Lighting the Way

Persistent climate change concerns, volatile energy prices and a growing awareness of technological advancement in energy are leading consumers across the globe to reconsider their role in the electric power value chain. Likewise, substantial increases in utility infrastructure investment are likely due to global demands for climate change mitigation; the need to support aging networks and generation plants; and proliferation of government stimulus plans for weakened economies.

For energy and utility companies, this presents an historic opportunity to encourage new, mutually beneficial behaviors and create business models to meet new consumer demands.

Our last report, "Plugging in the Consumer: Innovating Utility Business Models for the Future," explored the radically changing relationship between energy providers and consumers who took part in a survey conducted in late 2007. Even during the global economic downturn, progress has continued along the two dimensions shaping these changes: technology advancement and consumers’ desire for more control. Ultimately, this will result in movement of the basis of the industry to a participatory network – an interconnected environment characterized by a wide variety of grid and network technologies that enable shared responsibility and benefits. It will drive the creation of entirely new markets and products.

To continue our research about consumer expectations, we launched a followup survey in the fall of 2008. We surveyed over 5,000 customers from an expanded group of countries. This included the "core group" from our prior survey – the U.S., the U.K., Germany, the Netherlands, Australia and Japan – plus Canada, Denmark, Belgium, France, Ireland and New Zealand. Our survey findings strongly suggest the historical view of customers as "like-minded" is already outdated in most places.

Encouraging New Behaviors

In our surveys over the past two years, many consumers demonstrated at least one goal associated with asserting more control over their energy usage. The features of a participatory network appeal tremendously to them, because it would offer abundant service options and information to manage energy usage according to specific goals, such as cost reduction or environmental impact.

There is not much evidence that consumers think lower rates are coming. Over half see the cost increasing at roughly the same pace as usage. Forty percent see their bills increasing more rapidly than their usage (or not decreasing as much as any reduction in usage). Six percent think their bills will increase more slowly (or decrease more rapidly) than their usage. Overall, this year’s respondents have a slightly more pessimistic view of the next five years than those last year.

Cost remains the powerful motivator behind a desire for control over energy usage and a willingness to change behavior. Four in five consumers are willing to change the time-of-day in which they perform energy-consuming housework in exchange for cost savings of 50 percent or more. With the prevalent feeling that prices will move inexorably upward and awareness of smart meters growing, over 90 percent of respondents indicated that they would like a smart meter or other tools to manage their usage, with 55 percent to 60 percent of these respondents willing to pay a one-time or monthly fee for that capability.

Consumers’ emphasis on climate change and the availability of renewable energy programs in response to this demand for more carbon-neutral products remained about the same year to year. Across the core group countries, the percentage reporting that they did not have renewable power programs available dropped to 16 percent from 21 percent in the new survey (see Figure 1). Rather than changing their answers to the affirmative, however, most of the movement was to "don’t know" (up to 50 percent from 46 percent).

According to industry experts in some of the countries surveyed, the high level of "don’t know" responses, in part, reflects doubts in some countries about the veracity of green power claims. Still, if to a larger extent many customers truly cannot answer that question, this could indicate a valuable opportunity lost to ineffective communication with customers in countries with significant renewable resources and high participation levels.

In addition to environmental concerns, the global economic downturn of 2008 is clearly having severe impact on consumers. Across the core group countries, the number of consumers paying a premium for green products and services is down 20 percent to 30 percent (see Figure 2).

This change in spending patterns also seems to influence perceptions of green power options among consumers from core group countries that do not have (or are unsure if they have) green power options. The percentage of people who say they want green power options is down slightly, falling to 78 percent in 2008 from 85 percent in 2007. But, during that one-year period, the percentage of those willing to pay an additional 20 percent or more monthly dropped by nearly two-thirds, to just 6 percent from 16 percent.

The percentage of those who have green power options and actually buy them remained about the same, however. This is not surprising given contractual commitments, significantly higher prices for nonrenewable fuels in the past year (which eliminated some of the cost differential between standard and green power), and the overall commitment to the environment expected of "green" consumers.

Analyzing Consumers

In "Plugging in the Consumer," we described an emerging segmentation comprised of four consumer types: passive ratepayers (PR), frugal goal-seekers (FGs), energy epicures (EE) and energy stalwarts (ES) (see Figure 3). Our latest survey results reinforce these segments as likely outcomes of current trends. Two main attributes are associated with variances in consumers’ behavior profiles:

  • Personal Initiative. A consumer’s willingness to make decisions and take action based on specific goals such as cost control, reliability, convenience and climate change impact.
  • Disposable Income. A consumer’s financial wherewithal to support energy-related goals. In early adoption phases, only those with sufficient resources will be able to implement new technologies and buy more expensive products.

