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Demand response and smart thermostats are “revolutionizing” the utility-customer relationship

Jun 10, 2019 4 MIN. READ

Smart thermostats ushered in a new era for the utility-customer relationship. Now, demand response programs are capitalizing on this momentum to create wins for both parties.

Traditionally, utilities used demand response (DR) strategies to focus primarily on managing grid operations and higher than typical energy loads through curtailment events during peak demand periods. While successful, it required costly controls, maintenance of this hardware and created a rigid customer experience.

Today, utilities are implementing new technology solutions and new programs. The surge of cost-effective new technology (smart thermostats, solar, storage, electric vehicle technologies, etc.) when married with time of use rates allow a utility to reduce friction while integrating the benefits of energy efficiency and demand response. The net result is a more flexible way of managing load and a better customer experience.

This, however, is not another blog about the current wave of technology. The key shift in how utilities are leveraging DR for system management and optimization, however, is really in the relationship between utilities and customers. Consumers are gaining more control over energy usage and accessing technologies that better serve both the grid and their everyday needs.

The introduction of smart thermostats was a paradigm shift in the residential utility space. This new dynamic has demonstrated that customers have shown an affinity for new tech and an increased willingness to collaborate with their utility on household energy consumption in different ways. Utilities now have the opportunity to cultivate a bi-directional relationship with consumers, where each party plays a role in establishing a healthy and flexible grid.

By coupling DR with smart thermostats, utilities can further engage their customers to better manage their load. Smart thermostats activate these forward-thinking customers for future offerings that will not only help utilities meet the evolving needs of the grid but benefit consumers as well.

Unlocking the customer is key to meeting the load challenge

This next generation of customers is different. They are active, informed, and hungry for control at their fingertips. Utilities, however, have to accelerate how they meet a number of challenges while managing and optimizing load in real time, such as:

  • Legacy organizational structures do not focus on value creation and customer experience and as such make it difficult to adapt to new strategies;
  • the considerable costs that traditional demand response can incur;
  • customer expectations of an easy, convenient experience where they have full control; and
  • regulatory hurdles that limit utility activities as well as may restrict cost recovery and earnings opportunities.

Smart thermostats are the enabling “linchpin” of demand response initiatives—having opened the door for an evolved relationship—but utilities must find ways to advance through this door without tripping over regulations, unanticipated expenses, or organizational silos. Customer engagement and education (as well as customer experience) are the new cornerstones for effective implementation. Today the customer is critical to the utility’s success in providing a reliable grid.

Challenges to implementing effective flexible load management programs include:

  • non-supportive legislation or lack of enabling legislation;
  • poor or non-existent cost and/or lost revenue recovery;
  • internal silos impeding the integration of energy efficiency and demand response, and/or the coordination between system operations and program implementation;
  • availability of clean energy at peak demand times negating the need to reduce load;
  • retiring coal firing generation and replacing it with other generation;
  • renewable targets requiring clean energy generation; and
  • the need for additional support and resources for customer education and engagement.

Best practices for achieving flexible load management goals

So, how do utilities meet their goals and bring early-adopter customers along the journey with them?

It starts with a holistic approach and a solid foundation. Critical factors include:

  • identifying the synergies between energy efficiency, DR, and distributed energy resources and developing a roadmap that aligns with the current and future grid needs
  • adoption of scalable load management technologies that enable the utility to meet the needs of today and tomorrow
  • an enterprise customer engagement strategy that emphasizes user-centered design and fully considers consumer needs, including choice, comfort, control, and convenience
  • intelligent and rapid use of pilots to gain direct experience as a way to inform program design with “boots on the ground” implementation know-how

These four elements—plus a test and learn feedback loop to continuously improve and refine the approach—need to be in place from the onset. By doing so, utilities create the best possible environment for success—minimizing the complexities and risks of implementing new load management solutions that can potentially lower system costs, provide for a healthy grid, savings, emissions reductions, and/or opportunities for customers to earn incentives.

We are witnessing a transformation—smart thermostats are just the beginning of the evolution of the new relationship between utilities and customers. The key is to leverage these forward-thinking customers and keep educating and engaging them in preparation for new technologies and load management solutions as they become available.

By considering regulatory, load management, and customer needs—in addition to utilizing best practices—utilities can partner with savvy customers on these initiatives, ultimately setting themselves up for a bright future and a strong grid.

By Robyn Link

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