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Published: August 12, 2013
 / Winter 2013 / Issue 73

 
 

Waiting for the Digital Grid

The modernized grid should revolutionize the way electricity is distributed and used, but its potential hasn’t yet been realized.

There have probably been a few times when you’ve opened your electric bill and been shocked at the amount you owe. But in the future, widespread implementation of the digital electric grid may help you avoid such moments. Your smart meter would tell you how much electricity you’re using and when. It could also help you offset costs by running your dishwasher during off-peak electricity hours or turning off your living room lights if you forget to. If you have a solar panel or wind turbine on the digital grid, you might even find yourself selling electricity back to the power company.

Smart meters are among the more visible signs of the digitized grid. Utilities have begun installing them at customers’ homes, and power companies are already sending consumers monthly notices comparing their electricity consumption to that of their neighbors. In fact, about 33.5 million smart meters have been installed in the United States, representing 25 to 30 percent of residential utility customers. Installation rates approach 75 percent in some areas, and full penetration across the country could happen by 2020.

But smart meters are only a starting point. A fully realized digital 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 components. And the technology needed to update the electric infrastructure has yet to be fully developed. Completed rollouts of digital grid technology will take several years, and the pace will vary among both states and utilities. Although digital grid technology should be a win-win advancement in utilities management—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 companies are offering any of those innovative services—like home automation—that the digital grid is supposed to spawn.

What happened? Many in the utility industry wonder if the hype around digital grid technology outpaced individual utilities’ ability to deliver or got ahead of regulatory willpower to support the needed investments through rate hikes. The first wave of smart-meter installations 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 unfounded, about the costs and privacy implications of automated metering. Smart meters have also been blamed for making people sick—with ailments as varied as headaches, arthritis, and high blood pressure. Even recurrences of cancer are being pinned on the technology. Consumer 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 inclination and ability to make necessary investments. Industry studies suggest 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 willingness of regulators to add digital infrastructure costs to customers’ bills. Regulatory attitudes will mirror public perceptions.

Moreover, many of the early investments 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 customers’ demonstrated and potential electricity usage.

 
 
 
 
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