I was at the Solar Electric Power Association’s Utility Solar Conference last week, and I was struck by a couple of things:
- All the presentations and POVs from utilities revolved around how much solar to build, what type of solar to build (utility scale, community or DG), how to best interconnect it to the grid and how much to charge for it … all the while presuming that utilities would, in fact, be the controllers of this new energy reality, the continuing Paternalistic Providers of Power, if you will.
- There was also a lot of talk about price signals … that many of the problems the utility industry is facing will go away when the utility can appropriately charge based on demand and time of day.
Given all the announcements from SolarCity/Tesla over the last couple of weeks, I literally found myself thinking, “I wonder if this is what it sounded like in the board rooms at Blockbuster and Kodak, circa 2000.” Here’s what I mean: our Pulse studies have repeatedly borne out (and so has our practice marketing energy efficiency, renewables and sustainability) that Americans are driven by convenience. I’ve written here repeatedly about all the wonderful apps (my new favorite is the Amazon Dash button) that make life even more convenient and allow us all to live a do-it-for-me-do-it-now reality. So when I hear that the utility industry is planning to make life LESS convenient for customers, I’m pretty certain this isn’t going to go over very well.
I didn’t mind calling Grandma after 6:00 on Sundays when it was all I knew. Now that I’ve grown accustomed to calling her anytime I want for the same price, restricting that access feels like punishment. And as a consumer who’s now used to getting plans and programs personalized for me, I won’t put up with it. So if consumers get even more disgruntled with their utilities (currently 55% of Americans are less than satisfied with their utility), they’ll start looking for other options.
The newly announced Tesla batteries are not a panacea (there have been a couple of articles criticizing the residential battery’s inability to actually run all the power needs in a home overnight), but let’s imagine a future – I’m guessing, at the rate of innovation, in about five years – where I could generate power during the day with solar panels, store that power in my batteries and run my home off those batteries at night. And let’s imagine that’s all connected to an energy management platform on my smartphone that sends me actions/tips for how to most efficiently manage/use my power so that I’m never left stranded with drained batteries. In that reality, why do I need my utility, exactly?
I’m a focus group of one – dangerous, I know. But indulge me for a minute: I pay roughly $300/month for natural gas and electricity. If I could replace that $300/month utility payment with a $300/month loan payment for the previously described, stand-alone energy production/storage/management system, why wouldn’t I do that? Presuming I actually own the system after 10 years of payments and the life of the system is 25 years, I’d actually get power for free (minus some maintenance/repair costs, I’m sure) for the next 15 years. Under that model, why do I need to be connected to the grid at all? Why do I need to be inconvenienced by my utility’s new time-of-use rates and demand charges? When I’m the CEO of my own power plant, I can use power whenever I want, totally guilt free.
Now, I’m not a typical utility customer – I have an above-average monthly payment and I know enough about options like this to be dangerous – but how many customers like me would my utility have to lose before their business model is totally upended? Five percent of residential customers? What percentage of commercial customers? And when that happens and the utility files for more rate increases so it can charge the customers who haven’t left more money to cover the loss, won’t that just create more reasons for those customers to run away, too?
My advice to the utility industry: get in the middle of this. Devise a package that allows me to have something resembling that self-generation/storage/management program, only purchased from my utility. In reality, leaving my utility entirely is a little scary … so knowing that I’m still connected to the grid is reassuring. If utilities can get preferred pricing from solar and battery manufacturers, they can charge customers a bit of a markup, plus a monthly fee to stay connected to the grid as a back-up. This doesn’t allow utilities to avoid losing a lot of my monthly payment … but it lets them retain some of the revenue, while also giving them assets they can use to keep the lights on for everyone.
In essence, utilities, I’m suggesting you rethink your business model, much like companies profiled in Good to Great. Stop thinking of yourselves as providers of electricity; start thinking of yourselves as providers of insurance. As we enter this new world of options, the strongest value proposition you’ll have is in providing peace of mind.