Fill 'er Up

Deck: 

Smart Grid as Quick-E Mart

Fortnightly Magazine - April 2010

During interviews for this month’s cover story, “Customer Service: 2020,” leaders in the world of back-office information technology (IT) spoke with Fortnightly about customer service and the smart grid. They came from companies as diverse as Oracle and Telus, HP and Convergys, Vertex and SAP. But whatever the company, whatever the discussion, almost every leader came around eventually to focus on a single agent of change—the rise of electric vehicles.

Each executive imagined that EVs will transform the way utilities interact with customers, but in ways that not all of us might yet fully appreciate.

Gas Station of the Future

Several of the people interviewed for our cover story suggested that distributed generation will create a new role for utility customers: the “prosumer” role, in which individual customers and communities generate electricity for upload into the grid. Of course this is nothing new; utilities have been required to provide interconnection services for some types of customer-owned generation since 1978. But even if full-fledged net metering spreads across the country, the prosumer trend seems inextricably tied to the economics of small generation technologies—especially rooftop photovoltaics, and also things like micro-cogeneration.

But even without steep declines in the cost of these systems, might EVs feed into the same trend? Might so-called “V2G” (vehicle-to-grid) technology turn drivers into prosumers by allowing them to sell small amounts of power back into an integrated smart grid?

Oracle Vice President Guerry Waters expressed skepticism that V2G would emerge any time soon. “It’s hard to project when it will happen,” he said. “EVs will become a reality. A lot of auto manufacturers are focused on it, and the Obama administration set a goal of having 1 million EVs on the road in the United States by the year 2015. The rising price of gasoline will add fuel to that fire, and auto manufacturers will turn up production. But predicting how that will become a resource for utilities is a bit more dicey.

“By 2020 there will be smart-charging infrastructure, so EVs won’t unduly burden the electric system,” he said. “I’m just not sure that within a decade we’ll have all the issues solved for [V2G] to become anything but a fairly minor play. However, the utility will be viewed as the gas station of the future. The utility will be right in the middle of providing energy and interacting with EV owners.”

So irrespective of whether consumers become prosumers, EVs bring a different set of requirements—and opportunities—for utility customer service.

Specifically, the smart grid and smart-charging technology will allow utilities and their customers to achieve some important goals. First, smart charging will ensure a million cars plugging in at one time don’t crash the grid. Second, it will give drivers some choices about their power consumption, so they can take advantage of cheaper off-peak power rates when quick charging isn’t a priority. Third, it will allow drivers to charge their cars no matter where they’re parked, and have the kilowatt-hours show up on their own bills.

The shorthand is the “Grandma’s house” problem: When you visit your grandmother, how can you charge your EV without running up Grandma’s light bill? The answer raises some important implications about the utility’s role as gas station.

“There’s a lot of speculation about the ways EVs will change the way electricity is distributed,” said Jose Jimenez, director of HP’s global energy practice. “How will customers get charged when they plug in their cars at the office? Will they pay different prices? I drive from Atlanta to Orlando regularly and I’m used to paying different prices for gasoline in different places. The rates themselves won’t be the driving force, but how the utility will bill for it has implications for the business model.

“Maybe people can get together and negotiate rates,” he suggested. “Maybe a given customer can sign up for a certain rate structure. Do you charge extra for customers who regularly top off in the middle of the day, versus customers who are always running the batteries until they’re almost out of juice? How do you track it? Who will manage that customer interaction?”

Monetizing Mobility

As Jimenez pointed out, providing smart charging services might open the door to providing other products and services, some directly related to the EV, and others merely piggybacking on the deeper customer relationship that comes from providing smart charging via the smart grid.

Of course, many utilities have gone down the road of selling value-added services, and despite spending tidy sums on marketing, that business has remained a small niche. But the rise of EVs will bring a whole new set of requirements—and business opportunities. EVs actually might be a game changer. For instance, a smart-charging system and the related interface could provide the customer with information about the car’s status, including firmware and software updates and maintenance recommendations. It could help the driver to find a local mechanic—perhaps a mechanic who’s offering a discount coupon.

Beyond that, becoming EV fuel suppliers might allow utilities to distribute other services. Just as convenience stores turn a bigger profit selling potato chips than they do selling gasoline, utilities might earn bigger margins delivering home-area networking (HAN), appliance management and perhaps even entertainment services than they do charging a customer’s car. And doing so doesn’t require getting into the video-on-demand business; BP Amoco doesn’t make Pringles, it just owns the shelf where customers pass by and begin salivating. Likewise the utility’s biggest asset will be its relationship with customers, and the hardware and software that allows those customers to access virtual shelves stocked full of tantalizing services—some of which can’t be imagined today. The utility’s fully integrated and mobility-enabled customer-service platform—including the smart grid, the EV smart-charging system and back-office IT—will provide the ecosystem for other services to evolve.

“The utility will take care of the basic infrastructure that supports this relationship with the customer,” said Maureen Coveney, executive director with SAP. “Customers will be making proactive decisions about how they’re consuming. They’ll be driving EVs and perhaps also producing energy that affects the utility’s portfolio. All these things are going into the utility’s operational infrastructure, and the customer will expect a quick way to understand what they’re consuming and the ability to quickly monetize decisions about that consumption.”

All of this represents a big opportunity for utilities. The deeper customer relationship that comes from charging EVs will create greater reliance on utilities than customers have ever had before. This is a good thing if utilities can profit from it—and if they can deliver the goods even more reliably than they have before.

“The ability to deliver uptime takes on a different tone,” said Dan Sullivan, managing director with customer service outsourcing company Vertex. “Outages are never fun, but if you can’t drive your car, then you’re shut down completely. More customers will scream tomorrow than they do today.”