| Customer Privacy and the Smart Grid Location: New York Author: Patti Harper-Slaboszewicz Date: Wednesday, October 21, 2009 We are told privacy is a big issue for consumers, but I propose that bigger drivers for consumers are convenience and control. If privacy were that big of an issue, how many consumers would use their credit card for everyday purchases? How many would continue to shop online? Consumers have chosen to continue to use credit cards even though it provides a record of what stores are frequented and how much they spend. Customers risk identity theft to use credit cards or to shop online but do it anyway because it provides convenience, and in many cases, more control over their lives. Think about grocery shopping—do you have a grocery store card in your wallet? If you do, every item you purchase at the grocery store is associated with your shopping card account. In return, you are offered discounts on selected items and perhaps sent coupons for products to buy that are similar to those you have already purchased. Grocery stores use those cards to create brand loyalty and to better understand their customers. So far, grocery stores have been highly successful in signing up customers for their cards despite the loss of privacy. Contrast this to when our parents shopped at grocery stores and paid in cash—only the clerks knew what my parents purchased from week-to-week or how much they would typically spend. Moving on, consider toll booths. Many commuters prefer to drive through toll booths without having to stop. Yet, by doing this, commuters provide a record of when someone using their account goes through each toll zone. Commuters appear to be willing to give up their privacy for convenience. Smart metering could be considered another invasion of privacy—utilities will know total household energy use on an hourly basis, day in and day out. They may also know when some appliances are in use, such as air conditioners, heaters, hot water heaters, pool pumps, and electric dryers. While consumers are not going to be given a choice about smart metering (this will be decided in a regulatory hearing for the majority of customers) they will be given a choice as to whether utilities know when some of their appliances are in use. If they choose to participate in utility programs, utilities will have information that goes beyond their total household energy use. What will utilities do with this information and what should customers fear? Utilities will use the information, first and foremost, to operate their grids more efficiently. If some customers agree to allow utilities to adjust the operations of the air conditioners from time-to-time when utility grids are stressed, then everyone benefits. Participants should pay less than they would otherwise on their electric bill and non-participants benefit as well from demand reductions achieved by the partnership of participants and their utilities. However, utilities do have their eyes on adapting to a transformed energy marketplace by moving from commodity providers to trusted energy advisors. Nine Window Air Conditioners In an ideal future energy marketplace, utilities would be indifferent to how much energy consumer purchase but would offer advice and bundled products to assist customers in lowering their carbon footprints. Utilities plan to use information gleaned from smart metering and individual appliance use to offer products to customers based on their patterns of energy use. This is similar to what grocery stores do now with information they gather on individual customer buying habits except instead of offering coupons for Brand X flour, utilities might offer customers new pricing plans, air conditioning service, or coupons for Energy Star appliances. Utilities should be able to tell if a customer is using too much energy for air conditioning by comparing energy use patterns across different weather conditions with other "similar" customers. Not all utility customers will be interested in additional products from utilities, but pilot projects completed over the past five years have found significant interest by consumers in learning to use energy more wisely and saving money on their electric bills without sacrificing convenience or comfort. And that is what utilities can offer with smart metering, and eventually, with home area networks that allow a limited number of appliances to "talk" with each other. In one focus group of Pepco customers held in Washington D.C., a woman described her household air conditioning, which was not one central air conditioning system but nine window air conditioners. It was difficult for her to check the status of each air conditioning window unit as people came and left throughout the day. How much easier it would be for her to manage all nine window air conditioners from one device? This is the convenience that we're talking about when all the pieces come together. It will take some time for utilities to roll out smart metering and for utilities or other market players to offer home area networks at a reasonable cost to manage nine window air conditioners. Each window air conditioner would have to be plugged into a device which, at the very least, allows the power to the unit to be turned on and off from a controller device. More sophisticated devices might also include a temperature sensor which would allow the system to treat the nine window air conditioners similar to a central air conditioning system with nine zones. Once installed, the system managing the nine units would know when each unit was on, temperature of the various rooms in the home, and when the units were scheduled to provide cooling. If this information were shared with the utility, it would be relatively easy to surmise when individual rooms are likely to be occupied. Would customers find this upsetting? Certainly, if this information was shared with would-be criminals. But if the information was kept secure and was used as intended by the utility, then customers are unlikely to give up the convenience and control for privacy considerations. The key is for utilities to be clear with customers as to how information will be used and in my opinion, give customers choices about what information will be shared outside the home. Offering Choices Some customers may opt to use utility applications to manage their electrical devices but may desire to not provide utilities with information on when appliances are used. In other words, their utility may be able to provide a management plan for air conditioning and real time pricing information, but utilities will not be provided when the air conditioner runs or provide a status in real time. Most customers likely will not care—they will be interested in the convenience and control aspects and not be concerned if utilities have information on when their TV is on. After all, someone already knows what we buy at the grocery store, when we buy airline tickets, and where we drive our cars. We are on camera everyday and probably don't even know it. Cell phone companies can track our movement by which towers our cell phones are pinging for network service and our kids probably complain about us on Facebook. Meter data is pretty boring in comparison. 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