively new area of endeavor, it does have a past, and that past has already yielded some real successes and resulting proven practices. But the relatively poor results in some residential DR programs clearly demonstrate that either these lessons have not been learned, or they are not being applied effectively.
In other words: While these are not uncharted waters for the industry, they apparently remain so for some of the stakeholders. The secret to success in residential DR programs exists in getting all of the key stakeholders to cooperate from the initial planning through the implementation.
The suggestions included here are not intended to constitute a comprehensive project plan. Rather, they address five aspects of a residential DR program that require close cooperation among the stakeholders to minimize and mitigate problems.
#1 Ensuring Consumer Incentives
Perhaps there is nothing more important to the success of a residential DR program than a real incentive to participate. Without significant savings based on the rates or rebates, consumers are unlikely to engage in sufficient numbers to make a meaningful difference. Experience has shown that peak rates need to be at least 3 to 5 times the off-peak rates (or more) to provide a genuine incentive for consumer engagement.
The key stakeholders include utilities, regulators, DR aggregators, customers, and optionally, industry analysts and consultants. Because any change in rates can become quite controversial, it is important to have a united front among all of the stakeholders when announcing DR programs. Consumers will need to be informed about both the rationale behind the change (avoiding blackouts and building new power plants) and the potential savings compared with the status quo flat-rate structure.
#2 Ensuring Interoperability
While standards for various smart grid technologies continue to evolve, a solid foundation already exists for the technologies needed in a residential DR program. In North America the dominant home area network (HAN) used for DR is the ZigBee wireless networking protocol, along with its companion Smart Energy Profile (SEP). SEP specifies the home energy management protocols and applications, including those for DR, receipt of pricing signals, load control commands and text messages from the utility, time synchronization, security, etc. Nevertheless, even where adequate standards exist, interoperability is not always guaranteed. One effective way to ensure interoperability is to use a comprehensive DR solution from a single provider, and not a piecemeal solution from different vendors.
The key stakeholders include the technology vendors in the DR infrastructure—from the enterprise software through the chosen communication path (AMI, customer’s broadband, public network, etc.) and to the devices in the premises HAN. Depending on the circumstances, third-party testing and certification labs may also be involved. Ideally, the solution would already be proven either in an existing deployment or in a test bed before deployment. If that is not the case, it becomes even more important to select a DR solutions provider or prime contractor that is responsible for delivery of the complete DR solution.
#3 Make DR Part of Regular Business Processes
This is the stage when problems caused by issues with the incentives, rates and/or interoperability will be encountered. By incorporating the DR solution into its business processes and overall operations, it will be easier for the utility to fine tune the program to maximize participation and results. Too many opt-outs may reveal an insufficient incentive for either engagement or potential savings—or both. While interoperability may be solid, there will be other problems, and these are covered later.
The key stakeholders include the utility, DR solution provider, system integrator (if any), third-party installer, and of course, the customers. The customer is the most important stakeholder when integrating new business processes, and should be treated as such by all other stakeholders, especially by the DR solution provider, third-party installer, and Help Desk who together constitute the “User Experience”.
Problems at this stage are minimized with a good promotional and educational campaign. Research and experience both demonstrate that the more consumers understand the issues, the more willing they become to participate in the solution. IBM’s 2011 Global Utility Consumer Survey, for example, found that respondents who were most knowledgeable about energy issues were 64% more likely to change their usage patterns.
Oklahoma Gas & Electric (OG&E) found that success in a new DR program involved close cooperation from the AMI, enterprise software and smart thermostat vendor, as well as from the testing, integration and installation providers—all coordinated by the utility. OG&E then conducted an extensive educational campaign before embarking on what is probably the industry’s largest-scale AMI-based roll-out to date to some 40,000 residential customers.
#4 Resolving Problems Quickly and Completely
When a serious problem occurs, the response should be “All Hands on Deck” from all stakeholders. Indeed, all parties that could possibly be involved should be “assumed guilty” (causation) until “proven innocent.” The reason is that some problems can have multiple, interrelated causes, and it will be up to the utility to minimize finger-pointing and keep everyone focused on finding the cause(s) and a solution.
Problem resolution is normally easier and faster when working with a DR solutions provider or prime contractor owing to their greater familiarity with the total solution. Looking at in another way: the more vendors involved, the more difficult it will be to identify the root cause of the problem and resolve it with minimum disruption to the consumer.
In the event an in-premises device is involved, the key stakeholders would be the consumer, the utility and the DR solution provider. A detailed root cause analysis must be performed and a stable long-term solution must be found as soon as possible. In some cases it may be necessary to recall and replace or rework every unit affected, which will require close cooperation between the DR solution provider and the utility.
#5 Promoting Success
This aspect of residential DR programs is often overlooked. Yes, such promotions could be considered rather self-serving. But they also serve another purpose: Promoting success, especially about the satisfied customers who achieved substantial savings will help maximize the participation and engagement of additional consumers.
The idea here is to leverage the marketing prowess and resources of all parties, especially the vendors, to promote the successful results. All of the stakeholders, including the regulators who wisely approved the rebates or changes to the rate structure, should be credited as being part of the project’s success.
Stories like these also help the industry by documenting the lessons learned and growing set of best practices to the benefit all stakeholders. And the simple truth is: If we, as an industry, don’t tout our own successes, who will?
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About the Author
Louis Szablya is VP of marketing and product management at Energate, Inc., where he is responsible for marketing, product management, and partner programs. Prior to joining Energate, Szablya was Director of Smart Grid Integration at SAIC, a Smart Grid and Utility Consultant, and VP of Sales and Delivery at GridPoint.