(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
Technology for the Masses
The consumer-centric smart grid and its challenge for regulators.
By now it should be obvious that the thorniest question mark facing the smart grid is not about standards and technology, but rather, who owns the data.
Is it the utility—and by association the regulators—or is it the customer, along with the manufacturers, vendors, and software designers that create products and services to serve that customer?
And more important, do consumers already have an intuitive sense of the issues at stake, and might this intuition help explain some consumers’ negative reactions to early utility forays at smart grid deployment?
One vision—a utility-centric smart grid—implies perhaps more of the already-familiar notion of utility-sponsored programs for energy efficiency and conservation, with all the attendant pitfalls and rate-making issues about cross-subsidies and cost-benefit allocations.
The other—a customer-centric view—celebrates a world of programmable devices and applications (or “apps”) that might make it easy for early-adopting electric consumers to save money and energy without needing to become energy experts, or even to understand the barest rudiments of energy cost accounting or utility tariffs. After all, in the financial industry personal computers already can be programmed to make thousands of microtrades a minute. Such information technologies also can make the many adjustments needed, hour by hour, to manage household energy consumption without any ongoing control from the homeowner—or the utility or regulator, for that matter—or even any direct awareness of what the software actually is doing.
This philosophical divide between top-down and bottom-up versions of the smart grid gains extra significance because retail energy consumers today generally don’t understand their electricity and natural gas bills, or even the definitions of the units of measurement—the kWhs and therms commonly used for billing. This lack of understanding often combines with suspicions about sales pitches, promises and mandates—which might lead utility customers to approach energy conservation with the same wary skepticism that comes with the purchase of a used car.
Which smart grid vision prevails might determine whether advanced distribution technologies realize their full potential for utilities, customers, and the economy as a whole.
Of Apps and Appliances
Since the 1970s, regulators have held hearings, launched experiments, and introduced pilot projects to encourage conservation, and utilities have sponsored many programs to spur energy efficiency and demand-side management (DSM). Yet consumers often have met these attempts with apathy or even dread.
By contrast, consider the telecommunications market.
Smart phones and other multipurpose hand-held devices are everywhere. Most people aren’t inhibited by their complexity and readily take on new applications. The revolution in information and communication technology opens a new opportunity to overcome the persistent failure of consumers to fully understand their utility bills, how they consume energy, and how the utility measures that consumption. Smart devices and meters overcome this problem because consumers will no longer need to understand the