Ecmweb 6763 Electric Utilities Data Analytics Pr
Ecmweb 6763 Electric Utilities Data Analytics Pr
Ecmweb 6763 Electric Utilities Data Analytics Pr
Ecmweb 6763 Electric Utilities Data Analytics Pr
Ecmweb 6763 Electric Utilities Data Analytics Pr

The Changing World of Demand Side Management

Oct. 18, 2014
Information technology drives program improvements at electric utilities.

With the growing need for more electricity, gas, and water due to population growth, increases in energy/water demand per capita, changing economic dynamics, and other factors, electric utilities across the globe are facing decisions to either build more infrastructure or reduce demand (or at least slow the rate of demand growth). Reducing demand for a resource (e.g., creating “negawatts”) without degrading — and frequently improving — the result (e.g., light, heat, computing power, etc.) often costs less than creating more of the resource. Furthermore, in many cases, using existing resources efficiently and effectively is the only viable option for immediate results. One proven way utilities can efficiently reduce demand is by effectively designing and implementing utility-sponsored demand side management (DSM) programs.

Although DSM has been a tried-and-true solution for decades, the utility DSM industry is entering an exciting phase where the intersection of new technologies, economic drivers, policy frameworks, and rapidly changing consumer preferences provide a unique setting for innovative utility DSM technology and service providers (see DSM Market Size and Growth Potential).

As part of a past study, FMI interviewed various stakeholders, including technology service providers, utilities, and nonprofit organizations. Conversations revealed that achievement of optimal DSM program results hinges on:

•  the success of decoding and responding to specific customer preferences and behavioral patterns in order to design optimal programs, closely followed by

• efficient and effective implementation of such programs, and

• continuous monitoring and feedback to adjust programs and build cumulative knowledge of best practices.

Customer data analytics help utilities fine-tune their DSM programs (photo: tetmc/iStock/Thinkstock).

DSM programs are poised to change the face of energy consumption and savings throughout the global economy, thanks to emerging data management tools and advanced analytic techniques that allow utilities to target the right customers with the right programs. Through intelligent application of customer data analytics, they can analyze customer behaviors, demographics, and other factors in order to design more efficient and effective DSM programs.

“In the past, defining the customer was simple, and tracking by meter provided enough data,” says Phil Welker, executive director of PECI, a Portland, Ore., nonprofit organization that delivers energy efficiency solutions. “Now, the energy efficiency measures are more complex, and our understanding of the customer must be better.”

Utility customer data analytics help utilities get “behind the meter” in order to gain a clearer picture of customer needs and wants.

Smart application of information technology (IT) is also improving the actual implementation of utility DSM programs — delivering negawatts better, cheaper, faster, and with higher utility customer satisfaction. Utility DSM service providers are using IT to simplify the sales process and improve the utility customer’s experience when participating in a program. IT is being used to streamline the workflow and reduce the time and cost of installing energy efficiency measures. Finally, IT is being used to improve program reporting and quality control as well as provide a tool for continuous process improvement.

Utility DSM programs are growing quickly because it’s often easier and cheaper to reduce demand than to build additional infrastructure. IT is being applied to the utility DSM value chain in order to deliver results better, cheaper, and faster.

“The interesting thing about the energy business right now is that it is at the cusp of a revolution in how it acts with and thinks about customers,” says Duane Larson, director, Pacific Gas and Electric Co. (PG&E), San Francisco. “The utility industry is the last infrastructure industry to enter the information age.”

Editor’s Note: This article was adapted from an article that FMI originally published in 2012.       

Huckaby is a managing director with FMI Capital Advisors, Inc., FMI Corp.’s registered Investment Banking subsidiary in Raleigh, N.C. Clarke is a senior analyst with the firm. They can be reached at [email protected] and [email protected].

SIDEBAR: DSM Market Size and Growth Potential

The market for electricity and gas energy efficiency program spending by utilities was more than $9 billion in the United States and Canada in 2011. This represents a 21% increase as compared to 2010. By 2015, this market is expected to increase to more than $12 billion per year. (These amounts exclude water efficiency DSM programs, which add to market size.)

About the Author

Tim Huckaby | Managing Director

About the Author

Russell Clarke | Senior Analyst

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