It may have felt like the bleeding edge of energy deregulation at the time, but since the 1990s Australia and New Zealand switching rates have remained impressively among the highest in the world. But is the region’s time as stalwarts of energy retail innovation coming to an end? 

This blog looks at some of the talking points around Smart Grid technologies, and we explore the challenges emerging from rapid infrastructure roll out and how local utilities are now turning to back office systems and customer engagement models to maximise their chances of long-term smart grid success. 

As smart grid fervour sweeps across the US, government stimulus funding and multi-million dollar technology IPOs are breathing new life into the previously rather sedentary energy sector. Small-scale smart meter pilots have been quickly replaced by mass scale roll outs and more cost reflective pricing tariffs. 

CASE STUDIES IN WHAT NOT TO DO

Many of these accelerated roll outs have quickly become case studies in what not to do.   In a classic example of putting the cart way before the horse, smart meters were deployed, rates were raised and peak pricing introduced with little real consumer education. Few in-house displays or tools were provided so consumers couldn’t see, and thus understand, the new implications of their consumption until their next, much higher, bill arrived. 

The result: an upset and increasing litigious customer base. Awkward when you are a regulated utility, financially crippling if you happen to be a retailer operating in a fully competitive energy market. 

INVESTMENT IN CUSTOMER FACING SYSTEMS IS ESSENTIAL

It’s not just the headline grabbers who seem to have forgotten customer service basics.  A recent IDC Energy Insights review(www.earth2tech.com Utilities not ready for coming smart grid engagement, 11^th March 2010) finds that in general, US utilities’ preparations for the customer facing component of the smart grid are woefully inadequate. Seemingly focused on building out the smart grid infrastructure, most are not adequately investing in either the required customer education or customer service strategies. 

Other regions are also experiencing backlash to perceived utility profiteering from smart meters. Even in the Australian state of Victoria, a trailblazer in smart metering deployment, a moratorium on time of use tariffs has been called while the impact of the new pricing on already disadvantaged households is better understood. 

TACKLE SMART GRID CONCERNS UPFRONT

The lesson from the pioneers is clear. Concerns around affordability, privacy and data security need to be tackled up front if consumer mistrust of this new technology is to be overcome. Ultimately, smart grid success will depend on the willingness, and ability, of the consumer to participate. 

And the challenges faced by many market participants in Australian and New Zealand energy aren’t made any easier by the more fragmented nature of our supply chain. The new demand response environment will need to tackle critical peak supply, peak load and distributed generation. 

Both retailers and distributors have incentives to get it right. But making such tariffs simple enough for customers to understand, and moreover compel them to change their behaviour, will be a significant challenge. 

FLEXIBLE IT SYSTEMS ESSENTIAL FOR MANAGEABLE SMART GRID

In New Zealand at least, the main players have recently come together in an unprecedented move to try and thrash out what these tariffs should look like. While a raft of other smart grid issues are also on the table, they already seemed to have moved one step ahead of their US counterparts in collectively agreeing that putting the right IT systems in place first will go a long way towards creating a “manageable smart grid” (www.energyNews.co.nz” Industry collaboration on smart meters gears up, working groups formed” 24^th March 2010) 

And while most of the energy retailers have already been doing the hard yards in evaluating new, more flexible, billing systems and meter data management software platforms, network companies are now too realising that they may soon need to make the switch to smart grid ready platforms. Indeed, a few progressive New Zealand based distributors did grasp early on the potential of the smart grid to underpin more targeted demand response programs. 

So in parallel with smart meter deployment, they also developed a vision for the type of back office systems they would need to get the most from their hardware investment.   As a result, these network companies’  new generation billing and CRM systems will not only let them handle the volume of data anticipated and the type of smart tariffs required in the future, but also enable them to put the customer firmly at the centre of their smart grid strategy. 

STANDARDS COULD REDUCE ACCESS TO GLOBAL DEVELOPMENTS

As with any IT investment, opting to install such platforms before all requirements are known does carry an element of risk. And with smart grid technology evolving so quickly, the industry knows that setting local standards in concrete now could reduce any future potential to access global developments and cost of scale advantages. Interfaces to new market data hubs, in home displays, energy management tools, smart appliances, and even new metering technologies may have to be developed and redeveloped as the market matures and standards stabilise.  

OPEN TECHNOLOGIES WILL WIN ON THE DAY

Fortunately, no-one has to place their bets just yet. Many of the utilities that recently upgraded back office systems have opted for highly configurable and open platforms based on SOA principles. They are acutely aware that a key factor for the ongoing future success of smart grids will be continued investment in open technologies. And that ultimately, it will only be through ease of integration between back-end smart software / hardware platforms and smart metering and communications technologies that an acceptable return on investment for all stakeholders will be delivered. 

REBOOT AND RE-ENGAGE CUSTOMER SERVICES

So while President Obama’s Recovery Act Fund (http://www.rurdev.usda.gov/recovery.html ) and growing investment capital dollars may have US smart grid hype reaching fever pitch - there is no doubt that after the dust settles, many utilities there will still need to reboot and re-engage their customer services.  Locally, utilities are instead hoping that a more measured approach, together with their new found spirit of co-operation and early investment in customer facing technologies, will give them a much smoother ride to a smart grid enabled future.