We also found that other demographic characteristics – such as age and country of residence – affect the speed of technology adoption, ability to leverage control "behind the meter," goals embedded in accepting more responsibility for energy choices, among others.

Consumer Profiles

PRs that embody a passive preference for the status quo remain the most prevalent of any of the four consumer archetypes. However, we see a remarkable transition in progress. In the past, these typically uninvolved, acquiescent customers comprised virtually 100 percent of the customer base. They represent just 31 percent of our 2008 survey respondents.

The number of more engaged and goal-oriented customers all along the income spectrum is approaching one-half of the total customer base. Frugal goal-seekers (FGs), about 22 percent of the survey population, have limited resources but strong will to change the way they use energy and manage its consumption. This group desires low-cost control of energy choices. Energy stalwarts (ES) have enough strength in both will and wallet to proactively take measures from making simple efficiency improvements to generating their own electricity. They have a clear willingness to invest in energy choices and represent about one in five consumers surveyed. Both of these groups will strongly influence the other half of consumers as they succeed in meeting their goals.

The remaining respondents (26 percent) are the EEs, who are curious but not committed. While they actually demonstrate more knowledge about their provider and options than any other group, they do not share the cost concerns or clear desire for information and control. This appears to be a matter of choice and not ignorance. While passive in some ways, this group is open to experimentation, particularly when the cost and lifestyle impact of a behavioral change are low.

Generational Change

In the short term, changes in customer needs will occur based on personal initiative and income. In the long run, even more radical changes may emerge as the millennial generation continues to move into adulthood and the energy customer base. By varying definitions, the first wave of these information-hungry, technology-savvy consumers is somewhere in our 25- to 34-year-old demographic grouping and fully encompasses the 18- to 24-year-old age group.

Precisely at this juncture, we see major changes in the survey results related to the ways consumers learn about companies and products, what they value and what they will pay for, as well as how they communicate with each other and the companies with which they do business. This, ultimately, may give way to new customer segments that will influence the shape of the industry in ways unimagined just a decade or two ago. To effectively determine the best strategy for a customer-focused transition to the participatory network of the future, every provider of energy or related services will need to construct an inventory of existing customer interactions with a wide variety of current and future service and product models.

In the following sections, we outline how specific consumer segments view the technology and business advances associated with key interactions.

Learning about Providers

Important messages from providers do not always reach consumers, as evidenced by consumers’ lack of awareness of available green power options (see Figure 1).

Additionally, only one in six consumers foresees a decrease in usage over the next five years, and only about a third say their provider can help them save energy despite strong efforts by the industry and governments to promote efficiency. In particular, provider messages are not reaching the youngest consumers. For example, those aged 18 to 34 are 40 percent more likely to not know if they have a choice in providers versus those 35 and older. The under-34 group also is twice as likely to not even know their provider’s name.

While all age groups will continue to rely heavily on their providers for information about energy (85 percent to 90 percent of respondents indicated this was a likely source), reliance on other sources differed starkly. Those over 55 are more than 10 times more likely to look to government for energy information than to social networks and other Web 2.0 content. Current trends also imply that those under 25 are becoming almost as likely to use the latter, rather than the former. To reach all generations, companies need to understand how different consumers tend to educate themselves about providers and their offerings with the wide variety of media available.

Controlling Costs

Not surprisingly, those aged 18 to 34 were most eager for the types of "self-service" and automated energy management that smart metering and smart grids will bring. What may be surprising, however, is that this age group – and particularly those under 25 – is the most willing to pay a stated premium for these services of approximately $100 U.S. as a one-time fee, or a monthly fee of $5 U.S. (see Figure 4).

Having a message sent to a mobile device when power is out at the consumer’s home also garnered significantly higher interest from the under-25 age group. About 30 percent were more likely than the other age groups to pay $1 per month for such a service. This finding may be related to the generally higher willingness we observed of younger age groups to subscribe to these programs, to their higher rate of ownership of mobile data devices and plans, or a combination of the two.

Investing in the Consumer

Substantial new increases in investment in utility infrastructure will come with a great deal of public, regulatory and shareholder scrutiny. All of these stakeholders will want to know how the public as a whole can benefit.

