Smart Grid and Consumers

Jul 1, 2010
192 Pages - Pub ID: SB2601062
Abstract Table of Contents Search Inside Report Related Reports

The zone of interaction between the smart grid and the consumer has been characterized as “the great unknown.” Yet ready or not—with the smart grid rapidly taking shape, a rush of companies swarming the market, state mandates kicking into effect, and actual deployments being built out—the smart grid is now poised to plunge headlong into this largely unexplored land of consumer demand. Yet so far, despite optimistic reconnaissance gathered from pilot projects and other preliminary tests, real-world expeditions into the new consumer frontier have met with a host of problems—from cost overruns to consumer resistance. So perhaps at this point it would be prudent to step back and reassess this terra incognita.

The smart grid is currently conservatively valued at just over $20 billion in the United States and over $70 billion globally. Yet only about 10% of this amount is accounted for by consumer applications—mostly smart meters. The smart grid will only truly achieve its goals if it establishes positive two-way communications between utilities and consumers. This means that residential applications and services must necessarily gain significantly in share before the smart grid can realize its visionary promise.

This study presents a wealth of insights into smart grid/consumer dynamics. It examines the issues involved in building positive two-way communications interactions, and the intrinsic negative resistance that can be expected. With a focus on residential applications and services, it provides an in-depth analysis of advanced metering infrastructure, smart meters, demand response, dynamic pricing, home energy management systems, home area networks, smart appliances, popular communications platforms, and futuristic technologies. The competitive situation is also discussed, showing how giants like Cisco, Duke Energy, and Google are entering a fledgling field so far dominated by relatively recent startups, such as Enernoc, Control4, and a flock of other companies. Other areas covered in this study include product and marketing trends, recent smart grid deployments, and consumer surveys regarding smart grid acceptance.


Additional Information

Market Insights: A Selection From The Report


The Land of Consumer Demand
The first, most obvious thing one encounters on entering the land of consumer demand is that it is ruled by the physical and emotional, not the logical. Taking precedence here are needs, desires, preferences, habits, creature comforts, and so forth. Rationality and efficiency are not the paramount principles here. Accordingly, any technology introduced into the land of consumer demand, no matter how positive its promise, must be perceived as satisfying consumer needs and desires to gain acceptance, rather than some producer’s logical imperative.

The thrust of consumer demand goes even further. For in this emotionally charged atmosphere, if a newly introduced technology is perceived negatively—as not satisfying needs and desires, or even felt as threatening or dangerous—imposition of it by mandate will breed resentment, antagonism, and perhaps rebellion. In this case, no matter what the ultimate benefits are, any initial hostility caused by an imposed, unwanted new technology onto consumers could give birth to an enduring adversarial relationship.

Debunking the Internet Analogy
This confusion about utility versus consumer orientation is clearly manifest in the popular analogy comparing the smart grid with the Internet. While more than superficial similarities exist between the two, in the final analysis it must be clearly understood that the smart grid is not the Internet. The smart grid is not about entertainment, social networking, shopping, or the pursuit of knowledge. Its owners/proprietors are not consumer-savvy marketers like Google, Apple, Twitter, or their ilk. No, the smart grid is not based on fun, excitement, or convenience like the Internet. Instead, it is based on the innate drudgery associated with paying bills to utilities—a task about as pleasant as paying the mortgage. And who are the proprietors of the smart grid? They are the giant utilities, companies not known for their brilliant marketing and with whom consumers have had a longstanding and ambivalent relationship.

In short, the smart grid is not the Internet. So far it is all about business, not pleasure. And consumers know this, having dealt with utilities for all their adult lives. Thus any attempt to market the smart grid based on “sci-fi pie-in-the-sky” hopes that a fantastic new world of home area networks and such await those who embrace it is bound to encounter skepticism.

Business Relation with Utilities
This is not to say that consumers will reject the smart grid. Indeed, far more likely is that most will welcome it—but only on their own terms. Consumers have a business relationship with utilities. Pretending otherwise risks diluting what popular appeal the smart grid does have. Thus rather than responding to abstract promises, consumers will probably be most positively disposed to a straightforward business proposition: embracing the smart grid in exchange for physical benefits and tangible value.

