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THOUGHT LEADERS SPEAK OUT: Key Trends Driving Change in the

THOUGHT LEADERS SPEAK OUT: Key Trends Driving Change in the Electric Power Industry

Edited by: LISA WOOD Vice President, The Edison Foundation Executive Director, Institute for Electric with ROBERT MARRITZ Editor & Publisher, ElectricityPolicy.com

December 2015

IEI thanks Jon Blansfield, Adam Cooper, Tyler McLeod, Niki Nelson, TD Smith, and Stephanie Voyda for their contributions. © 2015 by the Institute for Electric Innovation All rights reserved. Published 2015. Printed in the of America.

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Published by: The Edison Foundation 701 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2696 Phone: 202.508.5440 : www.edisonfoundation.net TABLE OF CONTENTS

Table of Contents

INTRODUCTION...... 3 Lisa Wood, Vice President, The Edison Foundation & Executive Director, Institute for Electric Innovation

CHAPTER 1: TRANSITION TO A CLEAN ENERGY FUTURE...... 7 Using the Full Energy Portfolio...... 9 Thomas A. Fanning, Chairman, President and CEO, Modernizing and Decarbonizing the Grid From the Outside In...... 13 Nancy Pfund, Managing Partner, DBL Partners & Mark Perutz, Partner, DBL Partners Clean Energy is Good Business...... 17 Frank Prager, Vice President, Policy and Federal Affairs, Xcel Energy An Energy "Less Traveled By" Begins With Solar...... 21 Tom Werner, President and CEO, SunPower

CHAPTER 2: DIGITAL AND DISTRIBUTED GRID...... 25 In the Transformation of Smart Grids Into Smart Cities, the Only Limit is Imagination...... 27 Scott Lang, Executive Chairman, Silver Spring Networks Tomorrow's Digital and Distributed Today...... 31 Pedro J. Pizarro, President, Southern California Edison & Erik Takayesu, Director, Electric System Planning, Southern California Edison How the " of Energy" is Driving the Digital and Distributed Power Grid...... 35 Thomas M. Siebel, CEO, C3 Energy Leading at the Edge of the Grid: An Integrated Platform for the Future...... 39 Rodger Smith, Senior Vice President and General Manager, Oracle Utilities

CHAPTER 3: INDIVIDUALIZED CUSTOMER SERVICES...... 43 No More Average Customers...... 45 Ron Binz, Past Chair, Public Utilities Commission Putting the Energy Puzzle Pieces Back Together...... 49 Mary Anne Brelinsky, President, EDF Energy Services Making Energy Personal...... 53 Tony Fadell, Founder and CEO, Nest Labs Residential in 2025...... 57 Peter Kind, Executive Director, Energy Infrastructure Advocates LLC Unlocking Value Through Customer Engagement...... 61 Alex Laskey, President and Founder, Opower

CONCLUSION...... 65 Bob Rowe, President and CEO, NorthWestern Energy

1 As this transition “unfolds in the regulated electric power industry, it is about balancing affordability, reliability, clean energy, and individualized customer services.

—LISA“ WOOD

2 INTRODUCTION

Introduction

LISA WOOD Vice President, The Edison Foundation and Executive Director, Institute for Electric Innovation

merica's electric utilities—which has already reduced carbon dioxide provide the critical infrastructure emissions 15 percent below 2005 lev- thatA enables all other infrastructures— els; other emissions have also been are at the beginning of a profound but reduced. At the same time, moderniza- quiet transformation. That transforma- tion and digitization of the grid enables tion, more evolutionary than revolution- the integration of more carbon-free ary, is largely invisible but it is underway renewables, both large-scale and dis- and is being driven largely by: tributed. In fact, we expect exponential Technological innovation; growth in solar over the decade, Federal and state policies that in all sizes. Wind energy, already com- favor competition in some aspects petitive with other fuels, is projected to of providing electricity service; increase substantially as tower heights of the non- increase to produce more energy. competitive components Today, the electric power indus- of electricity service; and try is the largest investor in carbon- Changing customer needs free in the U.S. and increasing expectations. A more digital and distributed grid KEY TRENDS DRIVING CHANGE The power grid itself is changing, Three "megatrends" are at the core of becoming "smarter" by virtue of a digital this transformation. communication overlay, with millions of sensors that will make the grid more con- The transition to a clean energy future trollable and potentially self-healing. The energy mix we use to generate elec- The electric power industry is invest- tricity is changing. By investing in renew- ing more than $20 billion per year in able energy, transitioning from to the distribution grid alone, which will , and pursuing energy effi- enable the connection of distributed ciency, the U.S. electric power industry energy resources as well as devices

3 INTRODUCTION

in our homes and businesses. Many regulation evolves to accommodate of these resources and devices will these changes. Just as the business interact with the grid, resulting in model of electric utilities must change more efficient grid operations. The because the power mix is undergoing digital grid is evolving into a multi- transformation, the grid is more com- path network of power and information plex, and customers have different flows that will use data analytics for grid expectations, so too must the regu- and optimization from latory model change. Regulation will end-to-end. have to provide a glide path for utilities to achieve corporate and policy goals, Individualized customer services while also setting incentives and pen- As the grid becomes increasingly dig- alties for utilities based on meeting ital and distributed, customization of agreed-upon performance objectives. services for electricity customers will continue to grow. Here are some exam- THE NEXT DECADE ples. Large commercial customers Many of us would agree that, a decade increasingly want renewable energy from now, the U.S. electric power indus- to meet their corporate sustainability try and energy services will look some- goals. Cities and towns are request- thing like the following: ing customized services such as help We will have a cleaner electricity with micro-grids, smart city services, generation mix, with lower or renewable energy. Some residential carbon emissions; customers want rooftop solar to gener- The power grid will increasingly ate their own electricity. And, residen- integrate a mix of central and tial customers increasingly want to man- distributed resources; age their energy use using connected The grid will become more digital, devices like and Nest Learning more controllable, and more inter- connected. PG&E aptly calls this Thermostats, and through web-based the Grid of Things™; platforms. At the same time, for many, many customers, safe, reliable, and A mix of entities—both utilities and other companies—will provide dis- affordable electricity will continue to tributed energy resources both on be the preferred service option. the supply side and the demand Although these mega-trends are driv- side; and ing change, it's important to recognize Suppliers—both utilities and oth- that the speed of transformation will ers—will offer customers a wide depend to a great extent on whether range of individualized and cus- tomized services.

4 INTRODUCTION

Ultimately, as this transition unfolds in the regulated electric power industry, it is about balancing affordability, reli- The Transition to a Clean Energy Future ability, clean energy, and individualized customer services. This is largely the job of regulators and other policy makers. But the ultimate challenge is to make this transition of the electric power industry affordable to all Americans! And this is the job of all stakeholders. A More Digital and Distributed Grid * * * * * The authors of the essays that follow provide their unique views on the three key trends that underpin the profound transformation of the electric power industry—increasingly clean ; a more digital and distrib- uted grid; and individualized customer Individualized Customer Services services. These essays are an important addition to the conversation.

5 Fact Sheet: Transition to a Clean Energy Future

National Power Generation Mix

HYDRO NATURAL AND OTHER COAL GAS NUCLEAR RENEWABLES OTHER

2005 49.6% 18.8% 19.3% 8.8% 3.7%

TODAY 38.6% 27.5% 19.5% 13.2% 1.4%

Wind

22% 9% STATES5 generate MORE THAN Iowa 8%

of50% wind energy 7% 6% nationwide Colorado Oklahoma California

Solar

U.S. Installed Solar Capacity

Over the 2015 Q2 past 2 years, SOLAR CAPACITY SOLAR ALMOST accounted for 2011

28%of all capacity doubledin the U.S. additions in the last year 3.9GW 19. 6 G W CHAPTER 1

TRANSITION TO A CLEAN ENERGY FUTURE

lectric utilities have moved with vision and agility, away from carbon-based fuels and toward carbon-free and low-carbon resources in a very short time, Eand ahead of policy mandates. In just ten years, the nation's power generation mix has changed dramatically—adding significant amounts of natural gas, wind, and most recently solar. The authors of the essays in this chapter not only examine the transition toward a clean energy future but point to the fact that it is well underway. The Southern Company is on the cutting edge. As CEO Tom Fanning's essay makes clear, Southern has cut its coal use from 70 percent to 36 percent, while quadrupling its natural gas use from 11 percent to 46 percent. Also, it has added or announced 3,600 megawatts of renewable energy projects since 2012. Nancy Pfund and Mark Perutz of DBL Partners, a sustainability-oriented venture capital firm, focus on the clean energy transition, observing that advances in soft- ware are "eating [the grid] from the edge"—the space between the distribution sys- tem and the customer. The grid edge is where innovation will uncover previously undiscovered clean resources, both on the supply and demand side. Xcel Energy Vice President Frank Prager is proud of the wind energy in the compa- ny's mix. Renewables comprise more than 20 percent of Xcel Energy's energy port- folio, most of it wind. "We have more than 5,700 megawatts of on our system today," he says. In fact, Xcel Energy has been the nation's top utility provider of wind energy for 11 years, as wind displaces millions of tons of carbon dioxide

(CO2) and protects Xcel customers from variable natural gas prices. Finally, SunPower CEO Tom Werner focuses on the exponential growth in solar energy, the fastest-growing source of renewable energy in the U.S. Already solar

reduces CO2 emissions by 23.5 million metric tons each year—the equivalent of tak- ing 4.9 million cars off the road. He urges focus on R&D to drive down costs further.

7 If we embrace the “challenges presented by a changing fuel mix and an increasingly cleaner generation portfolio, we will have succeeded in delivering value to customers. “—THOMAS A. FANNING

8 TRANSITION TO A CLEAN ENERGY FUTURE

Using the Full Energy Portfolio

THOMAS A. FANNING Chairman, President and CEO, Southern Company

outhern Company's commitment more than 4.5 million customers, that to providing a full portfolio of is a remarkable turnaround in a short Senergy resources—including nuclear, period of time. natural gas, a lignite-fired integrated Nuclear energy, which today provides gasification combined-cycle (IGCC) 63 percent of America's emission-free carbon capture and storage (CCS) proj- electricity, must be a dominant solu- ect, wind and solar energy and other tion in a lower-carbon world. We are, renewable energy, as well as energy through our Georgia Power subsidiary, efficiency and —to constructing two new units at Plant our customers remains paramount. The Vogtle, which when complete, will sup- Southern Company has always been ply enough safe and emission-free elec- laser-focused on providing the best tricity to serve a half-million homes and combination of safe, reliable, afford- businesses. These new nuclear units are able, and environmentally responsible expected to offer economic benefits to energy to the people and businesses our customers and, in view of the goal we serve. of the Environmental Protection Agen- Our shift from coal-based generation to cy's Clean Power Plan, will discharge natural gas has been fundamental and no carbon into the atmosphere, as significant, and has resulted in greater compared with what gas-based or coal- availability and lower prices. Where based plants of equivalent size would ten years ago the Southern Company have emitted. We need more nuclear in system relied on coal for about 70 per- America and in the world, but not every cent and natural gas for about 11 per- utility can build nuclear generation: it cent of our generation, we are now at takes scale, operational credibility, a about 36 percent coal and 46 percent strong balance sheet, reg- natural gas. For a company that serves ulation, and financial integrity.

