The utility’s role is changing, and regulation must change along with it – to spur innovation and respond to evolving customer needs. Modernizing the industry will require a dynamic approach.
A land rush in the burgeoning home energy management market.
The Prius Effect—a term that’s gained currency in sustainability circles—is shorthand for the strong link between information and behavior demonstrated by the popular Toyota hybrid.
The car was among the first to provide a real-time fuel consumption gage on the dash; step hard on the gas, watch the MPG gage go down. Coast gently along and see the savings. Drivers with the gage become aware of—even obsessive about—the way their driving habits affect consumption, and by extension, cost.
It’s a simple idea with a big efficiency impact, and it shows clearly that when consumers are given timely, meaningful information about energy use, they make different decisions. Not surprisingly, the Prius Effect often is referenced in discussions of the burgeoning home energy management market.
“Customers like information,” says Dan Delurey, executive director of the Demand Response Coordinating Committee, an energy policy non-profit. “They use that information to change the way they use electricity. Numerous pilot programs and research efforts have demonstrated the Prius Effect. It’s one of the things that’s driving this market.”
And driven it is. The last year has seen a veritable explosion in an area that previously was a nascent extension of the greater smart grid—the stuff of small pilot programs and futurists. Not anymore.
“Last year there was a lot of stuff out there that was just vaporware, but now it’s like, ‘kaboom!’” says Lynne Kiesling, an economist at Northwestern University who focuses on the utility sector. “The land rush is a good metaphor. Part of what’s driving the frenzy is the federal stimulus money, much like the government opening Oklahoma drove the original land rush.”
The pioneer analogy works on another level, too. Like the Sooners, companies racing to plant their stakes in the home energy management landscape aren’t really sure what they’re in for. Standards are still coalescing for privacy, security and interoperability.
“Another thing that’s still not there is a convergence of efficiency, demand response, smart grid and climate-change mitigation programs,” Delurey says. “These have to be in silos for certain reasons, obviously. But there’s a lot of convergence needed, and that will be a big factor in how this ramps up.”
Then there’s the big question of how or whether utilities will adapt their business models to incorporate the real potential of home-energy management. The technology is ready for a robust, nuanced customer relationship, dynamic pricing and vibrant retail competition. But disparate regulation and the industry’s traditional caution present enormous forces of inertia.
“The utilities can talk a mean streak about innovating their business model to be more consumer oriented, which is a good thing, because for the past hundred years they haven’t been, and it would be nice if they would try,” Kiesling says. “But utilities have an interest in keeping electricity as a boring, in-the-background, don’t-think-about-it product, because that reinforces their business model.”
In any event, third-party entrants to the market aren’t waiting for utilities to sort it out. They’re pushing