Popular Appeal Necessary for Success
Whether agreeing with the preceding analysis or not, it is undeniable that the whole question of popular appeal has profound implications. For at root, the smart grid can realize its full potential only in a free-flowing minimum-friction interactive exchange between producer and consumer.

This interactive exchange demands a healthy amount of trust, which can only be built on the foundation of a positive transparent relationship. If instead the relation is poisoned by hostility or festering resentment then any dream of a smoothly functioning “bi-directional power network synchronized with a communications network” will not come to fruition.

In this context, consider government efforts currently underway to impose the smart grid by mandating the installation of smart meters. California and Connecticut have already issued these mandates—although CT’s mandate is currently on hold—and Texas is likely to be next. But the question arises here: If consumers have smart meters, will they actually use them? The answer is important, as the smart meter will form the foundation on which all the other more elaborate smart grid functions will be based. If consumers do not interact positively with the meters—if they ignore them or even feel threatened by them—the entire smart grid project, no matter to what heroic proportions it grows, will be born with an Achilles heel.

In sum, ultimately the smart grid must have popular appeal to realize its full potential. Thus imposed mandates risk long-term negative consequences if they engender apathy or, worse, arouse ill will.

Utility Benefits
The smart grid will have popular appeal only if it offers consumers solid, demonstrable benefits. Certainly, smart grid proponents are bending every effort to make the case that it does so. Yet in tallying up the various benefits promised by the smart grid, it becomes clear that the most solid, direct benefits will flow to utilities. Meanwhile, the consumer will mostly see only indirect, and rather amorphous, benefits—at least in the initial stages of development.

Consider all the beneficial impacts the smart grid will have on utilities. It will greatly improve operational efficiency and reliability, systems will be upgraded, overhead and operational costs will be reduced, and grid management will be optimized, among other positive impacts. Following is a brief look at some specific utility benefits.

Greater Reliability

Greater efficiency in managing electricity flow over a smart grid transmission and distribution infrastructure will increase grid reliability by lowering line loss. FERC estimates that smart grid infrastructural enhancements would heighten efficiency by 3% to 4%. Reliability will also improve with the reduced stress on the grid brought about by dynamic pricing. According to Ahmad Faruqui of the Brattle Group, a fully instituted dynamic pricing regime will produce demand reduction during peak periods in a range of from 13% to 27%.

Grid reliability will also be enhanced through use of advanced operational sensors and software—analytic, visualization, etc. These will allow utilities to see problems developing in real time and take proactive corrective measures before the problems spiral out of control.

Reduced Overhead/Administrative Costs

Given the remote control capacity of smart meters, there will no longer be a need to go into the field to read a meter.  Not having to rely on meter readers translates into time and money saved on personnel, transportation, insurance, and other overhead costs. Remote control of smart meters also saves on administrative costs associated with connection and disconnection services. Moreover, with AMI in place, utilities are able to determine if a problem originates on the consumer or the utility side, thus lessening the need to dispatch service technicians.

Fewer Customer Service Issues

Ideally, with the smart grid there will likely be fewer customer service issues to deal with. For example, the old billing method that relies on estimated meter readings will be rendered obsolete by smart meters, with the result of fewer disputed bills. The smart grid will also enable alternative billing solutions, such as replacing monthly billing with prepaid metering options, which would also reduce disputes. Finally, since consumers will be able to track their own electric use over the Internet or via in-home displays, fewer calls will be made to customer service to provide this information.

In the News

Portugal Matures into Formidable International Trendsetter with Sweeping Clean Energy Initiatives

New York, September 1, 2010 - As countries around the world scramble to create, deploy, and sustain clean energy adoption initiatives, few have done so with the gusto of Portugal.  The country is quickly emerging as a “green” trendsetter due to its determination to reduce its dependence on imported fossil fuels by channeling its wind, solar, and hydropower resources and by improving smart grid capabilities and exploring the use of electric vehicles—even though such clean energy transitions have come at substantial financial costs.

“Germany is well-regarded as a green energy leader with its hefty share of the total installed wind energy capacity in Europe. But it’s Portugal that has us excited, and we anticipate enormous growth in the country’s generation of wind power due in large part to government stimulus incentives,” says Shelley Carr, publisher of SBI Energy, which released the market study Offshore Wind Farm Manufacturing Worldwide in April 2010.  “Though Portugal’s efforts come at a price, one must remember that this is a region with prodigious wind and water power resources, both of which are widely regarded as the most cost-effective to harness.”