Energy and utility companies will need a strategy for aligning customer wants and needs with technology deployment roadmaps, beginning with rigorous customer segmentation and building an inventory of customer interactions. This must be followed by a program to analyze the interactions that are anticipated with each consumer segment and to assess whether existing capabilities are sufficient to leverage the new infrastructure in ways that support the new customer experience:

  • Identifying customer wants and needs specific to the interactions that will be most important to each particular segment;
  • Identifying the interactions that can be most effectively enhanced through participatory network deployment strategies;
  • Defining new or augmented business capabilities and regulatory models that must be developed to translate technological capabilities into customer benefits;
  • Determining which capabilities, if any, will be ceded to other providers for further development;
  • Integrating the development of specific new business capabilities into the participatory network deployment roadmap; and
  • Communicating these new capabilities clearly and effectively to all stakeholders.

The outcome of this process will lead to critical decisions about the customer-facing business capabilities on which the enterprise will focus.

Existing organizational strengths and new capabilities to be developed – one by one or in combinations – will form the basis for a broad menu of new products and services that the energy provider can offer. Each energy or service provider must be prepared to analyze its customer base to determine specific wants and needs before assessing how customers want to see new products and services emerge. After preferences are evaluated, they need to be applied to the customer interaction inventory in a way that identifies what should to be enhanced through technological improvements, regulatory change or improvements to communication channels.

This needs to be an ongoing process; customer assessment will not cease to be important once the participatory network is in place. The good news is that the data required to perform this continual assessment will be ubiquitous and arrive in real time from multiple sources of value-generating insights. But with this capability comes a challenge: finding new and powerful ways to collect, assimilate and evaluate this torrent of data in a way that will lead to inspiration for new programs and products that appeals to an expanding number of involved consumers.

The Smart Grid Gets Real

Utilities around the world are facing a future that demands technology and service to better measure, manage and control distributed resources. Sensus has anticipated that future with real-world solutions that are already at work in millions of households today. As a leading provider of advanced metering and related communications technologies to utilities worldwide, Sensus has been aggressively pushing the boundaries of utility management. Our innovative communication systems enable utilities to intelligently utilize their resources with unprecedented efficiency.

FlexNet Smart Grid Solution

FlexNet is the electric utility industry’s most powerful AMI solution. It meets AMI requirements of today; ubiquity, redundancy, security and demand response, and is smart grid ready. FlexNet is simple; its lean architecture uses a powerful, industry-leading two Watts of radio power to transmit information that maximizes range and minimizes operational costs with low infrastructure requirements. FlexNet insures sustainability, protecting the utility infrastructure investment and uninterrupted delivery.

Every FlexNet endpoint is equipped with the ability to accept downloadable revised code; modulations, protocols, frequency of operation, even data rate can be fully upgraded as future requirements and features are developed. Sensus FlexNet further mitigates risk by using APA™ (All Paths Always) technology; this ultimate form of self-healing ensures critical messages are delivered without re-routing delay.

iCon Smart Meters

The iCon line of solid state smart meters integrates seamlessly with the FlexNet AMI solution. Communication vendors and metrology engineers nationwide consistently find that the advanced family of Sensus meters provides complete functionality, superior reliability, flexible integration capability, industry standards compatibility, and economical value. The modular mechanical, electrical, and software designs, in combination with the advanced sensing capability, predictably deliver the speed, accuracy, and reliability required to meet today’s electric utility needs. With an unsurpassed accuracy exceeding ANSI C12.20 (Class 0.2), the iCon Meter by Sensus is built with a backbone of reliability and precision.

Surviving the Turmoil

With the new administration talking about a trillion dollars of infrastructure investment, the time for the intelligent utility of the future is now. Political pressure and climate change are going to drive massive investments in renewable and clean energy and smart grid technology. These investments will empower customers through the launch and adoption of demand response and energy efficiency programs.

Many believe that the utility industry will change more in the next five years than the previous 50. The greatest technological advancements are only valuable if they can enable desired business outcomes. In a world of rapidly changing technology it is easy to get caught up in the decisions of what to put in, how, when, and where – making it easy to forget why.

