Where’s Waldo? Searching for the customer in the Smart Grid Dialog

• Aug 12, 2010
• David Shepheard

A few weeks ago I attended the inaugural Distribution Technology and Innovation Summit (DTI) in Las Vegas. The focus of the conference was on the current state of the Smart Grid market with presentations from utilities, trade groups, and state and federal regulators. In the meetings and social receptions, you couldn’t swing a dead cat without hitting someone who was talking about DOE funding, state regulatory approval and Smart Grid project “definitization”. For those of you new to the term (as I was up until a few weeks ago), definitization is the term the government uses to mean that a contract has been finalized and approved and in this case that the Smart Grid Investment Grant (SGIG) stimulus funds can begin being disbursed to cover approved project expenditures. Until a project has been definitized, the awards amount to nothing more than monopoly money.

So what does it take to get a project definitized? For one thing, it helps to have a solid achievable business case based on proven commercial technologies. It’s also imperative to have state and local regulatory support and shareholder support for the expected costs that will be born by customers and shareholders. You’ll notice that the customers themselves is largely absent in my description of the key constituents to get to definitization. And that’s a phenomenon that has only surfaced over the last few months.

If you think back to January 2009 and the first large-scale public awareness of Smart Grid (aka the GE “If our grid only had a brain” Super Bowl ads) it was a very different picture of public involvement and receptiveness to Smart Grid. The expectation was that the customer would be front and center in the Smart Grid deployment and responsible for many of the expected benefits. I remember at the time, my colleagues were optimistically comparing the GE ad to the landmark Apple Macintosh “hammer” ad of 1984. “This changes everything”, I recall one of them saying. What a difference a few months makes...

Fast forward and it’s hard to even find the customer in most Smart Grid discussions. At DTI, the vast majority of presentations talked about “not forcing” change on the customer, “optional programs”, and “focusing first on utility operational benefits”. And who should be surprised? Following very public concerns about Smart Meter accuracy in California, stalled state regulatory approval in Maryland, and limited success stories of proven benefits based on customer response, utilities, trade groups, and regulators are understandably a little gun shy of counting too much on the customer to make Smart Grid successful.

It’s understandable that the utility industry is excited about Smart Grid. It’s been nearly a century since electric utilities were at the forefront of technology innovation. Certainly, utilities have innovated during that time – but I’m talking here about real innovation – the kind that changes people’s lives in very measurable ways. Like having a device half the size of a standard deck of playing cards that holds every song from every 80’s hair metal and 90’s grunge band, every picture of your children and family, the latest movies you haven’t seen, efficient access to every piece of knowledge ever stored on the internet, games, games, games, weather, news, sports, maps, a compass, virtual landscapes, a camera, e-mail, endless productivity, social media, and personal interest applications…. oh a phone you can use to phone home like ET (unless you’re in the US in an AT&T dead zone).

Or say like, allowing electronic lamps to light your house instead of filling them with oil once a week. Refrigerators. Automobile manufacturing. Air conditioning. TV. Computers. Facebook.

Let’s face it, electric power is behind just about every other technology innovation that of the 20th and 21st centuries that has improved people’s lives. And yet, our customers don’t think of utilities as being “innovative” or “consumer-focused”. And who could be surprised? Most utilities don’t know when their customers’ power is out until the customer calls them (presumably on an iPhone since their power is out and they can’t use their home cordless phone.) I bet Apple could tell the utility that the customer’s power was out with a nifty iPhone app. Compare that level of customer intimacy to Apple with their latest launch of the iPhone 4 - which by Apple standards was a disaster. Last week, one of my colleagues told me that Apple credited his credit card $30 for the purchase of a case that he made prior to the Apple free cases program to try to resolve some of the AT&T network reception issues. Did he have to call Apple to tell them he would like to receive a credit? Nope. He got an e-mail thanking him for his continued support of Apple (they know everything he’s EVER bought from them) and the credit just showed up on his credit card. How did they know he bought a case? How did they link that to his account? How did they get authorization to credit his account? Isn’t that going to cost them a lot of money to credit people who didn’t even ask for a refund? What will shareholders think about that reckless loss of financial discipline? They’re all cheering in the street.

The answer to all of these questions is that Apple has earned the right to have customer intimacy. Customers, by their own free will, choose to have a relationship with Apple on their own terms. Apple has achieved this right through a consistent stream of innovative products, savvy marketing, and establishment of network effects through markets that enhance and support their brand. Utilities had the innovation platform a half century ago, but have lost touch with the end-customer. And getting that perception of utilities as innovative and achieving customer intimacy is not going to come back quickly. It’s going to take baby steps, and time, and a stream of innovative products and services that enable customer to choose of their own free will what kind of relationship they want to have with their utility. And then, and only then, maybe we too can have a Super Bowl ad with a woman throwing a large hammer at a giant screen.

But until then, Smart Grid projects must go on, in many cases sans customer. State regulatory approval, DOE funding definitization, project initiation activities all march on to the 3-year drumbeat of SGIG funding. For now, the customer has been replaced by a focus on utility operational benefits in the Smart Grid dialog.

Tune in soon for a primer on the state of the Smart Grid market and utilities shift towards distribution business operational improvements as the cornerstone of Smart Grid programs.

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