In terms of world numbers for smart meter installations, some industry estimates see a fivefold rise—from roughly $50 million in 2010 to $250 million by 2015.  Much of this huge and rapid increase in smart meter installs will take place in Europe, according to SBI Energy’s Smart Grid and Consumers Other sources reveal that five years ago only 17% of Portugal’s smart grid power originated from clean energy resources, but that number could rise to almost half of the nation’s smart grid power by the end of 2010.

Meanwhile, Portugal is making progress on the electric vehicle front.  “There is tremendous optimism that Portugal could become the first nation with a national network of charging stations for electric cars,” says Carr.  SBI Energy’s Electric Vehicle (EV) Infrastructure Manufacturing reveals that the European-Union sponsored Sagittaire is running demonstrations of hybrid buses in eleven cities across France, Spain, Portugal, Norway, and Italy. In each city, the hybrid-electric bus fleet will be tested under different operational and practical conditions. In addition, Portugal is involved in the Renault-Nissan Alliance’s zero-emissions vehicle initiatives that are sweeping Asia and the United Kingdom, France, Switzerland, Ireland, Israel, Denmark, and Monaco.

And with automakers in Europe planning new business models for electric vehicles and plug-in hybrids before 2011 that could completely overhaul its electric vehicle transportation infrastructure by eliminating the need for gas stations and relinquish fueling responsibilities to utility companies, Portugal has steadfastly proven itself a willing participant and test projects are in development for the country.

About SBI Energy
SBI Energy, a division of MarketResearch.com, publishes research reports in the industrial, energy, building/construction, and automotive/transportation markets.  SBI Energy also offers a full range of custom research services. 

In the News

Six Clean Energy Markets That Will Change Life As We Know It in the Next Five Years

New York, August 26, 2010 - Renewable energy is receiving a big push from the Obama Administration and from governments around the globe. Stimulus packages and government incentives for green technology has created jobs and established new industry, which in turn has sparked a brighter outlook on the world's economy. Going into 2011 and beyond, SBI Energy has identified six clean energies that will not only gain double-digit growth in the next five years, but will also alter the lifestyle we know today.

Green Building Materials and Construction - Traditional construction creates considerable debris which ends up in our landfills, soil and fresh water supply. Furthermore, inefficient materials used in construction produce higher energy bills for the homeowner. The judicious use of recycled materials, lumber that is harvested from sustainable forests, more efficient insulation and windows, and improved construction techniques can drop energy bills for consumers while reducing the need for raw materials simultaneously. Market research performed by SBI Energy forecasts the size of the global green building materials market to grow to over $580 billion by 2015 from about $160 billion in 2010. This represents a growth rate of 21% CAGR which is significant but understandable in light of increasing demand for products that save energy and minimize harmful environmental effects.

Enhanced Oil Recovery- EOR refers to a variety of oil producing methods, by which 70% - 90% more oil is produced from oil wells than is typically extracted by conventional oil production methods. Some of the more common EOR methods include steam, gas or chemical injection, which improve the viscosity of the oil, enabling the oil to flow more freely out of the well. More oil indicates lower prices. SBI Energy estimates dollars from EOR will climb steadily with some gentle fluctuations. SBI's analysts calculate the EOR market will experience a compound average growth rate (CAGR) of 63% per year over the 6-year span to total $1.3 trillion in 2015.

Solar Technology - We've all seen the solar panels on residential home roofs and today energy providers are multiplying this concept by installing large solar farms and using concentrated solar power (CSP) technology to supplement power demands. Electricity from CSP technology is generated like conventional electricity, except solar power is used to heat the boiler instead of fossil fuels. Global CSP installations are just getting started and SBI Energy expects to see real growth in the segment beginning in 2012.CSP is the fastest growing segment within the solar technologies, going from $0.7 billion in 2010 to $3 billion in 2014, a CAGR of 42% for the period. Including systems and panels, SBI Energy sees the world solar market growing to $173 billion in 2014 - a CAGR of 28%.

