Initiating the Smart Grid Transformation Part 2 of 3

Jose Antonio Vanderhorst-Silverio | Jul 4, 2010

        

By following John Kotter’s suggestions about why transformations efforts fail, it becomes crystal clear that the smart grid undergoing process lacks a clear vision as it was not designed as a transformation effort, but to make use of the financial opportunities given by the stimulus package. A vision that puts customer first is urgently needed to initiate a transformation process. The emerging vision leads to two systems that mutually reinforce each other: the regulated Smart T&D Grid and the competitive Smart Enterprise that put customers first. The vision integrates the two systems into a smart grid only at real-time operation.

Initiating the Smart Grid Transformation Part 2 of 3    By José Antonio Vanderhorst-Silverio, Ph.D. Creator of the EWPC-AF Systemic Consultant: Electricity First posted in the GMH Blog, on July 4th 2010. Copyright © 2010 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write tojavs@ieee.org to contact the author for any kind of engagement.

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 A new vision that in fact puts customer first is urgently needed to start a transformation effort. The 2^nd person is well ahead of most of us. From a paper that he is aware of, “Coordination of Energy Efficiency and Demand Response, provided as a resource to assist those advancing the National Action Plan for Energy Efficiency’s goal of achieving all cost-effective energy efficiency by 2025,” he knows very well that "it is important to align retail rates with energy efficiency and demand response objectives."  

Going back to the initial question, Is the smart grid that is being pushed a transformation effort that failed? The real problem is that the smart grid is not really about a real transformation effort, but about a huge government financial stimulus opportunity, when what the global market need is in fact a transformation. The underlying assumption in the whole discussion is that utilities can impose supply side rates (of smart meter investment) on all customers via a regulator that must follow an obsolete mandate. To empower others to act on the vision, we need to get rid of the obstacle with a new mandate to state regulators.

 

By getting rid of that underlying assumption, we can easily respond to the 1^stperson comment “It would be interesting to hear what other options can be brought into play to persuade users to allow smart meters into their homes.” Instead of asking for legislation to keep the obstacle of the needed transformation, we can open the industry to innovation by following the well known Technology Adoption Life Cycle (TALC) as a way to put the customers first. A transition with customers on regulated rates and customers on market rates needs to be effectively designed.

 

In the TALC, customers are dynamically segmented into 1) Innovators (that just try it!), 2) Early Adopters (that get ahead of the herd), 3) Early Majority (that stick with the herd), 4) Late Majority (that stick with what’s proven), and 5) Laggards (that just say no!). The answer of what can a smart meter do for the customer can be answered by Goffrey Moore’s insights on high tech marketing.

 

Those insights let us see how to integrate the meter with a whole service offering that goes through The Chasm between segment 2 and 3, continues through The Bowling Alley and The Tornado of segment 3 to get to Main Street in segments 3 and 4. In his book Crossing the Chasm, Moore shows that crossing The Chasm isn’t easy. As the technology based service crosses The Chasm to take hold of a niche market and a killer application has emerged, it become attractive to a mass market that fuels The Tornado, with huge investment available to facilitate rollouts.

 

The smart grid that is being pushed is shown to be a very costly failed attempt to avoid the TALC of high tech products and services by regulatory fiat. In these high tech situations, the only customer engagement that works is the TALC. It seems slower, but at the end of the day it is a lot cheaper. In fact this slowness fits with what a 5^th person wrote: “The problem is right now everyone is broke including our various levels of government not to mention consumers who are suffering with a 10% unemployment rate. This makes it a tough time for big investments, particularly ones that will involve visible rate riders that consumers can easily understand and call their commissioners to complain about.”

 

To enable the required vision, the solution is for state governments to take the lead to develop new mandates away from a world when information was more expensive than energy into a world in which information is a lot cheaper than energy. Now that we know we need to star over, we can go to step 5 of the Lessons From Successes:  

Step 5 - Empower others to act on the vision: (a) Get rid of obstacles to change; (b) Change systems or structures that seriously undermine the vision; (c) Encourage risk taking and nontraditional ideas, activities, and actions.

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