by Nancy Young, Skipping Stone
New technologies, environmental awareness and a weak economy have worked together to create rapid evolution on the energy landscape. January's Electric Light & Power Executive Conference provided a microcosm of the energy industry and was the ideal setting for collecting informed, executive-level opinions about the current state of the industry and trends that map where we're going.
The survey tool was created and administered by Skipping Stone, a consulting firm founded by energy executives and dealing exclusively with the energy industry. Skipping Stone's deep expertise in the field has led to a third consecutive year of collaboration with the Electric Light & Power Executive Conference team.
Skipping Stone designed the survey questions based on the conference agenda. Questions range from informational concerning industry segment representation to opinions about technological advances, predictions regarding federal and regulatory rulings and the economic climate.
Polling was conducted between registration and the start of the first session. Results were tabulated quickly and were presented in slide format during or at the close of the relevant sessions. This immediate turnaround is the key to the survey's success. It provided feedback relevant to the session topic in time to be incorporated into the session and facilitated lively discussion that carried over from one session to the next.
The survey represents nearly an evenly distributed cross section of industry participants with the exception of end users, as seen in Figure 1.
Market research participant company types. Solutions providers are considered to be software vendors, technology companies and hardware providers (metering, EMS, etc.). Professional services companies are an aggregate of consultants, analysts and lobbyists.
Industry Growth Potential
The data regarding opinions on growth potential has been collected since 2010. Figure 2 offers year-over-year insights.
Areas with greatest growth potential. Twenty percent of respondents cited demand response (DR) as the No. 1 area of expected growth in 2012. This represents a continuation of a trend regarding the importance of DR as a strategy for the industry.
While smart grid software was the second-most important growth area identified, not one utility representative listed it as a primary growth area. This suggests a potential disconnect between solutions and technology providers and their targeted customers.
Battery storage seems to have been more on minds in 2011 than in 2012, suggesting that many people either investigated battery storage in 2011 or heard from people who did that issues remain with large-scale deployment.
Apparently the high hopes held for sustainability and retail deregulation in 2010 were replaced by battery storage and real-time pricing in 2011, only to give way to advanced metering infrastructure (AMI) and smart grid technology this year. Clean energy technologies, wind generation and electric vehicles (EVs) have suffered a downturn in the opinions of respondents regarding their growth potential. Solar has maintained a slow but steady increase during the past three years. That DR has remained a top growth area for the second consecutive year is significant because all sectors rated it second in importance.
Power Market Drivers
The economy was the No. 1 issue on everyone's mind, as seen in Figure 3.
Rank the economic, financial drivers that impact power markets. Natural gas drilling was the only nonregulatory or market-oriented driver offered for power markets and was considered critical by only 11 percent of respondents. Renewable portfolio standards (RPS) and Environmental Protection Agency (EPA) concerns were cited as more important.
DR programs remain considered to be strong investments for utilities relative to other choices, although it is interesting how evenly distributed the responses were in Figure 4.
Investments based on ability to generate ROI. The utility respondents were distributed evenly in their opinions on return on investment (ROI) with energy efficiency, DR, new transmission and distribution (T&D) lines and substation automation all garnering equal support. DR was given enough moderate support across all segments to end up as the highest-value ROI opportunity.
Solutions providers saw smart meters as strong ROI candidates for utilities, indicating this sector assumes it can leverage the value of smart meter implementation, but it has yet to convince the utilities sector. All respondents other than utilities considered smart meters a good investment. Utility respondents' having given them a low rating might reinforce the case for the disconnect cited in industry growth potential (Figure 2).
Respondents also were asked to define the two most likely investments utilities will be forced to make regardless of ROI, as seen in Figure 5.
Investments utilities will be required to make. Energy efficiency investments seem to have gained attention this year, and apparently DR programs were seen as more of a companion to new generation investment than an alternative to it.
Cloud computing seemed to be a strong buzz phrase throughout the conference as sectors deal with managing "big data." Two questions were asked to determine opinions regarding cloud computing, as shown in Figures 6 and 7.