9 TRANSITION TO A CLEAN ENERGY FUTURE

Coal use is on the decline in the United off-base. To date, that includes 11 solar States, but coal still is used to provide projects totaling 310 megawatts. As more than one-third of the nation's Dennis McGinn, Assistant Secretary of electricity and is widely deployed else- the Navy, Energy, Installations and Envi- where around the world. The IGCC coal ronment, said about the Naval Subma- gasification facility being built by our rine Base at Kings Bay, Georgia, such Mississippi Power subsidiary represents efforts have many benefits, including a way to keep coal viable while cap- physical , energy diversity, and turing most of the emitted carbon and regional resiliency. using it for enhanced oilfield recovery. All this activity underscores our belief This Kemper County energy facility is that customers' energy needs are best designed to produce electricity from met by a balanced portfolio of electric- locally mined lignite with 65 percent ity generation resources, each of which carbon capture—a carbon profile better offers its own distinct advantages. than a similarly sized natural gas plant. In countries with high natural gas prices and significant coal reserves, such as in Eastern Europe and Asia, the IGCC tech- nology we are pioneering could con- tribute to a global solution that is good for customers and for the environment. Renewable energy is also an important Developing and fast-growing part of our full port- a Full Energy folio. Across the Southern Company Portfolio system, we have added or announced more than 3,600 megawatts of renew- able energy projects since 2012. That Our vision of the balanced portfolio includes solar and wind facilities in six also embraces energy efficiency. If states, one of the nation's top we can produce and deliver electric- plants and, in Georgia, the largest vol- ity more efficiently and help custom- untary solar program of any state. ers use it wisely, we can do more to The Southern Company system is also harness energy's great potential to partnering with all four major branches grow the economy and improve peo- of the United States military to develop ple's standard of living. Among the renewable energy projects both on- and ways we do this is by partnering with

10 TRANSITION TO A CLEAN ENERGY FUTURE

customers—for example, helping busi- nesses and local governments switch to high-efficiency LED lighting systems, which have longer life spans and much reduced energy requirements as com- pared with conventional lighting. We also offer customers who drive electric lower electricity rates for off- peak usage to save on their charging costs. These kinds of solutions make a real difference for customers. Developing the full portfolio is a cen- tral component of our broader com- mitment to strengthening a culture of innovation at Southern Company. Initia- tives such as SO Prize—a recent internal ideas competition—and the new Energy Innovation Center in Atlanta seek to engage all of our employees and are driven by a desire to deliver the best reliability, the lowest prices, and the cleanest for the benefit of our customers. It's about integrating new thinking in how electricity is used in homes, businesses, and factories. If we embrace the challenges presented by a changing fuel mix and an increas- ingly cleaner generation portfolio, we will have succeeded in delivering value to customers. That is where our focus is and should be—transforming our busi- ness to benefit our customers.

11 With respect to the “power grid, software is eating it from the edge, as distributed energy resources of both energy supply and demand are bringing the grid from its cable TV past into its Internet future. —NANCY PFUND & MARK“ PERUTZ

12 TRANSITION TO A CLEAN ENERGY FUTURE

Modernizing and Decarbonizing the Grid From the Outside In

NANCY PFUND Managing Partner, DBL Partners

MARK PERUTZ Partner, DBL Partners

s venture capital investors in the meters (introduced by companies like energy sector, the biggest (and still CellNet, Itron, Silver Spring and eMe- accelerating)A change that we've seen to ter), which opened the door to myr- the power grid over the past decade is policies, programs, and applica- the transformation from a centralized tions. Some of them are still at an early broadcast-based system like cable TV stage, including: time-of-use rates, net to a network-based system like the Inter- energy metering, demand charges, net. This transformation is largely driven demand response, and energy disag- by the dramatic evolution happening at gregation diagnostics. the edge of the grid: behind-the-meter The second behind-the-meter digiti- customer proliferation of new distrib- zation wave is the accelerating rollout uted energy resources and the growing of the (IoT) in homes application of energy-saving software. and businesses. To borrow a phrase from Marc Andrees- Adoption of IoT in homes (introduced sen, software is eating the world.1 With by companies like /Nest and respect to the power grid, software is Apple) is likely to be driven by the eating it from the edge, as distributed homeowner's desire to have control energy resources of both energy supply over all her home appliances, lighting, and demand are bringing the grid from temperature, media and home secu- its cable TV past into its Internet future. rity from a , as well as The first digitization wave of behind- for energy choice (particularly clean the-meter resources began with smart energy), rather than by her desire to

13 TRANSITION TO A CLEAN ENERGY FUTURE

help modernize the grid. It will, however, to retain old or build new fossil-fueled have just that valuable side effect by peaker power plants), new dispatch- enabling the widespread deployment able capacity, avoidance or defer- of automated demand response—an ral of transmission and distribution often unnoticeable demand adjust- upgrades, mitigation of energy island- ment that will neatly and automatically ing, and integration of renewables and help to balance supply and demand on EV charging. Case in point: In October the grid while providing energy bill sav- 2015, for the first time, ings to the homeowner. IoT in the home resources aggregated across multiple will also enable effective integration of commercial were bid into electric vehicles (EVs), eventually allow- the California ISO real-time market as a ing large-scale distributed EV charging demand response resource. and discharging to help stabilize the The grassroots proliferation of distrib- power grid. uted energy resources—supported by The rollout of IoT in businesses is software and IoT in behind-the-meter likely to be driven by the motivation deployments—is crucial to the trans- to reduce energy costs. By using sen- formation from a centralized to a net- sors and software to measure and see worked power grid. Generating renew- their energy usage profile, businesses able energy close to load is the most can execute an informed deployment efficient and sustainable approach to of solar, storage, load reshaping, and establishing a flexible power grid for energy efficiency retrofits to evolve the future, and complements utilities' their facilities into "hybrid-electric" larger centralized power plants. This buildings that reduce their electricity combination of distributed and cen- bills and optimize comfort for build- tralized generation will help reduce the ing occupants, while having the key need for new transmission and distribu- side effects of improving grid oper- tion (T&D) infrastructure. ation and facilitating achievement of Obtaining permitting and public sup- state-level renewable energy targets port for new T&D infrastructure is chal- and energy conservation goals. This lenging, and contributes to rising grid commercial behind-the-meter evo- operating costs on customer bills. In lution (introduced by companies like 2014, separate studies of the effects of Advanced Microgrid Solutions, Stem, behind-the-meter solar generation con- SCIEnergy, Enbala, and Renew Finan- ducted for the Nevada PUC and for the cial) brings these benefits to the power Mississippi PUC—although controversial grid: peak shaving by automated and much debated—found that distrib- demand response (obviating the need uted solar provided a net benefit for all

14 TRANSITION TO A CLEAN ENERGY FUTURE

ratepayers, both those with and without is powered in large part by customers' solar. The net benefit in both cases was new behind-the-meter approaches. driven by savings on the cost of energy Innovative private and public compa- and generation capacity, savings on nies are tapping into a variety of motiva- maintenance and upgrades to transmis- tions to sell IoT software and distributed sion and distribution infrastructure, and energy resources to homeowners and reduced transmission losses. businesses, and to evolve the power The strong desire of consumers and grid, beginning at the grid edge. brand-conscious businesses to play an Continuing this evolution inward from active role in producing and consuming the grid edge will require some regula- clean energy is an added driver toward tory changes, such as allowing utilities the growth of distributed renewables. to purchase (and add to the rate base) This is reflected in the sizeable and infrastructure-as-a-service, rather than growing renewable energy goals of only adding infrastructure via capital state governments. For example, in expenditures. By purchasing operational October 2015, California increased services such as capacity, power quality, its renewable energy mandate to 50 control, and frequency support percent renewables by 2030. Finally, from the grid edge, and by adding soft- when the scale of job creation from the ware at the utility level to manage this deployment of distributed energy sys- infrastructure-as-a-service on demand, tems is taken into account, along with utilities could lower their costs and health benefits resulting from fewer increase the overall resiliency of the grid. fossil fueled power plants under the * * * * * Obama Administration's Clean Power Going forward, everyone will benefit Plan, and the environmental benefits of when utilities, regulators, energy com- reduced greenhouse gases, the bene- panies, and software companies work fits of a future with both utility-scale and together to extend this transformation widely deployed distributed renewable from the grid edge throughout the resources becomes even clearer. entire electric system for a power grid The fundamental construct of the power that is more robustly and efficiently grid, which has remained remarkably designed for the 21st century. unchanged for most of the past century, despite tremendous advances in nearly every other industry, is now transform- 1. Marc Andreessen, Why Software Is Eating The World, The Wall St. Journal, Aug. 20, ing from a rigid, unidirectional, and 2011. Available at http://www.wsj.com/ centralized system to a more flexible, articles/SB100014240531119034809045765 12250915629460. networked system. This transformation

15 Xcel Energy's strategy “to decarbonize rests on three principles: renewable energy leadership, system modernization, and sound regulatory policy.

“ —FRANK PRAGER

16 TRANSITION TO A CLEAN ENERGY FUTURE

Clean Energy is Good Business

FRANK PRAGER Vice President, Policy and Federal Affairs, Xcel Energy

cel Energy, which serves Minne- Our wind portfolio has displaced mil-

sota, Colorado, the Texas Pan- lions of tons of CO2 while protecting our handle,X and parts of five other states, customers from the risk of volatile nat- is located adjacent to some of the best ural gas prices. In the last several years, wind energy resources in the nation. we have acquired new wind energy Beginning in 2005, we committed to at prices below the cost of the next- a path of clean energy and environ- best natural gas alternative. This wind mental leadership. Ten years later, energy acts as a hedge against volatile we have reduced our carbon dioxide gas prices, while saving our customers

(CO2) emissions by more than 20 per- money today. cent and are on to achieve a 30- Xcel Energy has adapted its system percent reduction by 2020. Our strat- to accommodate this extraordinary egy to decarbonize rests on three amount of renewable energy resources. principles: renewable energy leader- Working with the National Center for ship, system modernization, and sound Atmospheric Research, we developed regulatory policy. forecasting expertise that enabled us to integrate unprecedented amounts RENEWABLE ENERGY LEADERSHIP of wind energy. On October 2, 2015, Renewable energy now makes up more 54 percent of the electricity supplied than 20 percent of Xcel Energy's energy to our Colorado customers was gener- portfolio, with the majority coming ated by wind energy for the entire day. from wind. We have more than 5,700 megawatts of wind power on our sys- Customers want renewables in their tem today and have been the nation's energy mix, and we're happy to oblige. number one utility provider of wind Our renewable energy portfolio is energy for 11 years. growing and helping to reduce CO2 emissions at low cost.

