strategy+business Winter 2013 : Page 15

leading ideas leading ideas and full penetration across the coun-try could happen by 2020. But smart meters are only a starting point. A fully realized digi-tal grid requires a panoply of new hardware and software throughout the power distribution network, and infrastructure that can support and maintain it. Utilities have just begun to install these network compo-nents. And the technology needed to update the electric infrastructure has yet to be fully developed. Com-pleted rollouts of digital grid tech-nology will take several years, and the pace will vary among both states and utilities. Although digital grid technology should be a win-win ad-vancement in utilities manage-ment—generating cost savings and efficiency gains for both customers and their utilities—thus far it has failed to live up to its full potential. We’re Not There Yet Despite the promise of the digital grid to help with problems like power outages and high electric bills, most utility companies and their customers have yet to see the concrete benefits. In fact, few com-panies are offering any of those in-novative services—like home auto-mation—that the digital grid is supposed to spawn. What happened? Many in the utility industry wonder if the hype around digital grid technology out-paced individual utilities’ ability to deliver or got ahead of regulatory willpower to support the needed in-vestments through rate hikes. The first wave of smart-meter installa-tions fueled expectations that falling rates and amazing new services would soon follow for businesses and consumers alike. But when those expectations weren’t met, the door was opened to a range of concerns, mostly un-founded, about the costs and privacy implications of automated metering. Smart meters have also been blamed for making people sick—with ail-ments as varied as headaches, arthri-tis, and high blood pressure. Even recurrences of cancer are being pinned on the technology. Consum-er backlash ensued, slowing smart-meter deployment in some states and undermining utilities’ messages about the grid’s benefits. To recover the momentum, much depends on each utility’s incli-nation and ability to make necessary investments. Industry studies sug-gest that full digitization of the U.S. electric grid could cost between US$338 billion and $476 billion, many times the estimated $8 billion invested in digital technologies so far. Utility investment decisions will depend to a large degree on the will-ingness of regulators to add digital infrastructure costs to customers’ bills. Regulatory attitudes will mir-ror public perceptions. Moreover, many of the early in-vestments have been in front-end communications and data-gathering technologies. But to move the grid forward, utilities need to focus on the capabilities that create benefits for their customers by investing in back-end analytics that make sense of front-end data—translating that data into meaningful customer insights. These insights, in turn, will help utilities tailor products and services to better meet custom-ers’ demonstrated and potential electricity usage. A survey of U.S. consumers in 2012 by the Edison Electric Insti-tute found that only 45 percent of respondents knew the term smart grid , and barely half of those famil-iar with the term felt they under-stood how digital grid technology worked and what it could accom-plish. Consumers often take a skeptical view of new technologies they don’t fully understand. Utilities can counter this skepticism by edu-cating customers on the benefits and risks of the digital grid (including the operational benefits it provides), setting realistic expectations, and addressing consumers’ concerns. 15 Illustration by Grant Snider

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