Offshore Wind Farms - Coastal area will have a new view as nations increasingly harness the renewable energy generated by the fierce winds a few miles off their shorelines. During the next five years, SBI Energy expects offshore wind farms to crop up at a much faster pace than land-based turbines. Leading manufacturers of turbines and components are riding the wave of production expected to result from growing interest in offshore projects, such as the recent approvals of Cape Wind in Massachusetts and The Offshore Wind Economic Development Act in New Jersey. Helping them accelerate their offshore initiatives are government cash and tax incentives that promote renewable energy development, particularly in Europe and the U.S. "States are leading the way in off-shore wind development because it spurs economic development, helps to stabilize energy costs, and moves our country towards energy independence in a sustainable fashion," comments Donald Carcieri Governor of Rhode Island. SBI Energy forecasts the global market to grow at a five-year CAGR rate of 11% to reach more than $78 billion. The fastest growth will come from the U.K., which will more than double its offshore market value to reach nearly $5 billion in 2015.

Electric Vehicles - For years the marketing and advertising from government and car companies alike have boldly stated that electric cars will take over the car industry “real soon now.” Now, electric vehicles, in the form of hybrids that combine both gas and electric motors, are finally beginning to do just that. The world populace is accepting hybrid electric vehicles, giving them equal weight as an option in their car purchases. Just how quickly this market will grow depends on several factors including gas prices, government incentives and vehicle price. According to market research from SBI Energy worldwide hybrid electric vehicle sales will double from just under 700,000 units sold in 2009 to 1.5 million passenger hybrid vehicles sold in 2014. Exponential HEV market growth will occur in smaller existing markets such as Europe, Australia and South Korea, and in new markets such as India and China where product sold will increase from 95,000 vehicles in 2010 to 440,000 vehicles in 2014, a phenomenal 47% compound annual growth rate.

Smart Grid Technologies - Implementing and integrating all of the renewable energies is somewhat contingent on the upgrade of our existing dilapidated 100 year old electrical grid to a powerful sophisticated smart grid system. The smart grid can be seen in broad outline as an architectonic structure consisting of three major sectors: grid infrastructure; information and communications technology (ICT); and applications and software (A/S). Despite consumer concerns over privacy and cost regulation, the smart grid will encourage clean energy production and ensure reliable electrical supply to the world through digital grid operation and a distributed network. SBI Energy sees the global smart grid market soaring upward nearly 150% between 2009 and 2014, reaching $171 billion in 2014. Meanwhile, the U.S. market is projected to double over the timeframe to about $43 billion by 2014.

SBI Reports has been leading industrial market research reporting for more than a decade. The brand established SBI Energy to address the complex nature of the Energy and Resources industry. SBI Energy reports capture data vital to emerging energy market sectors on a global scale. Growth of energy technology, manufacturing, construction, transportation and investment is exciting in its innovations and opportunities, and integral to the advancement of security and science. SBI relies upon only the most experienced analysts with excellent credentials, years of industry experience, and the trust of colleagues and peers.

Research for this article is based on the following market studies from SBI Energy:

EOR Enhanced Oil Recovery Worldwide

Electric Vehicle (EV) and Plug-In Hybrid Electric Vehicle (PHEV) Markets Worldwide

Smart Grid and Consumers

Global Green Building Materials and Construction, 2nd Edition

Offshore Wind Farm Manufacturing Worldwide

U.S. Solar Energy Market World Data, 2nd Edition: PV, Solar Thermal, CSP

# # #

In the News

Smart Meter Manufacturers and Utilities Reap Benefits of U.S. Stimulus Package

New York, July 16, 2010 - “Trilliant and competitors such as Itron Inc., the largest U.S. maker of utility meters, are beginning to benefit from the $4.5 billion in stimulus funds the Obama administration directed toward smart grids to improve efficiency and accommodate electric vehicles and rooftop solar panels, reports the Washington Post in a July 15th article. Trilliant Chief Executive Officer Andrew White told the Washington Post, “There's been an avalanche of requests from utilities; we're getting about one a week."

This comes as no surprise to market research publisher, SBI Energy who in a market study published last month estimated the value of the United States smart meter market at $6 billion for 2010. “Our projections see robust growth across the board in smart meters. U.S. smart meter value will triple over 2009 to reach $15 billion by 2014,” notes Smart Grid and Consumers report author David Cappello.