17 TRANSITION TO A CLEAN ENERGY FUTURE

SYSTEM MODERNIZATION Our decision to relicense and STRATEGY upgrade our zero-carbon nuclear Xcel Energy began modernizing its gen- plants in avoids about

eration resources over a decade ago. In six million tons of CO2 emissions Minnesota, we implemented the Metro annually (compared to the most efficient fossil-based alternative). Emission Reduction Project (MERP), which retired aging coal-fired power And, we have made substantial investments in our transmission plants and replaced them with efficient system in Texas, Minnesota, and natural gas facilities. We worked with Colorado to deliver renewable our stakeholders, including customers energy to customers. As distrib- and environmental groups, to craft a uted and new grid technologies plan that reduced emissions and met advance, we are committed to the needs of the community. enabling interested customers to access more distributed low- In Colorado, we followed a similar carbon energy. approach. In 2010, the Colorado Legis- lature passed the Clean Air-Clean Jobs GOOD PUBLIC POLICY Act (CACJA), requiring Xcel Energy to Decarbonization requires substantial develop a plan for reducing emissions. investment in the electric system, and By 2018, we will have retired or switched appropriate regulatory strategies are to natural gas more than 1,000 mega- critical to its success. Xcel Energy's suc- of coal-fired generation. As with cess in reducing emissions depends on the MERP, CACJA grew from a collab- with regulators and other orative effort. We took advantage of policy makers that encourage finan- changes in the natural gas marketplace cially sound emission-reduction pro- grams. For example: to reduce CO2 emissions from our Col- orado operations with minimal cost In Minnesota and Colorado, we increases to customers. helped renewable portfolio standards that enabled competi- Our carbon reduction strategy extends tive renewable energy acquisition to other initiatives. and protection of customers from We have some of the nation's excessive rate increases. most aggressive customer energy The state statutes that authorized efficiency programs, which last our MERP and CACJA plans set year avoided the emission of about the parameters for the programs 550,000 tons of CO2. and ensured timely, fair recovery of costs.

18 TRANSITION TO A CLEAN ENERGY FUTURE

We developed regulatory pro- * * * * * grams like CapX 2020 to create the By looking for economic and efficient framework for critical transmission ways to decarbonize our energy port- investments in , Min- nesota, and that help folio while recognizing and respecting integrate wind into the regional the unique differences of the juris- resource mix. dictions we serve, our approach has In Minnesota, we are engaged in resulted in significant emission reduc- the collaborative "e21" effort with tions at a reasonable cost. other stakeholders to consider reg- ulatory policies that will facilitate a low-carbon grid transformation.

THE FUTURE Today, we are working with our states to prepare plans to meet the requirements of the EPA's Clean Power Plan (CPP). We are committed to the approach that has proven so successful in the past: collaboration and good public policy. Xcel Energy will continue to grow its renewable energy portfolio, reducing emissions along the way. Xcel Energy's Wind Resources In fact, we have already started. In the Upper Midwest, we've proposed a new resource plan that will result in the retire- ment of more than 1,000 megawatts of coal capacity and the of new natural gas generation and 3,500 megawatts of large-scale wind and solar. This plan will bring economic develop- ment opportunities to Minnesota, North Dakota, , and our other states while helping to meet CPP obli- gations. For our Minnesota system, the plan will result in a 60-percent reduction in CO2 from 2005 levels by 2030.

19 We are entering an “unprecedented solar revolution that will forever transform how we power communities, businesses both large and small, individual households, and governments. “—TOM WERNER

20 TRANSITION TO A CLEAN ENERGY FUTURE

An Energy Road "Less Traveled By" Begins With Solar

TOM WERNER President and CEO, SunPower

n one of his most famous poems, "The At SunPower, we have the privilege of Road Not Taken," the 20th century being on the front lines of this transfor- Ipoet Robert Frost is famously remem- mation every day, and our partnerships bered for his concluding passage: Two with utilities are critical to decarboniz- diverged in a wood, and I — I took ing electricity generation. the one less traveled by. And that has The United States currently has enough made all the difference." solar capacity installed to power approx- By all accounts, the U.S. is on the cusp of imately 4.6 million homes. Solar is the a "less traveled by" road as it relates to fastest-growing source of renewable energy sourcing and delivery. Accord- energy in the U.S. Already it reduces car- ing to estimates by the Energy - bon dioxide emissions by 23.5 million tion Administration, roughly two-thirds metric tons each year—the equivalent of of U.S. electricity consumption is met taking 4.9 million cars off the road. by fossil fuels. The rest—comprised of According to the International Energy nuclear, solar, wind, hydro, geother- Agency, solar energy could supply mal and other sources—has steadily more than one-quarter of the world's increased in recent years, with solar electricity by 2050. This projection increasingly playing a leading role in the would have been easily dismissed just 1 transition to a low-carbon economy. a few years ago. We are entering an unprecedented Fortunately, the world continues solar revolution that will forever trans- to move in this direction. President form how we power communities, Obama's recently published Clean businesses both large and small, indi- Power Plan is a significant step forward, vidual households, and governments.

21 TRANSITION TO A CLEAN ENERGY FUTURE

creating a tangible strategy for reduc- Similarly, utilities across the U.S. are ing carbon emissions—and along with launching innovative new programs it, other pollutants. Subsequent com- to support the development of dis- mitments by the U.S. and China to work tributed solar generation in their ser- together to reduce emissions and pro- vice areas. These include community mote clean energy have helped set the solar and local capacity requirement tone for a more forward-looking dis- programs, as well as partnering with cussion and actions. solar providers to market Without question, solar adoption in the systems directly to homeowners. New U.S. can help provide a blueprint for the York's "Reforming the Energy Vision" rest of the world as we shift our focus proceeding is an interesting model from rhetorical conversation to accom- encouraging participation by third- plishments. Three key areas should party providers; and utilities have help guide our collective strategy: responded with initiatives like Con Edison's proposed 'solar plus storage' First, we must learn from what is work- pilot with SunPower. ing. From large businesses to utilities to to individual house- Second, it's critical that we reduce holds, every solar installation serves the barriers to access for anyone who as a learning experience and a series stands to benefit from solar energy. of data points that can help inform our shared efforts going forward. For example, the of Cali- fornia, Davis now has the largest solar power installation in the UC system, a 16.3-megawatt SunPower system that is also the largest solar power plant to meet the electricity demands of a U.S. university campus. The project is playing an important role in helping 16SunPower . 3 solar M system W the UC system achieve its goal of car- at UC Davis Campus bon-neutrality by 2025, a commitment that establishes UC as a role model for other universities.

22 TRANSITION TO A CLEAN ENERGY FUTURE

Recent momentum in the solar mar- * * * * * ket creates an ongoing opportunity Ten years from now, we will look back at to highlight the economic potential of this moment in time when we took the solar energy. By partnering with our road 'less traveled by.' We'll contem- customers to develop new business plate the difference it has made in how and financing models, SunPower is we manage and control energy, and the helping to lead the conversation with positive effect it has had on our planet households, businesses and utilities. and prosperity. The goals have been For the solar market to maintain the set and the blueprint is in place. It's not level of growth it is experiencing, we a question of whether the world goes must prioritize public policies. The solar solar. It's a matter of how fast it will hap- investment tax , as an example, pen—and the difference it will make. has done its job in spurring the tran- sition to a clean energy economy. We 1. See U.S. Dept. of Energy, must make clear how long-term cer- Energy Information Agency, tainty in public policy aligns with what Annual Energy Outlook 2015, Table A8. customers value. Third, it's critical that we double down on industry-wide innovation in deploy- ment of solar technologies and related energy services such as battery storage and energy management. We are on the cusp of significant breakthroughs similar to what we've seen in informa- tion , focusing on high per- formance, fully integrated system solu- tions to accelerate the mainstreaming of solar. A laser focus on R&D and its role in continuing to lower the cost of owning and operating solar systems will help this transition.

23 Fact Sheet: Digital and Distributed Grid

Grid of Things™

By 2020, utilities will be the

Top Industryusing IoT

More than

things25 will Billion be connected to the IoT

Digital and Distributed

As of 2015, Utilities are Digital grid enables utilities deployed investing TWO-WAY MORE THAN

60+MILLION 20BANNUALLY in the power and distribution grid SMART METERS information flows CHAPTER 2

DIGITAL AND DISTRIBUTED GRID

n the U.S., the movement toward a more digital and distributed power grid is well underway. The need for more reliable and resilient grid operations, for greater Iefficiency and control, and for the connection and interaction with the "Internet of Things" (IoT)—every device with an IP address—creates new challenges, roles, and opportunities. The deployment of more than 60 million digital smart meters is one key building block. The authors of the essays in this chapter point to utilities as becoming the top industry using IoT by 2020, partnerships for smart cities, and the grid as an integrating platform. Today, U.S. utilities are investing more than $20 billion annually in the distribution grid—they have a central role to play as the inte- grators and enablers of the evolving Grid of Things™. Scott Lang, Executive Chairman of Silver Spring Networks, sees utilities and cities partnering to bring the benefits of a digitized distribution system to urban centers— smart cities. ComEd is leveraging its AMI canopy in to create a distribution automation program that is preventing significant of customer outages and is connecting other digital . Southern California Edison's Pedro Pizarro and Erik Takayesu see the landscape of SCE's distributed energy future unfolding as each year more customers install solar arrays and use smart phones to control devices in their homes and businesses. Tomorrow's digital and distributed grid will manage centralized generation and hundreds of thousands of distributed energy resources (DERs). SCE expects to be the critical integrator of the technologies that link customers and resources. The IoT is transforming the grid infrastructure, says C3 CEO Thomas Siebel. By 2020, 25 billion connected things will be in use and utilities will be the top indus- try using IoT. , elastic , and machine learning are already being applied to solve utilities' business challenges. Oracle Utilities Senior Vice President and General Manager Rodger Smith notes that consumers, businesses, and utilities are adopting DERs—and far faster than antici- pated. The utility of the future, he says, is the platform for delivering new processes and programs, integrating data and analytics to model and manage the new grid.

25 DIGITAL AND DISTRIBUTED GRID

Utilities are now in a “position to partner with, if not lead, cities to perform functions together that were not possible before the became a reality.

—SCOTT“ LANG

26 DIGITAL AND DISTRIBUTED GRID

In the Transformation of Smart Grids Into Smart Cities, the Only Limit is Imagination

SCOTT LANG Executive Chairman, Silver Spring Networks

he McKinsey Global Institute esti- (and the consequent ability to transform mates that between now and 2025, what once was a static structure into a Tthe world's urban population will grow dynamic, information-based interactive by 65 million people a year, or almost system) means the infrastructure is in 179,000 each day. Virtually every major place to perform functions in real-time, city projects itself as an innovation hub, and in a systemic way, to achieve signifi- a "smart city." The consensus among cant cost and energy efficiencies. stakeholders is that a smart city involves It also means that utilities are now in a disruptive technology and that utilities position to partner with, if not lead cit- are essential in implementing it. Today, ies to perform functions together that utilities have an opportunity to do far were not possible before the smart grid more than provide reliable, ubiquitous became a reality—provide clean and electricity to consumers. They can dra- reliable energy, alleviation of conges- matically improve the quality of life in tion and improved transportation net- their communities. works, adaptive street and area light- Electric utilities across the country ing, the conservation and efficient use are transitioning to a new, technolog- of resources, among many others. ical, business, and social environment As customers—, commercial, indus- largely defined by advanced informa- trial, and municipal—evolve from pas- tion technology. The evolution of the sive consumers to active participants smart grid, right down to the device level