A New Era Emerges

The utility industry has, for decades, been the sleeping giant of the U.S. economy. Little has changed in service delivery and consumer options over the last 50 years. But a perfect storm of legislation, funding and technology has set in motion new initiatives that will change the way customers use and think about their utility service. The American Recovery and Reinvestment Act allocates more than $4 billion, via the Smart Grid Investment Grant Program, for development and upgrade of the electrical grid. Simultaneously, significant strides in smart metering technology make the prospect of a rewired grid more feasible.

While technological advances toward the intelligent utility are exciting, technology in and of itself is not the solution for the utility of the future. How those technologies are applied to supporting business outcomes will be key to success in a consumer-empowered environment. Those outcomes must include considerations such as increasing or sustaining customer service levels and reducing bad debt through innovative charging methods and better control of consumption patterns.

Facing New Challenges

Future smart grid considerations aside, consumer expectations are already undergoing transformation. Although some energy prices have decreased recently in light of declining natural gas prices, the long-term trend indicates rates will continue to climb. Faced with increasing energy costs and declining household incomes, customers are looking for options to reduce their utility bill. Further, utilities’ ability to meet demand during peak periods is often inadequate. According to the Galvin Electricity Initiative, “Each day, roughly 500,000 Americans spend at least two hours without electricity in their homes and businesses. Such outages cost at least $150 billion a year. The future looks even worse. Without substantial innovation and investment, rolling blackouts and soaring power bills will become a persistent fact of life [1].”

Simultaneously, environmental concerns are influencing a greater number of consumers than in the past. In April 2009, the U.S. Environmental Protection Agency (EPA) announced it had identified six greenhouse gases that may endanger public health or welfare [2]. According to the EPA, the process of generating electricity creates 41 percent of all carbon dioxide emissions in the U.S. Utilities are under pressure to offer ways to reduce the impact of fossil fuels to accommodate rapidly changing economic and social conditions.

Strategies such as rate structures that incent customers to schedule their energy-intensive activities during off-peak times would help the utility to avoid, or reduce, reliance on the facilities that produce greenhouse gases. Lowering a residential thermostat by just 2 degrees reduces reliance on less desirable sources of generation. According to McKinsey &
Company, carbon dioxide emissions can be reduced by 34 percent in the residential sector alone through enhanced energy productivity [3].

If a significant number of residential consumers could reschedule their peak usage today, it would extend the life of the current infrastructure and reduce the need to raise rates in order to fund capital investments. But at present, in most jurisdictions there is no demonstrable incentive, such as rate structures that reward off-peak usage, to motivate consumers to conserve in any meaningful way.

Aging CIS

Those utilities saddled with aging customer information systems (CIS) – and those executives who have been reluctant to adopt new technology – will be challenged to adapt to the new paradigm. Even utilities with a relatively new CIS in place may find themselves with technology not suited to today’s world. Typically, utilities have been “load serving entities” – matching supply to demand. In the new recession-prone environment, proactive utilities will need to encourage conservation to match supply. Most utilities do not have the capability to show consumers how and when they can save money by using electricity during off-peak hours.

Until utilities can address these needs, and answer customer inquiries about how to save money and energy, they will not be in a position to focus on desired business outcomes. Currently, many utilities track quantitative performance indicators, not business outcomes.

Desired Business Outcomes

Determining the tools, processes or intellectual property needed to achieve desired business outcomes can be a dilemma. Realizing targeted results may require out-of-the-box thinking. To leverage best-in-class practices, many utilities seek external expertise ranging from advisory and consulting resources to a fully outsourced solution.

When addressing the changes the future utility faces, it is easy to become focused on the what, how, when and where to deploy emerging technology rather than the most important element – why deploy at all? Figure 1 depicts Vertex’s four-level solutions approach to business outcomes as an example of keeping the focus on the “why.”

Level 1: Identify Business Challenges. What are the key issues your organization is grappling with? They may be part of the macro trends impacting the industry as a whole or they may be specific to your company. The list might include issues such as substantial bad debt, poor customer satisfaction, declining revenue and profits, high operating cost to serve, and customer acquisition and retention.

Level 2: Identify Desired Outcomes. While acting on business challenges is an integral part of the process, the desired business outcomes are the drivers that will guide you to the solution. At the same time, the solution will also determine if the desired outcomes can be achieved with in-house resources or if an experienced third party should join the team. The solution will also clarify whether you have the technology to realize the desired outcomes or if an investment will be necessary. For example, desired outcomes might include reducing bad debt by 10 percent, improving customer satisfaction from the second quartile to the first quartile, or eliminating 30 percent of the cost of the meter-to-cash process. One or more of these outcomes may require new supporting technology.

