How DR and smart thermostats have revolutionized the utility-customer relationship

Jun 10, 2019

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

Utilities have traditionally relied on demand response (DR) strategies to reduce the cost of supply-side resources by curtailing energy use during peak demand periods. While successful, managing these events has required costly controls, like hardware maintenance, and created a rigid customer experience.

Today, utilities are implementing new technology solutions and programs to better manage supply-side generation costs, as well as to optimize the use of demand-side resources. The surge of cost-effective new technology (smart thermostats, solar, storage, electric vehicle technologies, etc.) combined with time-of-use rates is giving utilities and customers greater choice, while also providing an opportunity to integrate the benefits of energy efficiency and demand response. The net results are a more flexible way of managing load and improved customer experience.

That said, the current wave of technology is just one piece of the equation. The key shift in how utilities are leveraging DR is actually in the relationship between utilities and customers. Consumers are gaining more control over energy usage and accessing tech that better serves both the grid and their everyday needs.

A smart paradigm shift

The introduction of smart thermostats was a paradigm shift in the residential utility space. This new dynamic demonstrated that customers have an affinity for technology and an increased willingness to collaborate with their utility on household energy consumption. 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 and their data (and smart meter data if available), utilities have more granular insights on customer energy usage and load shapes. This information can be leveraged to more accurately predict and target customers who are likely to benefit from savings at certain times of the day.

Utilities can also use this data to further engage customers to better manage their energy consumption during peak periods—potentially saving them money by reducing monthly bills. For example, by pre-cooling homes during off-peak times, customers can remain comfortable during peak time events while also providing utilities a way to better manage peak-coincident load. Smart thermostats are a conduit to moving these forward-thinking customers toward future offerings that will not only help utilities meet the evolving needs of the grid but benefit consumers as well.

Engaging customers to meet the load challenge

This next generation of customers is different. They are active, informed, and interested in leveraging smart devices to manage their energy use. Utilities, however, must accelerate how they meet a number of challenges while managing and optimizing load in real time. Some of these hurdles include:

  • 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 with choice over technology, installation, and participation options; and
  • regulatory hurdles that limit the ability to integrate energy efficiency (EE) and DR in some cases, as well as limitations on cost recovery and earnings opportunities for customer-sided assets, like behind the meter (BTM) storage.

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 cornerstones for effective implementation and delivering customer value. Today, the consumer is critical to the utility’s success in providing a reliable grid.

Driving adoption to achieve 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. Best practices include:

  • identifying the synergies between energy efficiency, DR, and distributed energy resources;
  • developing a roadmap that aligns with current and future customer and grid needs;
  • adoption of scalable load management technologies—such as customer-sided distributed resources and devices connected to a technology control platform—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; and
  • 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 engage further and 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 by educating and engaging them in preparation for new technologies. This will help orchestrate the adoption of distributed and renewables resources to benefit all customers, as well as the grid.

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.

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