27 DIGITAL AND DISTRIBUTED GRID

in managing how and when they use Smart grid technology has driven oper- power, utilities are finding that they ational efficiency, dramatically improv- must radically redefine their role to ing outage response and restoration focus more on the critical infrastructure time and managing distributed and that powers their customers and com- intermittent generation. That same munities. This not only provides utilities technology platform, particularly its an opportunity to realize new efficien- advanced communication and control cies and define new revenue streams, it capabilities, can also be harnessed also positions them as the platform on by municipalities to create a platform which to build smarter cities. upon which they can deploy additional Utilities and cities are becoming aware smart city services over time. that their continued success and rel- Silver Spring Networks partners with evance are best served by working customers around the world to imple- together toward the common goal of ment smart energy and smart city plat- providing innovative, highly reliable, forms. In the course of that work, we safe, and responsive services. Both are have seen incredible results when util- moving from a centralized, top-down ities and cities collaborate. model to a distributed, horizontal struc- Street lighting can easily account for up ture; their relationships with customers to 40 percent of a city's energy budget. and constituents are becoming much That's a very large chunk of a municipal more collaborative. In the process, their budget at a time of increasing demand digitized interactions with customers will for city services and severe budget con- yield massive amounts of information in straints. To cut costs and improve quality real-time. At the core of the challenge of service, Florida Power and Light (FPL) that both face—but particularly utilities— in South Florida, including Miami, is is how to make effective use of this data. leveraging its existing smart grid to con- nect and manage a network of 500,000 street lights, creating the largest smart Internet Protocol (IP) networked street light deployment in the world. In the past, almost all the lights in their network had to be manually inspected to see if they were functioning properly. Now, the network will save what were Smart City thousands of wasted man-hours, and

28 DIGITAL AND DISTRIBUTED GRID

outages and voltage problems will be This canopy, for example, can be much more quickly addressed, improv- extended to connect other smart-city ing reliability and quality of service assets including smart water networks, for customers. and environmental sensors, The lesson here is the importance of EV chargers, parking meters, and traf- networking. Replacing aging lights with fic lights, among many others. Intelli- LEDs is not enough. When networked, gent traffic systems can detect LED lights can save approximately 65 volume in all directions and quickly percent in energy costs and reduce adjust to allow the most efficient flow. maintenance by as much as 90 percent. Estimates say 70 percent of all wasted fuel results from sitting at traffic lights Smart grid networking can also provide in a city, so using this intelligent, inter- communities with a wide variety of qual- connected system could significantly ity of life benefits as well as cost savings. cut pollution and waste. In Chicago, ComEd is leveraging its AMI canopy for a very progressive Dis- As utilities continue to rapidly install the tribution Automation program that has infrastructure and software essential to already prevented more than 1.2 million manage a smart grid, and as cities com- customer outages, and is beginning to pete with one another to attract new, connect street lights and other digital technology-dependent industries, it's assets across its territory. Denmark, clear that a between the Copenhagen, often called the most two is more than mutually beneficial— livable city in the world, is networking it's critical. street lights to enable automatic dim- * * * * * ming or illumination at dangerous road In many cases the infrastructure to sup- junctions and in inclement weather. port these partnerships is already in These and other "smart city" smart place or quickly being deployed to sup- grid infrastructures provide immediate port other assets. What's needed now quality of life benefits to residents and is the imagination to take full advan- a source of cost-savings for the city. tage of a new, highly cooperative envi- They also establish a city-wide network ronment to build smarter cities today. canopy upon which additional smart city services can quickly and cost- effectively be deployed in the future, allowing cities to quickly recoup their investment and deliver additional value to their citizens.

29 DIGITAL AND DISTRIBUTED GRID

The evolving DER “landscape offers companies like SCE a rare opportunity to redefine what it means to be an in the 21st century.

—PEDRO J. PIZARRO & ERIK TAKAYESU“

30 DIGITAL AND DISTRIBUTED GRID

Building Tomorrow's Digital and Distributed Power Grid Today

PEDRO J. PIZARRO President, Southern California Edison

ERIK TAKAYESU Director, Electric System Planning, Southern California Edison

riven by accelerated technological affordable, and clean energy to all innovation, electric utilities today of our customers. These concurrent Dhave the opportunity to redefine and responsibilities require us to implement modernize the electric grid, making it this transition thoughtfully, engaging even more secure, reliable, resilient, effi- with and enabling our customers at the cient, interactive, and clean. This next forefront of technology adoption, while generation power system will enable continuing to control costs. our customers to seamlessly integrate At SCE, the landscape of a distributed distributed energy technologies and energy future is easy to envision. Each contribute directly to effective, efficient year, more of our customers are install- grid management. This system will ing photovoltaic solar arrays and using also maximize energy from integration intelligent devices like smart phones to of renewable and low-carbon energy control temperature, lighting, and even sources such as solar and energy stor- appliance operations in their homes age, thereby lowering greenhouse gas and businesses. They are buying elec- emissions from the electric sector. tric vehicles and battery storage units. Southern California Edison (SCE) They will connect to community solar has launched efforts to prepare our and community storage units in ever employees and our grid for this more greater numbers. Our customers—more customer-driven, distributed, clean than 14 million people across a 50,000 energy future. As these efforts move square mile service territory—expect us forward, we will continue fulfilling our to be ready for that future. commitment to safely provide reliable,

31 DIGITAL AND DISTRIBUTED GRID

Tomorrow's digital and distributed PLANNING & OPTIMIZATION power grid will manage centralized To support the DRP, SCE is develop- generation in concert with hundreds ing methods to plan for and integrate of thousands of distributed energy DERs, including: resources (DERs). We anticipate the Integrated Capacity Analysis to development of local retail markets, systematically model, study, and which will be a platform for DERs to publicly display circuit capacity for provide grid services in order to max- the integration of DERs; imize the value for both DERs and Modernized Planning Processes other customers. These markets could that identify optimal locations include both aggregators and direct to encourage DER adoption, forecast future DERs on the participants who will create their own distribution system, and zero programs and contracts and compete in on areas that require addi- to provide services. Future markets tional grid reinforcement to may also include multiple custom- support higher penetration; ers and devices interacting in micro- Integration of Smart Inverters that transactions to share supply and optimize the regulation of voltage demand across the grid. and provide additional stability during outage events; and The State of California and our Public Distribution /VAR Control Utilities Commission (CPUC) recog- (DVVC) that regulates voltage nize that grid modernization is essen- through advanced capacitor con- tial to realizing energy and environ- trol technology. By reducing and mental goals. In July 2015, California's tightly managing voltage on the investor-owned utilities filed Distribution distribution system, SCE expects Resources Plans (DRPs) with the CPUC to lower customer energy con- that detail necessary actions to realize sumption by one to four percent. Integrating DVVC technology into the vision of a 21st century power grid. the grid could save customers hun- SCE's job, as a utility and distribution dreds of millions of dollars. system operator, will be to project future grid needs, maintain a grid that ADVANCED AUTOMATION enables customers to seamlessly con- SCE is testing and preparing to install nect any resource or device, and oper- new automated technology solutions ate a market that creates opportunities that improve the reliability, flexibility, for customers to provide grid services and resilience of the grid, such as: and be appropriately compensated. Real-time Visibility that utilizes more Some key elements of the 21st century state-of-the-art digital sensors and intelligent circuit devices to provide power grid include:

32 DIGITAL AND DISTRIBUTED GRID

system operators greater visibility additional data flow from sensors into the real-time status of load, and smart meters to enable better DERs, and multi-directional flows. control of grid components. Improving situational awareness for Grid Management Systems based operators should reinforce reliabil- on innovative architecture that ity and power quality. ultimately would replace current Self-Healing Distribution Circuits legacy technology to support both that use new intelligent switches operations and market functions. with sensing capabilities to auto- matically detect and isolate faults This evolving DER landscape offers and instantly reroute power from companies like SCE a rare opportu- DERs to other functioning circuits— nity to redefine what it means to be an reducing the number of utility electric utility in the 21st century, and customers affected by outages, to transform our industry and our rela- and facilitating faster repairs and tionship with our customers. service restoration. With more renewable energy gener- Substation Automation 3 (SA3), the latest automation package that ated by both power producers and cus- will improve the responsiveness tomers, and shared by all, the grid will of the system and enable broader be much more complicated to operate. implementation of new customer Utilities like ours will be critical integra- technologies on the grid. SCE tors of these technologies, linking cus- plans to deploy SA3 to some 400 tomers and resources. In this scenario, distribution substations over the next decade. the role of the utility will be like that of a conductor, bringing each component IT PLATFORMS, COMMUNICATIONS, of an orchestra into harmony, with each & SOFTWARE participant's contribution benefiting SCE will deploy advanced tools and the whole in a system that is interactive, systems that enable the grid to serve efficient, and reliable. as a DER platform, and for operators to * * * * * manage more complexity, including: Like the engineers who constructed the New Grid Analytic Tools to support management decisions, lever- 20th century electric grid, SCE is devel- aging data from sensors and smart oping a 21st century grid today that will meters; and new long-term plan- provide the platform for a future energy ning tools to better forecast the model that is only beginning to be con- ability of DERs to meet grid needs. ceived. We are truly excited about the Communication Systems with road ahead. higher bandwidth, faster backhaul, and field area networks to support

33 DIGITAL AND DISTRIBUTED GRID

By 2020, 25 billion “connected things will be in use, and utilities will be the top industry using the 'Internet of Things'. —THOMAS M.“ SIEBEL

34 DIGITAL AND DISTRIBUTED GRID

How the "Internet of Energy" is Driving the Digital and Distributed Power Grid

THOMAS M. SIEBEL CEO, C3 Energy

he "Internet of Things" (IoT) is industry attention, they represent just a transforming the next generation fraction of the sensors being deployed Tof global energy grid infrastructure. on the physical grid infrastructure. Simply put, the IoT leverages the Inter- Consider smart thermostats, home net to connect machines, devices, sys- appliances, HVAC equipment, factory tems, and other "things," resulting in equipment and machinery, transform- a convergence of physical and virtual ers, substations, distribution feeders, worlds. Gartner predicts that by 2020, power management units, and power 25 billion connected things will be in generation and control components. use, and utilities will be the top industry These sensored devices can send and using IoT, followed by receive information across a computer and government, driven partially from network, and collectively generate investments in smart meters.1 massive amounts of information—an This decade, an estimated $2 trillion increase of six orders of magnitude. will be invested in upgrading electric To optimize the power value chain, grid infrastructure globally, including utilities require next-generation tech- the addition of millions of sensors to nologies to integrate and aggregate devices throughout the grid. More than data, apply sophisticated analytics in 400 million smart meters have been real time, and generate actionable installed globally as of 2015; that num- insights in a way that directs business ber will double in the next ten years. outcomes through a common data- and Although smart meters receive much intelligence-driven solution.

35 DIGITAL AND DISTRIBUTED GRID

NEW TECHNOLOGIES By leveraging machine learning and FOR GRID OPERATORS the science and tools of big data, a Big data, elastic cloud computing, new generation of smart grid analytics and machine learning are now being is enabling grid operators to predict applied to solve utilities' business chal- future demand, lenges, such as improving customer capacity, technical and non-technical engagement, managing the opera- losses, electric vehicle load, and vari- tional health of advanced metering able generation capacity across the infrastructure (AMI) assets, preventing entire energy value chain. revenue loss due to theft and meter In another BGE example, the utility used malfunctions, optimizing the mainte- the C3 AMI Operations™ application to nance of network assets, and increas- identify 3,600 meter health issues with ing grid resilience. 99 percent accuracy to streamline criti- For example, utilities now can use cal maintenance of AMI assets. machine learning—the ability of com- By correlating and analyzing the puters to learn without being explic- dynamic interactions associated with itly programmed and to continually the end-to-end power infrastructure improve their predictive precision—to as a fully interconnected and sensored classify network assets at high risk of network, utilities are realizing dramatic failure, segment customers for targeted advances in safety, reliability, cost effi- campaigns, predict load, ciency, and environmental benefits. and manage the complexities of dis- tributed energy resource management. PREDICTIVE ANALYTICS Just as a credit card company uses his- HAVE GLOBAL IMPACT torical spending data to flag potential With the European Union's recom- fraud, utilities can use historical and mendation of 80 percent smart meter real-time data to identify energy theft. penetration by 2020, EU member Baltimore Gas and Electric Company countries are seeing strong drivers for next- (BGE) proved this when it deployed generation analytics solutions, includ- the C3 Revenue Protection™ applica- ing large smart meter deployments in tion across its full service territory of Italy, the , France, and two million meters. In just six months, Spain. Such large-scale deployments the solution identified more than 8,000 may yield lessons for the United State's cases of potential theft with approxi- energy sector, which has deployed more mately 90 percent accuracy. than 60 million smart meters to date.