Level 3: Develop and Implement Solution. Once the specific business challenges have been fully discussed and the desired outcomes outlined, the next step requires designing the solution to enable achievement. The solution needs to be realistic, in line with your corporate culture, and deliver the right mix of technology, innovation and practicality, all with the appropriate cost-to-value ratio. Management must avoid the lure of overengineering to meet the goal, and thereby incurring more expense and complexity than needed. And the journey from perceived solution to actual solution to achieve a desired outcome might include some surprising elements.

For example, accomplishing the goal of reducing customer service costs by 30 percent might call for enhanced customer service representative (CSR) education and a reduction in the average number of calls a customer makes to the call center each year. The eventual solution may be very complex, and require touching all areas of the meter-to-cash process, along with implementing next generation technology. Or the solution may be as simple as upgrading the customer’s bill to provide more accurate and timely information. Putting more information in the customer’s hands makes billing easier to understand, resulting in fewer customer calls per year, leading to lower customer service costs. The value proposition enabling the business outcome might rely on a more robust analytics engine for analyzing and presenting data to customers. There are generally multiple paths that can bring about achieving a desired business outcome. Seeking external help on the pros and cons of the paths might be valuable to utility executives,
especially if the path involves deploying new technology.

Level 4: Measure Solution Results. Continuous process improvement must be a component of all solutions. The results must be measured and compared against the desired business outcomes. Reviewing results and lessons learned in a closed loop will empower continuous process improvement and maintain focus on the process.

Conservation and Education

While current technology may not be up to the task of helping consumers conserve and save money on energy, those restrictions will change in the very near future. Utilities need to start viewing themselves less as responders to supply and demand and more as advocates for conservation, the environment, and de-coupling of rates. Massive investments in clean and renewable energy, and smart grid technology, will empower customers to employ demand response decisions and gain energy efficiency. The real issue for the utility will not be how to implement the technology itself – wired, wireless, satellite, etc. – but how best to use the technology to achieve its desired business outcomes. Further, utilities need to be prepared for some disruption to business as usual while technology and business processes undergo a sea change.

The capability of deploying a smart grid and advanced meter management (AMM) is one of the most significant changes impacting utilities today. The outcomes are not achieved by technology alone. Those outcomes require the merging of AMM with meter-to-cash processes. The utility will realize business value only if the people and discrete processes within the customer care component of the end-toend process evolve to take advantage of new technology.

The New Reality

Most utilities already enjoy acceptable levels of customer satisfaction. As the smart grid comes on line, with its associated learning curve, myriad details and inevitable glitches, customers will depend on the utility for support and clarification. Call center volumes and average handle times will increase as the complexity of the product grows by an order of magnitude. The old standard of measuring productivity according to number of calls completed within a pre-determined number of minutes will no longer be viable. Average call length increased by a factor of four for one utility that has experimented with smart grid technology. Longer call times, however, can ultimately translate to increased customer satisfaction as consumers receive the information they need to understand the new system and how to reduce their energy bill.

But a four-fold increase in call center staff to accommodate longer calls is not economically practical. In the future, utilities will need to provide more in-depth education to CSRs so they can, in turn, educate customers. They may even need to change their hiring criteria, and seek more highly skilled call center staff who are already versed in the meter-to-cash process. For some customers, alternative sources of information such as the Internet will suffice, thus offsetting some of the strain placed on the call center.

Achieving Desired Outcomes

The following section provides examples of how the combination of advanced meter management and redefined meter-to-cash processes and tools can enable and help achieve desired business outcomes.

Accurate and Timely Data – With smart meters and the smart grid able to capture usage data in intervals as frequent as five minutes, utilities will have more current information about system activity than ever before. Developing a strategy for managing this massive database will require forethought to avoid overwhelming the back office. When fully deployed throughout a service area, customers will no longer receive estimated bills. Devices in the home will provide readouts about usage activity, and some consumer education may be needed to help households understand the presented data and how it translates to their usage patterns and billing. Demand response participation is likely to increase as consumers become more aware of the benefits of managing their energy usage patterns. The federal government’s stimulus bill funding may include allocations for retrofits for low-income homeowners. The call center can function as a resource for customers who wish to investigate this program.

Reduced Bad Debt – As noted earlier, average handle time will be a less significant metric as consumer interaction with the call center increases. The CSR will become a key element in the strategy to reduce bad debt. CSRs will be the conduit for consumer education and building rapport with the customer when resolving past-due bills. As an alternative, utilities may want to turn to Madison Avenue to help them design and roll out a customer information campaign.