Status of company using cloud computing. Of the 42 percent who stated they were using cloud-based solutions as a regular part of their infrastructure, nearly all were technology and solutions provider companies. Utilities mostly did not use cloud computing at all, with a few having responded that they were using it sparingly.
Major concerns about using cloud computing. Concerns regarding cloud computing were highly concentrated toward cybersecurity issues. Every utility respondent listed cybersecurity as the No. 1 concern. Vendor risk was cited consistently across all sectors as the second-highest concern, with loss of control coming in an evenly split third.
Renewables continued to be a big part of the dialogue at the conference, but the conversation is changing. Figure 8 shows the survey results regarding concern about renewables.
Rank renewable energy issues. As more renewable projects come online and funding for future projects gets tighter, price competitiveness for renewables becomes more important.
The concern about managing the variability impact of renewables on the grid has declined substantially during the past year.
This would seem to indicate that this area is responding to the state of the economy.
Grid operators are less concerned with variability and more with price.
Best way to handle variable solar, wind. Respondent opinions of the best method to handle renewables' variability underwent a significant change from 2011 to 2012. Energy storage and the self-healing grid have lost adherents while DR has gained support. Although "other" has gained support during the past year, there is no consensus on what "other" is.
Smart Grid Behavioral Drivers
The final survey questions concerned customer behavior regarding participation in utility programs' being made possible by smart metering technology. Figure 10 shows the expected time frame for participation as communicated by conference attendees.
How quickly after a smart meter is installed will customers participate in smart meter utility programs? Apparently the hope for a quick response seen in 2010 has been tempered by experience, and the widely held expectation that no one would not participate is gone; however, the core expectation remains for a one- to two-year turnaround. Skepticism has entered the scene. This view that participation likely will take time is born out in the responses to the two questions that followed, seen in Figures 11 and 12.
C&I. Figure 11 reflects opinions on the most important factor driving commercial and industrial (C&I) behavior change as a result of the new opportunities associated with smart grid implementation.
Most compelling reason C&I customers will change behavior because of smart grid. The consensus was that regulatory and utility practices will do most to influence behavior change.
The poor showing for DR might reflect the lack of C&I representation in the survey group and that end users remain undereducated on load-management benefits.
The utility sector was unanimous in identifying incentives and dynamic pricing as the key driver for C&I customers. None listed DR as the prime factor.
Support for DR as a driver came almost exclusively from professional services company representatives perhaps because they are more in touch with C&I customer opinions than utilities are.
Residential, mass market. On the residential behavior side, the data in Figure 12 provides a year-over-year view that suggests a utility-driven approach will be most effective in compelling behavior change in the mass market.
Most compelling reason residential customers will change behavior because of smart grid. A combination of incentives and dynamic pricing is seen as the best means for gaining benefits from smart grid implementation. The data shows that more weight is being given to the pricing in 2012 and that the high hopes in 2010 and 2011 for behavioral changes stemming from incentives and information access respectively have been dashed.
Regulatory motivation for smart meter investment. The final question concerned respondents' opinions of what is driving smart meter decision-making at the commission level. (No respondents identified themselves as regulators.)
Reasons utility commissions believe in smart meter investment. The data represents the opinions of stakeholders in the regulatory process and what they perceive to be the driving factors for regulators. Utility respondents, who placed little value in smart meters in the previous questions, chose customer benefits and cost savings as reasons the commissions believe utilities will invest in smart meters.
The Electric Light & Power Executive Conference and DistribuTECH Conference & Exhibition are excellent environments to gauge the status, prioritization and attitude of the smart grid community.
The 2012 event showed a weeding out of ideas that looked attractive in the early stages of smart grid strategy and a momentum toward adopting solutions and technologies that are gaining traction.
Renewables seem to be impacted negatively by economic concerns and an increased focus on price competitiveness; however, managing the variability of renewable resources on the grid seems less intimidating than it was in 2011.
Although DR was consistently considered high-growth, full of ROI potential and a must-adopt for utilities, it was seen as inconsequential in changing customer behavior. This contradiction points to a need for education in that area.
Nancy Young is a senior consultant at Skipping Stone, a consulting firm founded by energy executives and dealing exclusively with the energy industry. Reach her at n firstname.lastname@example.org.