36 DIGITAL AND DISTRIBUTED GRID

Enel, a leading integrated player in the grid reliability, reduce energy loss, global power and natural gas markets and decrease maintenance operating serving 61 million customers, was the costs. The initial deployments proved first utility in the world to replace tra- that the data analytics solution could ditional electromechanical meters with readily handle Enel's smart grid data digital smart meters. By 2006, Enel had processing and aggregation needs, installed 32 million smart meters across and deliver more than 200 million Euros Italy. With 38 million smart meters today, in operational efficiencies to Enel. C3 Enel is on track to deploy approximately Energy and Enel are working to expand 46 million across Europe by 2019. Enel the deployment of this solution widely represents more than 80 percent of all across Enel's distribution network. smart meters on the continent. McKinsey & Co. estimates the value of To unlock operational value from big C3 Energy's end-to-end smart grid ana- data in the smart grid, Enel deployed lytic solutions for a typical integrated two of C3 Energy's data analytics appli- U.S. utility and its customers is approxi- cations across an initial set of ten mil- mately $300 per meter per year, based lion smart meters and grid sensors in on lower operational expenses, more Italy and Spain—the largest deployment efficient use of capital, higher customer of a machine learning-based analytics value, and improved safety and reliabil- platform to date. ity of energy delivery.

Deployed in just eight months, the * * * * * solution integrated, normalized, and Utilities are realizing significant returns aggregated seven trillion rows of data by embracing cutting-edge technolo- from 13 unique data sources—customer gies, such as cloud-scale computing, information, billing, and work order sys- advanced smart grid analytics, and tems; outage management, producer, machine learning, to benefit their com- and meter data management systems; munities, consumers, other stakehold- and SCADA and validated theft case ers, and the environment. With contin- data, as well as weather data and Goo- ued innovation, the is gle terrain information—into a 700 tera- rapidly driving toward the Internet of byte data image updated in near-real Energy.™ time. More than 2,500 analytics gener- ate ten million predictions per day to 1. Gartner Says 4.9 Billion Connected 'Things' identify anomalous meter activity and Will Be in Use in 2015, November 11, 2014 predict asset failure to improve Enel's (www.gartner.com/newsroom/id/2905717).

37 DIGITAL AND DISTRIBUTED GRID

The utility of the future “needs to become the platform for delivering new processes and programs, integrating data and analytics to manage the new grid.

“—RODGER SMITH

38 DIGITAL AND DISTRIBUTED GRID

Leading at the Edge of the Grid: An Integrated Platform for the Future

RODGER SMITH Senior Vice President and General Manager, Oracle Utilities

e are now at the leading edge of Meanwhile, severe weather, solar flares, what has long been thought of and cyber threats to the system are asW unachievable, part of a very distant prompting increased interest in cyber- future: grids that can readily accommo- security, micro-grids, and improving date distributed generation of all types; grid resiliency. solar generation at all size levels; bat- These are indeed challenges, but they tery storage; electric vehicles that can also present a to innovation be used as load balancing tools; and and business renewal, as utilities and more, including combined heat and wider society explore solutions where power, wind, and demand response. the greatest change is occurring—at the Now apply an accelerant to that grid edge. Many utilities are beginning change: data produced by the growth to turn these challenges into opportuni- of connected devices. A new concept— ties. They are embracing a smarter, dig- the Internet of Things (IoT)—has been itized grid and leveraging it to improve coined to describe this phenomenon, reliability and outage response, while one of the most profound technolog- delivering high value services to cus- ical growth periods in human history. tomers and gaining new revenue in As these distributed resources con- doing so. tinue to interconnect and add data to the distribution grid, utilities are being EMBRACING AND LEVERAGING THE DIGITAL GRID tasked with providing infrastructure Empowered by technology innovation and keeping pace, and ensuring that and supported by policy, consumers, the data from these resources can be businesses, and even some utilities are made actionable.

39 DIGITAL AND DISTRIBUTED GRID

choosing to adopt distributed energy Oracle is a key partner in helping util- resources (DERs) at a pace far faster than ities mitigate the risks of rapid DER anticipated. Not so long ago, the Inter- integration. Our connected solutions national Energy Agency (IEA) projected enable DER lifecycle management solar and other DER growth out to 2030, through operations, data management, but the development IEA forecasted risk analysis and planning, service and was actually achieved by 2012, almost maintenance, outage management, two decades faster than expected.1 and customer interaction. Our tools These DERs may enable utility custom- enable utilities to profile DER load by ers to manage their energy choices location and condition of use, which is with little or no input from the utility. If a necessary step to understanding and customers do this, however, they intro- managing the impacts—both positive duce more reliability and service qual- and negative—that DER can have on the ity risks into the picture as many DERs distribution grid. produce energy intermittently. Alter- CONNECTING CONSUMERS WITH natively, if utilities support customers' VALUE-CENTERED SERVICES growing adoption of DERs, integrating Energy consumers are showing greater them into the overall network, they can interest in products and services to leverage the DERs as on-demand, low- help them use electricity wisely and cost tools for improving reliability and cost-effectively. The number of new outage response. entrants in the home energy manage- By proactively integrating these ment (HEM) solutions market in recent resources into an intelligent network years is indicative of the growing inter- model, utilities can use DERs to: est by consumer technology vendors. Predict asset risk and reduce But this market shift actually offers util- capital and maintenance expense; ities a pathway to advising customers Improve energy capacity to about HEM solutions. meet demand; With an unparalleled window into con- Reduce customer minutes of inter- sumption data and consumer behavior, ruption through more accurate utilities can expand the scope of their load profiling; mission by facilitating and enabling Deliver flexibility to meet peak energy consumption choices. Indeed, demand; and regulatory bodies are becoming more Improve utility resource planning. willing to consider the role of utilities as

40 DIGITAL AND DISTRIBUTED GRID

the provider of the enabling infrastruc- utilities. Within today's real-time utility ture in a dynamic, real-time marketplace, environment, operational technology as seen in emerging market rules and (OT), consumer technology (CT), and legislation around the globe in places informational technology (IT) business such as California, New York, Hawaii, models and processes are overlapping Germany, Australia, and . and converging. By connecting consumers with value- Customers are no longer complacent centered services, utilities can: and disengaged. They are becoming Expand revenue potential by pro- increasingly engaged in monitoring viding consumers with lifestyle- and managing their usage; having a based energy services; 24/7, multi-platform, real-time connec- Harness the value of real-time data tion with their utilities; and connect- to increase of excess and ing DERs to the utility's distribution stored DER generation into other grid. The utility that maintains a siloed markets; and approach to these newly engaged con- Offer new services, such as seg- sumers stands to lose them. mentation, energy trading, and construction and operation of Integrating OT, CT, and IT business mod- community-owned DER services. els and processes to deliver customer- focused solutions will be critical for the utility to succeed in this evolving system. The utility of the future needs to become the platform for delivering new processes and programs, inte- grating data and analytics from across the enterprise to model and manage the new grid. A utility that falls short Unlocking Value in Data will be bypassed by competitors. It's time to stop looking at today's rapid changes as challenges, and turn them THE FUTURE REAL-TIME UTILITY ENVIRONMENT into opportunities. The new technology infrastructure being developed is critical to managing 1. International Energy Agency, the digital power grid going forward and World Energy Outlook 2012. creating new business opportunities for

41 Fact Sheet: Individualized Customer Services

Past

ONE-SIZE- FITS-ALL ELECTRICITY SERVICE

COMMERCIAL RESIDENTIAL INDUSTRIAL

Present

WIND ENERGY

ACTIONABLE ENERGY ADVICE MANAGEMENT TOOLS

INDIVIDUALIZED CUSTOMER CONNECTEDNESS SERVICES SOLAR ENERGY

TAILORED SERVICES CHAPTER 3

INDIVIDUALIZED CUSTOMER SERVICES

ncreasingly, electricity customers want customized services. Some large com- mercial customers want 100 percent renewable energy to meet corporate sus- Itainability goals. Cities and towns want help establishing clean city initiatives. Many customers want tools to manage and control their energy use. And most custom- ers still want basic electricity service—safe, reliable, and affordable electricity. The authors of the essays in this chapter point to how technology, innovative solutions, and policy leadership all will play a role in providing changes that customers want. Former Colorado regulator Ron Binz reminds us that a new generation of Ameri- cans—those born after 1980 and sometimes called "digital natives"—are comfort- able with the digital world. By 2020, they will comprise more than half the U.S. pop- ulation. Digital natives will be demanding and leading the change to which both utilities and policy makers must respond. Mary Anne Brelinsky, president of EDF Energy Services, describes how her com- pany is putting the energy value chain pieces back together. "We are knocking down the walls between our retail business teams and the wholesale markets that support them," she says. EDF is also stirring its trading operation into the mix of services it offers larger customers. In "Making Energy Personal," Tony Fadell, CEO of Nest, says people give Nest Learn- ing Thermostats as gifts. They're fascinated with them and often check on the data they generate. This interactive technology opens the door to more personalized ser- vice, as utilities and customers collaborate to find solutions that customers want. To truly realize the potential of electricity service in 2025, writes Peter Kind, policy makers must chart the path forward. In this "reformed" industry model, utilities will be incented to provide customers the advice and services they want, while meeting regulators' and policy makers' goals and metrics. Opower President Alex Laskey reminds us that utilities lag behind most other indus- tries in providing a responsive customer experience. Customers want actionable advice, not data, on ways to lower their bills and other service options. Companies like Opower are using cloud software and data analytics to help utilities forge those improved customer relationships.

