Getting Consumers to Buy Smart Grid Electric Power

 “At times we’ve been tempted to scare consumers into the right behavior.” 

Chances are you are only vaguely aware of the so-called smart grid. Brewster McCracken  [right] executive director of the Pecan Street Project hopes someday you’ll consider it as integral to your consumption of electricity as the Internet is to your consumption of knowledge.

Whether that happens depends a lot upon how consumers are enticed to embrace the concept, which promises to give them more control over how and when they use electric power, and how much it costs them.

The term smart grid is relatively new, but the basic technologies have been around for decades. At the core of the system is a smart meter, a more technologically robust version of that electric meter with the revolving wheel that resides behind a bush on the side of your house.

With a smart meter at the center, proponents of the smart grid envision an environment in which a consumer could track energy use within a home or business with the same ease and whiz-bang cleverness as the latest iPhone app. Gee, the kids left the plasma screen on in the game room, and it’s sucking energy like crazy!

Proponents believe the smart grid will encourage consumers to use less energy, and by modifying their habits buyers can take advantage of dynamic pricing, the option of paying less or more for their electricity, depending upon when it is used.  On hot summer afternoons rates go up to run that A/C, at night they drop while you charge your electric vehicle.

Sounds promising, so what’s the problem?

The smart grid has plenty of supporters, and pilot projects have been implemented all over the country, one of the largest of which is in Austin, Texas, where McCracken’s energy management initiative resides. But consumers have been slow to embrace the smart grid, and at a recent conference at The University of Texas at Austin, researchers and energy executives pondered why.

Many argue in favor of the smart grid for environmental reasons, but dramatic calls to reduce carbon footprints have increased more angst about the environment than action.

 “At times we’ve been tempted to scare consumers into the right behavior,” says Elke Weber [right] a Columbia University researcher who studies how consumers make environmental decisions. “The problem is everyone has a finite pool of worry, and when we increase worry about one hazard it decreases worry about another.”

She points out that consumers tend to focus on a single corrective action to every dilemma. We recycle our milk bottles and Coke cans, and figure we’ve done our part for the environment.

Giving consumers a reason to care

McCracken also believes energy producers won’t succeed by promoting the smart grid from a utility-centric view. “We talk about improved billing or outage detection, and that simply doesn’t mean much to consumers,” he says. “We have to show we are solving real problems in consumer’s lives.”

He argues that isn’t just a pricing sell. “Price isn’t the salvation without other benefits. I pay more for my cell phone than five years ago, because I want a data plan that allows me to check my e-mails anytime I want. We have to leverage the new smart grid possibilities in ways that get consumers excited.”

Amanda Carrico, a social psychologist with the Vanderbilt Institute for Energy & Environment, agrees that price is over-emphasized by many energy policy makers. “We know from research that energy use in nearly identical homes can vary by as much as 300 percent,” she says. “There are obviously complicated behavioral factors that influence consumer behavior other than price.”

Carrico points out that the actual energy savings derived from programmable thermostats is negligible, in part because consumers don’t take the time to use them correctly. She emphasizes that smart grid technologies must be convenient and the advantages readily apparent.

“The single most effective thing you can do is give the consumer feedback on how they are doing,” she says, referencing utilities that have given feedback on monthly bills such as “You used 14% more energy than your neighbors.”

Can utilities learn to act like Apple?

Part of the problem is a utility mindset that doesn’t mix easily with the idea of offering consumer flexibility and creative options.

“We see utilities do things like shut off electricity during peak A/C time in the summer,” McCracken frets. “I call that the secret plan to kill the smart grid. It’s a command and control mentality.”

He supports open industry standards that would allow marketers to offer smart grid products directly to electricity consumers, much as apps are developed and sold to iPhone users.

That means convincing the average Joe that a new way of buying and using electricity is worth the pain of change. For Ahmad Faruqui, principal with the Brattle Group and a leading expert on the smart grid, consumer acceptance of the smart grid and dynamic pricing is already well on its way.

“Customers will tell you in a focus group they don’t want dynamic pricing,” he says. “But when you ask people after a pilot project, most of them say they like it. The idea that people will not respond positively to the smart grid is a myth that must be debunked.”

Weber concurs. “The good news is preferences are malleable. It is possible to change the status quo, and in nine months people will like the change…but they don’t like change at first.”

Information gleaned from Smart Grid Dynamics: Business Models & Consumer Acceptance, at the University of Texas at Austin Interdisciplinary Energy Conference on April 7-8, 2011.

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