Like Trilliant, SBI Energy has seen the increase in installation numbers of advanced two-way smart meters. Current trend trajectories show gigantic increases over the current decade (2010-2019). For the United States, smart meter installations are projected to rise from one-fourth to one-half of all approximately 120 million residential electrical accounts. The aggregate U.S. projections are as follows:
• 25 million by 2012;
• 40 million by 2015;
• 60 million by 2019.

Utilities embarking on a smart grid program have thus far taken it upon themselves to settle the upfront costs for smart meters and their installation—a cost typically ranging from $100 to $200 per meter. In turn, they are passing these costs back to ratepayers in the form of surcharges, SBI Energy reports. PG&E performed an initial rollout of 4 million smart meters, for example, recouping its $1.7 billion investment via rate hikes. Similarly, Xcel is doing its best to recover as much of its investment in the SmartGridCity.

The current grid is dilapidated and urgently needs to be upgraded. Improvements will mean shifting from analog to digital. The smart meter is a crucial component of this digital advance, ultimately providing a platform for dramatic energy savings.


About SBI Energy
SBI Energy, a division of MarketResearch.com, publishes research reports in the industrial, energy, building/construction, and automotive/transportation markets. SBI Energy also offers a full range of custom research services.

In the News

Latest SBI Energy Report Breaches “Great Unknown” to Explore Smart Grid/Consumer Dynamics and Challenge Widely Held Industry Perspectives

New York, June 30, 2010 - Determined to revolutionize the way the industrial and energy markets are analyzed, the latest report by leading research firm SBI Energy investigates the intriguing but previously obscure dynamics of the relationship between the smart grid and consumers (i.e., the end-users of electricity).  As a result, Smart Grid and Consumers is poised to be a groundbreaking study that delves into the crucial question of who benefits from the smart grid, which is an extremely complex subject that has so far received little attention from either utilities or smart grid marketers.

“The ‘consumer factor’ is coming to the forefront of smart grid engineering,” says David Cappello, SBI Energy analyst and author of the report.  “By focusing on the consumer sector of the smart grid, an area largely unexplored and often ignored in smart grid analysis, our study provides unique insights into the consumer mindset and shows how different it is from the industry's perspective.”

The paradox of the smart grid industry is that in the roll-out of smart grid meters, sensors, appliances, and other components, consumers have yet to be fully informed even though they are the key to smart grid success. Some consumers don’t even know that the smart grid exists! Nevertheless, consumers are keenly concerned about energy costs and energy options as it impacts them personally. This indicates a solid base on which to build consumer support for the smart grid, according to SBI Energy.

“The smart grid will never work without active consumer engagement, which is why a report such as ours is so important.  It evaluates the potential for consumer engagement against current attitudes of general unfamiliarity, indifference, and even downright resistance,” says SBI Energy Publisher Shelley Carr.

SBI Energy estimates the overall global smart grid market at $90 billion for 2010, an increase of 30% over 2009. The U.S. market is estimated at $26 billion for 2010, a rise of 12%. SBI Energy also projects the global smart grid market will increase 150% between 2009-2014, reaching $171 billion by the end of the forecast period. The U.S. market is projected to double over the timeframe to about $43 billion by 2014.

About 80% of the global smart grid's current estimated value represents investment on the utility side in grid infrastructure and information and communications technology (ICT). The consumer applications and software sector—primarily smart meters—represents the remaining 20%. “The consumer sector will undoubtedly grow in share in coming years,” says Cappello.

Smart Grid and Consumers is a first of its kind landmark study on the critical intersection between the smart grid and consumers. The report examines the issues involved in building positive two-way communications interactions, and the intrinsic negative resistance that can be expected. With a focus on residential applications and services, it provides an in-depth analysis of advanced metering infrastructure, smart meters, demand response, dynamic pricing, home energy management systems, home area networks, smart appliances, popular communications platforms, and futuristic technologies. The study also introduces an original classification system, dividing the smart grid into three sectors: grid infrastructure, consumer applications and software, and information/communications technology.

About SBI Energy
SBI Energy, a division of MarketResearch.com, publishes research reports in the industrial, energy, building/construction, and automotive/transportation markets.  SBI Energy also offers a full range of custom research services.

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