43 INDIVIDUALIZED CUSTOMER SERVICES

For electric “service, advances in clean energy technology, changing demographics, and how utilities are regulated will determine the speed of change. “ —RON BINZ

44 INDIVIDUALIZED CUSTOMER SERVICES

No More Average Customers

RON BINZ Past Chair, Colorado Public Utilities Commission

hink of the many ways you can con- be energy products and services that figure your home : we "didn't know we needed and now Tbroadcast, cable, satellite, or phone can't live without"—think about smart company TV; streaming , Roku, phones, , texting, and Google! Hulu, Sling TV, Apple TV and For electric service, advances in clean TV, just to mention a few. We're a long energy technology and changing way from the days when baby boomers demographics are driving the change. A had three broadcast TV channels and a third factor will determine the speed of few squirrelly UHF options. the change: how utilities are regulated. This array of choices is made possible Let's start with demographics. Peo- by the combination of digitization and ple born after 1980 are often called massive connectivity. Those two char- "digital natives," since they were born acteristics describe the Internet, which into a digital world. When the first dig- has fundamentally changed many U.S. ital natives turned four, compact discs institutions—entertainment, shopping, had just arrived in the U.S.; at age six, banking, libraries, travel, personal com- they witnessed the widespread use of munications, and even social relation- personal computers; and when they ships. Something similar is coming to reached age 11, web browsers were electricity service as the Internet meets invented and the World Wide Web as the electric grid. we know it began to emerge. It's too early to predict exactly what the Digital natives probably don't per- change will look like, but we can make ceive the rapid growth in digital-ness some educated guesses based on the because they've known nothing else. industries that have been reinvented by Expectations of what can be done and the Internet. Almost certainly there will

45 INDIVIDUALIZED CUSTOMER SERVICES

what should be done are much differ- The second factor propelling change ent for them, compared to people born in the consumer electric sector is on in the analog era. Digital natives are the the hardware side: the pace of clean new baby boomers. By 2020, digital energy and grid technology. Even the natives will comprise more than half the most bullish projections two years ago U.S. population. Fifteen years after that, did not foresee the recent breathtaking two-thirds of the country will have been decline in costs of photovoltaic electric- born after 1980. ity. And there is no end in sight: "Swan- son's Law" asserts that, with every dou-

Is there bling of new solar capacity, the cost an app for that? of solar generation falls 20 percent. While the trajectory of this "law" is not as steep for solar as "Moore's Law" is to electronics, it does describe a sector with exponential cost declines, while costs for traditional energy sources are Digital Natives going the other way. This also means that small-scale, distributed energy What's this got to do with electricity? resources will continue to evolve even Simply put, digital natives, in the words as their costs drop. of Apple Computer, "think different." Within 10 to 15 years, we should expect Marketing experts report that digi- that every device that touches the elec- tal natives adapt easily to advanced tric grid—from power plants to rooftop technologies, show a "contentedness solar systems, from batteries to street with complexity," and "have a desire lights, from toasters to to to control their own lives." Back in the electric vehicles—will have an internet day, everyone knew to ask a ten-year- address. This will be the "Internet of old to program the VCR. (Remember Things" and it will completely remake VCRs?) We can safely predict that this the physical electric grid. Any device generation—which will be the first to will be able to "see" any other device on use self-driving automobiles—will also the grid. With complete connectivity, be comfortable trusting digital "expert electricity producers (large and small) systems" to assist with complex choices will communicate real-time "prices to and complicated decisions. In short, devices,z" and electricity users will con- the skills and predilections of digital vey supply or demand "offers" to the natives match up well with the coming grid operator or directly to generators. changes in the electric sector.

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The resulting web of transactions How rapidly these changes happen will among billions of nodes in the elec- depend in large part on how today's tric grid is called "transactive" energy. electric utilities are allowed by regu- It sounds complex, but don't worry: lators to evolve. The way we regulate consumers will be spared the task of electric utilities hasn't changed much managing electric imports and exports in five decades. Utilities will need much for their freezers, hot water heaters, more flexibility than traditional regula- and vehicle batteries. Those tasks will tion affords today. That means that the be performed by an expert system— focus of regulation should accommo- sophisticated software that will man- date the far more complex grid—and its age all the necessary transactions in opportunities—that will entice competi- line with the consumer's desired pro- tors at every turn. file. Just as consumers don't need to Regulators need to turn to incentive know the details of packet-switching regulation—an approach that rewards in order to send a text or post on Face- utilities for achieving desirable policy , consumer access to the transac- goals, or penalizes them for failing to tive energy market will be enabled by do so. This approach will provide ade- software that hides the messy details quate or even increased earnings, while and simplifies the choices. encouraging utilities to embrace and What will this mean to the average excel in fundamentally new roles—pro- consumer? For starters, "average" will viding energy services and being the become much less meaningful. Each "orchestra conductor" for all the instru- consumer will have the choice of how ments in the new electric grid. fully to participate in the new electric To some readers, this may be an unsat- grid and will be able to select among isfying vision. It predicts profound many individualized profiles. Consum- changes for consumer electric service, ers might self-generate in part, buy but offers few details or assurances. It only renewable energy, offer demand projects a future by analogy to other response, plug into a micro grid, time sectors of the economy that have been shift usage, or offer local storage to the transformed by . rest of the grid. The uptake of these new But in 1980 few could foresee the pro- technological choices will probably fol- found changes the Internet would bring low the customary "S-curve" of adoption. to so many aspects of our lives today. Early adopters will emerge, followed in Predictable or not, the Internet of time by most of the consumer base. Things is coming to electricity.

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We are putting pieces “of the energy puzzle back together and providing innovative customer solutions— redefining customer expectations in the energy space much like did for the taxi industry. —MARY“ ANNE BRELINSKY

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Putting the Energy Puzzle Pieces Back Together

MARY ANNE BRELINSKY President, EDF Energy Services

was standing in my parents' kitchen introduction of Uber in NYC, the value over the holidays and my young- of a single taxi medallion has gone Iest son, Noah, asked me, "Mommy, is from a high of $1.3 million to a mere Grandma afraid she's going to lose her $650,000. phone?" I gave him a quizzical look and Technology advancement is happening replied, "No, I don't think so. Why?" My at an ever-increasing pace. Imagine if bright, inquisitive child asked, "Well, Alexander Graham Bell was alive today why does she have it tied to the wall?" and you handed him a cell phone. He It is easy to forget that this generation would have no idea what it was or how of Millennials has never had to untan- it worked. The technology in our phone gle the long curly phone cord tied to looks and functions nothing like the old- the wall, hold a tape recorder next to school rotary phone of my childhood. the radio to record their favorite Cindy But if you dropped in Lauper song, or drive to Blockbuster the middle of a switchyard next to a to rent a movie. Uber is yet another power plant, he could follow the tur- example of the same evolution and bines in the electric generator and the the continuing change in paradigms. transmission and distribution lines and Uber has forever changed the way we find the light bulb at the end of the line. get from point A to point B. Uber has We haven't experienced a revolution- single-handedly turned the taxi indus- ary change in our electric industry in try on its head—no small feat, given the several generations. Yes, the industry industry has employed the same basic has added renewable resources to the since horse-drawn generation stack, provided demand for-hire carriages began operating in response opportunities for indus- Paris in the early 17th century. Since the trial and residential customers, and

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developed innovative products that At EDF, we have been experimenting allow customers to tailor their energy with putting the energy value chain procurement strategies. That said, our pieces back together using technology industry hasn't experienced true trans- and offering unique products. We are formational disruption, but it will. knocking down the walls between our As an industry, are we laser-focused on retail business teams and the whole- these real challenges? Are we pushing sale markets that support them. Our our teams outside their comfort zones EDF Energy Services customer busi- and traditional paradigms and forcing ness works collaboratively with EDF transformation through technology like Trading to provide our commercial and others have done? How do we put our- industrial customers access to whole- selves in the driver's seat rather than sale markets, while also providing continuing to wait for the taxi? expert retail service. Sometimes that means providing integrated products In the 1990s, our industry in the U.S. was that combine renewable generation, partially unbundled and deregulated. load shifting, and price alerts in a sin- The generators were separated from the gle, integrated offering. We are put- traders, and the wholesale traders were ting pieces of the energy puzzle back separated from the retailers. Competi- together and providing innovative cus- tion drove efficiency in these segments, tomer solutions—redefining customer which helped drive down prices to the expectations in the energy space much consumers. But competition and unbun- like Uber did for the taxi industry. dling came with an unintended con- sequence: those companies could no By employing both our Retail business longer provide robust solutions across and our Generation Services business the entire energy value chain. I believe in a single , we've created that transformational disruption for our a unique, integrated corporate struc- industry is in how we put the pieces of ture. This incents our people to work the energy puzzle back together. together to foster creative customer solutions. I realized the power of this structure a few years ago when one of our global industrial customers asked us to find a wind generator to supply a large manufacturing facility. This particular customer wanted a "green" Putting the Energy Value Chain energy retail supply deal with EDF Pieces Back Together and they wanted that "greenness" to

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be steel in the ground, not just paper prices to facilities in areas with lower certificates. This customer also wanted prices. Yes, we have an app for that! its logo painted on the As an industry, we've spent billions and photos for its annual report. We installing smart meters. We should take approached one of our wind gener- advantage of that and make flexible, ator clients whose response was, "If real-time pricing available on a wide they give me a reasonable price for the scale. It would make us all as consum- energy they can anything they ers of energy much more aware of how want on the turbine." When you walk and when to use energy and get more into the lobby of this customer today, a efficient results in the process. photo of the logo-decorated wind farm On a more personal note, my home with longhorn cattle grazing nearby is electricity bill is indexed to the spot front and center. market. The price I pay for electricity at In addition to integrated products, my home in Houston changes every 15 speed is also becoming more important minutes. I have saved money for more to consumers. At EDF Energy Services, than ten years paying spot-index prices we are taking "big data" and turning for electricity, but that's not why I do it. I it into information that our customers want to ride the wave of energy innova- can use to make energy consumption tion. I have a smart meter. I have a smart decisions in real time. Our customers thermostat. The cost of electricity at need information at a faster and faster 4:00 p.m. on a hot afternoon in Texas is rate. Turning energy data streams into not the same price as it is on a mild Sat- information that our customers can use urday morning. Over the last ten years, to run their businesses is our primary there have been brief periods of very objective. For example, we've devel- high prices. On one occasion when oped an iPhone app that allows cus- my electricity price increased to more tomers to monitor their power stations than $1,000 per MWh, I called home from their phone; it displays current and asked my husband to go out to the wind speeds and weather near their garage and unplug the fridge. You facilities, and allows retail customers to would have thought I asked him to fly to see their power and gas consumption the moon. At that moment, I'm sure he alongside the appropriate real-time wished I was like the , but I really energy prices. Customers who have like being more like Uber. facilities in multiple locations can use this information to shift consumption from their facilities in areas with high

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How can utilities “add a new layer on top of their existing services—something to make customers happy and broaden the customer relationship? The answer is personalization. —TONY“ FADELL

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Making Energy Personal

TONY FADELL Founder and CEO, Nest Labs

eeping energy flowing safely and So how do we fix that? How can utilities reliably into homes and businesses add a new layer on top of their existing Kis challenging and complicated. But, services—something to make custom- for most utilities, the relationship with ers happy and broaden the customer customers is—at a high level—pretty relationship? simple: The utility brings energy to a The answer is personalization. customer's home—the customer uses a When we launched Nest four years certain amount of that energy, and the ago, we wanted to take the technol- utility sends a bill for the amount used. ogy inside our smartphones and put It's straightforward, and it's worked the it inside the devices in our homes same way for a really long time. that have looked and functioned the It's also very limiting. same way for decades. We wanted to Say a utility wants to build a better rela- give people greater control over their tionship with customers and set itself energy use; the safety of their families; apart. If the only interaction with those the security of their homes. customers is the product they're being That's how the Nest Learning Thermo- sold (which they don't really think about stat was born. unless the power is out) and the bill Instead of asking people to set their they receive (which they don't really like own energy usage schedules (which because it costs them money), then the most people never do) we designed utility doesn't have many options. And a thermostat that learned home con- that's especially problematic when util- sumption patterns and programmed ities want customers to do something itself. And it worked. This year, indepen- different—like using less energy on a dent studies proved that, on average, hot summer day or engaging around the Nest Learning Thermostat saved other energy programs and services.

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U.S. customers about 10–12 percent on For a utility, that opens up a whole their heating bills and about 15 percent world of possibilities. All of a sudden, on their air-conditioning (A/C) bills. customers don't just see the utility as So what does this mean for utilities? the entity that sends them a bill at the First, it proves that utilities can use per- end of the month. Instead, the utility is sonalized technology to give their cus- providing a product that knows them; tomers an experience they really want responds to them; and stays connected and begin to build a better, stronger to them no matter where they go. The relationship. utility's brand gets stronger, and the relationship with customers goes from a transactional one to something much more meaningful. So that's the first way personalized technology can help a utility build a better relationship with customers: by creating a great experience. The sec- ond way is by using technology as an incentive to transform how and when customers use energy. Technology Enables Energy Personalization Two years after we launched the Nest Learning Thermostat, we announced For years, most people didn't give their an opt-in program for our customers thermostat a second (or first) thought. called Rush Hour Rewards (RHR). RHR When their HVAC system broke, they helps people earn money or had the repairman install a new one. from their energy providers by using Today, that's changed. People don't less energy when everyone else is just buy our thermostats when their using more. Unlike traditional demand old ones break. They get excited about response programs that are one-size- them, give them as gifts, perform the fits-all, RHR takes into account when installation themselves, and check on people are home or away, their pre- them through a mobile app multiple ferred temperatures, the "profile" of the times a week. And, every month we home (large/small, how quickly it loses send a Home Report with data about cooling), and only deploys to homes how much energy they used. that can help reduce A/C use during

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peak periods. Most important, RHR customers are always in control of the temperature to ensure their comfort. To date, Rush Hour Rewards has helped achieve an average of 55 percent energy reduction in residential air con- ditioning loads during peak periods. And while customers can adjust the temperature at any time, just 14 per- cent of RHR participants changed the temperature during an event. For utilities, this is an example of a potential game-changer. It's easy to imagine a future where technology takes complex and difficult energy pro- grams and makes it easy for every con- sumer to understand and participate in them. That's why personalization is so import- ant—and why it holds so much promise. Today, we're seeing the first glimpses of how personalized technology can give customers and utilities more control and help them build a better relation- ship over time.

* * * * * The next decade will bring even more examples like this, with utilities and technology companies working to make tools that people actually use and love. And together, those tools will make a huge difference.

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We now need policy “makers to take the lead in charting the path forward to accelerate our electricity and environmental future by defining the framework and incentives to make this vision a reality. “—PETER KIND

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Residential Electricity Service in 2025

PETER KIND Executive Director, Energy Infrastructure Advocates LLC

ith a push from innovative But we must not get ahead of ourselves. approaches to regulation and To bring these benefits to fruition we relianceW on realized and future advances should bring all the players along, in technology—smartphones, remote beginning with the public: that is, cus- sensors, renewables, storage, and tomers. How do we reach customers, much more—electricity service in 2025 who are distracted by countless other can be cleaner and more omnipresent concerns, with something they take for than it is today. Customers' reliance on granted—their electricity service? There their smartphones is but one portal to is no easy answer to that, but appear- achieving a deeper penetration of elec- ances before civic, neighborhood, and tricity throughout the economy, includ- business groups by both utility and ing the transportation sector. regulatory officials to discuss topics of But to make this vision a reality, policy interest would be one opportunity. For makers—legislators, energy regulators, example: utility and regulator readi- and perhaps other stakeholders—must ness to speak after severe weather or provide an appropriate framework, other significant events could offer an including standards, incentives, and important opportunity to gain credibil- accountability to promote and produce ity with such groups. the desired behaviors. In any case, studies suggest that energy Few will argue with the benefits that efficiency and CER adoption levels customers, our economy, and society are still much lower than they should overall can realize from an enhanced be, while the opportunity to increase commitment to efficient energy con- adoption, based on available technolo- sumption, deployment of cost-effective gies, is great. Enhancements in internet clean energy resources (CERs), opti- and smartphone technology can also mization of capital deployment, and a improve how we educate our constitu- reduced carbon footprint. ents about available opportunities.

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My vision for future electric services is and financial incentives will be key to premised largely on broadened smart- achieving significant customer accep- phone applications ("apps") and remote tance and adoption. wireless sensors. While some utilities How do we encourage this vision and have introduced app-based efficiency accelerate the pathway to a clean, effi- tools, they are still in their infancy and cient, and more profitable energy future? have not yet been deployed at scale. In Educating customers about opportu- the future I envision, these energy sav- nities that exist must be a priority. Util- ing enabling tools will: ities have access to dwelling size and Allow customers to remotely age and energy usage. They can make control and program their lighting, appliances, heating it easy and profitable for customers and air conditioning; to learn about and adopt energy sav- Connect customers to opportuni- ings tools. A commitment to outreach ties to participate in CERs, includ- and will drive increased ing community and distributed PV, demand for efficiency technologies storage, and demand response; and practices. Allow utilities to cycle their Utilities, empowered by clear regu- customers' air conditioners and latory policy, should take the lead in chip-enabled appliances during educating customers on opportunities peak periods to save their custom- ers money and reduce the need for to save. For the most part, customers new energy resources that would trust their utility. But, for utilities to be otherwise be required; and trusted advisors to their customers, Allow electric vehicles to be they must be indifferent to customers' charged and discharged at preferences for specific technologies, optimal times to enhance vendors, or services. customer economic value. Why aren't distribution utilities rushing Smart meters and energy billing apps in to assume this advisor role today? It's can also provide customers with complicated, but generally utilities lack actionable information about their regulatory incentives to benefit from usage, how it compares with similarly selling less electricity and deploying situated neighbors, and potential fewer resources. While many jurisdic- energy saving opportunities. Provid- tions offer programs to compensate util- ing customers appropriate education ities for sales lost to efficiency—through

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decoupling and performance incen- With policy makers' leadership: tives—these are not sufficient to induce Customers will have new tools to utilities to wholeheartedly promote control their energy use, manage more efficient outcomes. Today's regu- their energy costs, and improve latory frameworks are weak band-aids, their carbon footprint; not transformational. Utilities will be re-energized by this new model and approach— For utilities to adopt a business model doing well for their investors and that places a premium on energy effi- enhancing customer value; ciency and making this energy and Technology providers will economic transition a reality, we need benefit from broader market transformational reform. opportunities and distribution In this "reformed" industry model, utili- channels for their offerings. ties would be incented to earn profits—in If policy makers will chart a pathway addition to a nominal return on invested forward, our entire society will benefit— capital—by providing customers valued customers, technology providers, utili- advice, services, and efficiency mea- ties and their investors, and the global sures. Of course, utilities that take on economy and environment. There's no this challenge must be accountable for time to waste. Seize the day! achieving the objectives and metrics adopted by policy makers. In addition to this regulatory reform, policy makers must set forth new stan- dards for buildings, appliances, and energy consuming equipment that Efficiency encourages both efficient use of energy 2025 and interconnection with today's Clean Power Customer energy management tools, smart- Education phones, smartphone apps, and home energy management technologies. We now need policy makers to take the lead in charting the path forward to accelerate our electricity and envi- Charting the Path Forward ronmental future by defining the frame- work and incentives to make this vision a reality.

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Cloud software can “help utilities deliver personalized digital experiences at every customer touchpoint— from the day a family moves into a new home through every bill, outage, or change they experience. —ALEX“ LASKEY

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Unlocking Value Through Customer Engagement

ALEX LASKEY President and Founder, Opower

he world is embarking on a new more than a century of experience chapter in energy use, genera- and developed valuable customer Ttion, and distribution. In the United loyalty. Research by Accenture shows States and Europe, utilities and retail- that consumers trust their utilities to ers are watching energy demand level deliver helpful energy advice more off for the first time in history. Glob- than any other service provider.1 ally, new technologies and regulatory Now utilities and others they may approaches are giving consumers more work with must deepen these rela- control over their energy use. tionships and provide valuable indi- In the 20th century, the goal was to vidualized services to residents and bring electricity to people. The advent business owners. of cheap, abundant energy sparked Globally, energy providers spend $30 revolutions in science and technology, billion a year on customer service, with and utility companies focused on grow- the largest of that expenditure going ing their generation fleets to meet the toward billing and call center oper- mushrooming demand for power. Today ations. Despite this massive invest- in the 21st century, utilities face new ment, research shows that interactions challenges, as electricity demand stag- between utilities and their custom- nates. Rising consumer expectations for ers lag behind most other consumer- new service offerings and competition facing industries.2 Companies in the from distributed generation are forcing banking, retail, and transportation a transformation of the industry. sectors have made dramatic improve- No companies are better positioned ments to the customers' experience, than utilities to lead the way forward. leaving the energy industry with a chal- Electric utilities have accumulated lenge just to catch up.

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Surveys and data make it clear what Thanks to the growth of smart meter customers want: lower bills, more deployment, energy usage data from ways to save, and personalized energy households and businesses have service options. With the growth of become increasingly available to utili- smart meter infrastructure, utilities are ties. Behavioral demand-side manage- managing more customer data than ment technologies—including Opower's ever. Their first impulse is often sim- "Behavioral Energy Efficiency" and ply to report this data back to custom- "Behavioral Demand Response" solu- ers online, but the great majority of tions—can play a significant role, as util- customers want utilities to give them ities look to reduce costs while improv- simple, easily accessible, actionable ing the customer experience. 3 advice—not data. Utilities also realize that they need to With the help of companies like accelerate the digitization of their cus- Opower, utilities are using cloud soft- tomer service. Cloud software can help ware to increase customer satisfaction utilities deliver personalized digital while lowering their overall service experiences at every customer touch- costs. Focusing perceptively on the point—from the day a family moves into experience customers want, energy a new home through every bill, outage, providers can forge new business mod- or change they experience. els that position them to lead in the new energy economy. NEW TOOLS FOR ENGAGING CUSTOMERS Already, many utilities are meeting ris- ing customer expectations with inno- vative technologies. In regulated and competitive electricity markets, tech- nology companies like Opower are giving utilities and energy providers the tools they need to unlock strate- gic business value from improved cus- tomer engagement. Puget Sound Energy (PSE) first part- Personalizing Offers nered with Opower to engage its cus- to Households tomers through Home Energy Reports (HERs), which provide customers with insights about their energy use and tips to help them save. PSE saw significant

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results from its HER deployment; it was personalized offers to households able to meet its energy efficiency - that are most likely to take advantage gets while adding a new, high-quality of new programs, products, and ser- touch point with its customers. That vices—from self-generation technology success led PSE to be the first utility to to smart thermostats. launch Opower's Bill Advisor solution, This strategy represents a win-win-win. which provides customers with proac- Customers benefit from helpful, trust- tive alerts about their usage, intuitive worthy advice about what products self-service tools, and integrated call are right for their homes; DER provid- center software. ers get an opportunity to expand their Billing issues are the number one driver customer base; and Con Edison is able of customer calls to utility call centers. to earn new revenue with a new plat- Fully 80 percent of customers say they form to market targeted products and want advance notification if they are on services. And all of this benefits the track for a large bill.4 PSE now directly environment by promoting energy effi- addresses these concerns through its ciency and clean forms of generation. deployment of Bill Advisor. As energy providers look to evolve their Technologies that manage ways of business models and take a leadership meeting heightened customer expec- role in the industry's transformation, tations can also address the increas- Con Edison is demonstrating how a ing number of customers who want strategic, customer-focused approach access to distributed energy resources can bring value both to their business (DERs). This is a boon for solar compa- as well as to the customers they serve. nies, but customers may also benefit from expanded options when consid- 1. Accenture Energy Consumer Services, THE NEW ENERGY CONSUMER: ering whether and how to go solar. This UNLEASHING BUSINESS VALUE IN also offers a valuable opening for utili- A DIGITAL WORLD 2015, available at https://resapps.accenture.com/ ties seeking to advise their customers' newenergyconsumer/unleashing- energy purchases. business-value-main.html. 2. 5 Universal Truths About Energy Con Edison, the utility that serves New Consumers, https://opower.com/ York City and Westchester County, fivetruths/index.html. 3. Id. N.Y., is striving to position itself as a 4. Opower, MOMENTS THAT MATTER: trusted energy adviser to its custom- A CUSTOMER-CENTRIC APPROACH TO EXPERIENCE MANAGEMENT 2015, ers. To guide the conversation around http://www2.opower.com/moments- DERs and accelerate uptake, the utility that-matter-whitepaper. is partnering with Opower to deliver

63 I think of the evolution “now underway as a movement from the utility as an infrastructure and provider to being an essential infrastructure and service provider. “—BOB ROWE

64 CONCLUSION

Conclusion

BOB ROWE President and CEO, NorthWestern Energy

he Institute for Electric Innovation ways that balance near-term price and the Edison Electric Institute impacts with long-term system and Tperform a great service by keeping customer benefits. us informed about and focused on Increasingly individualized the exciting changes in how energy is services. While most customers continue to expect a foundation produced, distributed, and used. As of reliable, safe, and affordable you've read throughout Key Trends service, increasing numbers also Driving Change in the Electric Power demand especially high levels of Industry, these changes are happening service quality (e.g., stable fre- quickly, with common elements, but in quency or voltage), exceptionally each instance on a timeline and with high reliability, or an especially approaches tailored to local require- low carbon energy source. Nota- bly, some customers even want a ments and expectations. high degree of engagement with This timely volume has focused on: production, distribution, and use of their energy. The rapid transition to clean energy. This is remarkable given My company, NorthWestern Energy, is the complexity of the supply an electric and natural gas provider in system and its capital intensity. Montana and South Dakota, also with Most of this transformation has been industry-led, as part of natural gas service in Nebraska, and thoughtful supply planning, and electric service in Yellowstone Park, in response to economic sig- Wyoming. We're making progress on nals and customer interests. each of these fronts in ways that make The evolution of the grid to be the most sense for our customers and more digital, flexible, reliable our region. Our Montana electric sup- and resilient. It's never quite been ply portfolio is now, by nameplate, true that "Edison would recognize almost 70-percent carbon free (hydro- today's grid," and I've never heard a based, with wind), but with a diverse set system engineer utter that canard. Companies across the country are of assets that complement one another. investing in grid modernization in

65 CONCLUSION

Given our largely carbon free supply technology, including solar and stor- portfolio, we are very concerned about age, may fit with our system and policies that mandate specific supply respond to specific customer expec- choices that do not meet our portfolio tations. A related project involves the needs and eventually drive up costs use of solar, storage, and controls on to customers. exposed rural radials to enhance reli- We've also been engaging with our ability. With a large, rugged, dispersed stakeholders to plan for the network's system—in many areas characterized by future. Building on success with our miles of line per customer rather than ongoing Distribution System Infrastruc- customers per miles of line—we are ture Plan, we've now launched an Infra- interested to see what applications may structure Stakeholder Group that will become cost-effective over time. help us take an end-to-end look at our Also, while many companies are closing gas and electric transmission, substa- local customer offices, we are reopen- tion, and distribution systems—includ- ing local customer offices and pro- ing the value proposition—and customer viding our employees access to more expectations for even more technology tools, information, and mobility in the deployment. We will also benefit from field. We want to be there for our cus- our participation in the Pacific North- tomers in the ways that are most valu- west Smart Grid Pilot, results from which able to them, including face-to-face. will inform our planning and investment As Tom Fanning describes in his essay, over the next decade. the modern supply planning process, Simultaneously, we've launched a which has been a great success over Community Sustainable Energy Work recent decades, has worked well to Group. This stakeholder group is facil- achieve long-term, least-cost, least-risk itated by the Solar Electric Power Asso- supply choices and increasingly clean ciation and includes, among others, electricity. That continues to provide a parties with whom we do not always foundation for good decision making. agree on subjects such as expansion The Southern Company, Xcel Energy, of current programs or Southern California Edison, and many implementation of the EPA's Clean other electric utilities are in the process Power Plan. We're asking this group of transforming their supply portfolios. to help us design specific projects, for Current planning regimes may be less which we have set aside capital, that satisfactory in meeting the more specific will help us understand how distributed

66 CONCLUSION

expectations of some customers for Both customer advocates and utility specific attributes, or to meet emerging companies want to protect customers policy goals. Xcel Energy's Frank Prager who simply expect safe, reliable, and highlights in a number of affordable service, while also working states, including Minnesota's "e21" with customers who have more specific project, which addresses multiple goals. Our ability to meet both basic goals and processes and the potential and evolving customer expectations benefits of a collaborative approach to depends on achieving regulatory reform. Technology—what can be done? In a sense, Abraham Maslow's "hierar- Policy—what either is required chy of needs" describes how our energy to be done or is permitted to supply planning processes to-date be done? have allowed us—and challenged Finance—what will debt and equity us—to meet our customers' changing investors support being done? needs for more sustainable energy and MEETING COMPLEX greater resiliency, for example, while CUSTOMER EXPECTATIONS still meeting customers' basic needs Electric and natural gas utilities have for safe, reliable, and long been the trustees of what the affordable electric Department of Homeland Security rec- service. ognizes as a uniquely essential infra-

Engag structure, on which all other critical omer ed st infrastructures depend. That role has Cu Ca rbon t become more important in an age of Fr silien ee Re instant global communications and EV and s, Microgrids global risks, including physical e security, cyber security, and

Wind , and Storag heightened preparation for , Sola extreme weather events. r, an chnologies Te w Te chnology d Ne Safe e , Re liable fordable Financ , and Af

Policy

Key Drivers of Change: Technology, Policy, and Finance

67 CONCLUSION

In California, Southern California Edi- and how the utility of the future will be son's Pedro Pizarro is helping lead the platform for delivering new pro- one of the most dramatic and complex cesses and programs, integrating data transitions in the industry, while fulfill- and analytics to manage the grid. ing multiple, important commitments. The evolution has also enabled new Pedro speaks for the industry when he ways of meeting customer expecta- says this requires us "to implement this tions for a range of energy services, transition thoughtfully, engaging with including—but also well beyond—the our customers at the forefront of tech- efficient delivery of electrons and mol- nology adoption, while continuing to ecules. Opower's Alex Laskey explains control costs." how utilities can meet rising customer As the articles in this volume make expectations, offer more personalized clear, infrastructure now includes hard- services, and ultimately function as ware and software, and assets with "trusted energy advisors." very different characteristics, operat- Service both more automated and ing together in complex ways. Nancy more personalized will increasingly be Pfund and Mark Perutz describe a expected by Ron Binz's "digital natives," technology-driven evolution to a flexi- who have lived their entire lives with ble, web-like network. This infrastruc- technologies that were commercial- ture enables and requires new ways ized only when the Boomers were buy- to manage and use unprecedented ing their mini-vans. The "natives" are volumes of data, converting noise to comfortable with complexity and want useable information. to participate in decisions—and the C3's Tom Siebel describes an ecosys- natives are impatient. tem of addressable devices generating I think of the evolution now underway data, which enable utilities to tackle as a movement from the utility as an multiple subjects involving asset man- infrastructure and commodity provider agement and predictive maintenance, to being an essential infrastructure and reliability, and revenue assurance. service provider. Serving as "trusted Oracle's Rodger Smith describes how energy advisors" fits perfectly with the the industry is at the leading edge of infrastructure and service model. Sun- power grids that can readily accommo- power's Tom Werner also emphasizes date distributed generation of all types the value of partnerships, including

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some very non-traditional partnerships value chain pieces back together—using among utilities and a whole range of its retail business teams, its trading entities relatively new to the space, operation, and wholesale markets—to including some of the authors who con- provide commercial and industrial cus- tributed to this volume. tomers the solutions they desire. Peter Kind says utilities can serve as Scott Lang describes an exciting new customers' trusted advisors if regula- area for collaboration, going beyond tion can be modernized so that utilities the smart grid to the smart city, in are compensated for meeting policy which Silver Spring Networks is much goals, like helping customers achieve involved. Smart city projects range in cost-effective energy efficiency, rather both size and scope. As Scott states, than solely from earning based on their the only limit is imagination. capital investment. Then, he says, util- Moving relatively toward a services ities will be able to use all the tools of model rather than a throughput model modern technology to achieve the does require those of us in the indus- most desirable goals for customers. try to "think differently" about how we One of those technology tools could do our work and engage with our cus- benefit utilities as well as customers, tomers. Technology innovation also says Tony Fadell, as the NEST Learning requires business innovation. Because Thermostat and its opt-in Rush Hour we—as electric and natural gas utili- Rewards (RHR) program offer oppor- ties—are trustees of essential infrastruc- tunities for both peak-period capacity ture and service, the business model savings for the utility and money sav- must be sustainable as well as nimble ings for the customer. Perhaps more and efficient. It must be able to earn important, a personalized technology the support of long-term investors, like the can help utili- because the capital requirements are ties give their customers an experience both large and ongoing. they want, even if they didn't know they Finally, both technology and business wanted it, and begin to build a better, innovation require policy makers to stronger relationship. support the transition, including mod- Mary Anne Brelinsky reports that her ified cost recovery and pricing mecha- company, EDF Energy Services, is nisms, and also less litigious and more experimenting with putting the energy collaborative ways to make decisions

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and provide guidance. Ron Binz asserts that regulation has changed little in decades, and that utilities must "be allowed to evolve" by regulators. Frank Prager says that collaboration, good public policy, and appropriate regula- tory policies are critical for the success- ful transformation of the power sector. For all of us—policy makers and regula- tors, electric service providers, technol- ogy partners, and investors—to meet policy goals and especially customer expectations, that kind of alignment will be necessary.

* * * * * The path to the future is never quite clear. As we identify the challenges we face and pursue solutions, it becomes clearer with every step we take. The customers we serve are counting on us to take those steps.

70 CONCLUSION About the Institute for Electric Innovation The Edison Foundation Institute for Electric Innovation focuses on advancing the adoption and application of new technologies that will strengthen and transform the power grid. IEI's members are the investor-owned electric utilities that repre- sent about 70 percent of the US electric power industry. The membership is com- mitted to an affordable, reliable, secure, and clean energy future. IEI promotes the sharing of information, ideas, and experiences among regulators, policy makers, technology companies, thought leaders, and the electric power industry. IEI also identifies policies that support the business case for the adoption of cost-effective technologies. IEI is governed by a Management Committee of electric industry Chief Executive Officers. In addition, IEI has a Strategy Committee made up of senior electric indus- try executives and more than 30 smart grid technology company partners.

About the Edison Foundation The Edison Foundation is a 501(c)(3) charitable organization dedicated to bringing the benefits of electricity to families, businesses, and industries worldwide. Fur- thering Thomas Alva Edison's spirit of invention, the Foundation works to encour- age a greater understanding of the production, delivery, and use of electric power to foster economic progress; to ensure a safe and clean environment; and to improve the quality of life for all people. The Edison Foundation provides knowledge, insight, and leadership to achieve its goals through research, conferences, grants, and other outreach activities.

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