Better Revenue Management – If customer education about the smart grid pays off, and consumers are using energy more judiciously, utilities will benefit. Without the pressure to make capital investments for new plants, there will be more opportunities for profit-taking and shareholder rewards. Utilities may instead be able to make profits on their energy efficiency and investments. New technologies will help utilities avoid spending the hundreds of billions of dollars that would otherwise be needed for base load. In addition, demand response participation on the part of residential consumers will better align commercial and industrial (C&I) energy pricing with residential pricing. C&I customers will see the quality and consistency of their power supply improve.

Increased Energy Efficiency – Utilities, whether municipal, public or private, will feel the social pressure to apply technologies in order to gain energy efficiency and encourage conservation. The future utility will become a leader, instead of a follower, in the campaign to improve the environment and use energy resources wisely. By using energy more strategically – that is, understanding the benefits of off-peak usage – consumers will help their utility reduce carbon emissions, which is the ultimate desired business outcome for all involved.

Increased Stakeholder Satisfaction – Stakeholders run the gamut from shareholders and public utility commissions to consumers, utility employees and executives. All of these groups will be pleased if the public uses energy more efficiently, leading to more revenue for the utility and lower costs to consumers. Showing focus on business outcomes is generally a huge plus that helps increase stakeholder satisfaction.

Lower Cost to Serve – Utilities must try to design a business model with flatter delivery costs. For example, if it costs the utility $30 to $40 per customer per year, staying within that existing range with more and longer customer calls will be a challenge. Some utilities may opt out of providing customer service with in-house staff and contract with a service provider. Recognizing that supplying and managing energy, not delivering customer care, is their core competency, a utility can often reduce the cost of customer care by partnering with an organization that is an expert in this business process. If this is the path a utility takes it is very important to find the provider that will enable the desired outcomes of your business; not all service providers are equal or focus on outcomes. We expect relationships with vendors within the industry will change, with utilities embracing more business partners than in the past.

Increased Service Levels – Public utility commissions (PUC) often review financial and service metrics when considering a rate case. Utilities may need to collaborate with PUCs to help them understand the dynamics of smart meters, along with temporary changes in customer satisfaction and service levels, when submitting innovative rate cases and programs. Once the initial disruptive period of new technology is completed, utilities will be able to increase service levels with greater responsiveness to customer needs. When the call center staff is fully educated about smart meters and demand response, they will be positioned to provide customers with more comprehensive service, thus reducing the number of incoming and outgoing calls.

Future Competition – The current and upcoming changes in the industry are so dramatic that utilities must first assess how consumers are accepting change. Reinventing the grid via the smart grid and its related products and services will create new opportunities and new business models with potential for increased revenue. The extent to which the future market is more competitive depends on the rate of acceptance by consumers and how skillfully utilities adopt new business models. It is our premise that utilities who desire the right business outcomes and focus on enabling them through process, people, and technological changes will be most able to excel in a more competitive environment.

References

  1. Galvin Electricity Initiative, sponsored by The Galvin Project, Inc., www.galvinpower.org
  2. Press Release, “EPA Finds Greenhouse Gases Pose Threat to Public Health, Welfare/Proposed Finding Comes in Response to 2007 Supreme Court Ruling,” April 17, 2009. http://yosemite.epa.gov
  3. McKinsey Global Institute, “Wasted Energy: How the US Can Reach its Energy Productivity Potential,” McKinsey
    & Company, June 2007.

Silver Spring Networks

When engineers built the national electric grid, their achievement made every other innovation built on or run by electricity possible – from the car and airplane to the radio, television, computer and the Internet. Over decades, all of these inventions have gotten better, smarter and cheaper while the grid has remained exactly the same. As a result, our electrical grid is operating under tremendous stress. The Department of Energy estimates that by 2030, demand for power will outpace supply by 30 percent. And this increasing demand for low-cost, reliable power must be met alongside growing environmental concerns.

Silver Spring Networks (SSN) is the first proven technology to enable the smart grid. SSN is a complete smart grid solutions company that enables utilities to achieve operational efficiencies, reduce carbon emissions and offer their customers new ways to monitor and manage their energy consumption. SSN provides hardware, software and services that allow utilities to deploy and run unlimited advanced applications, including smart metering, demand response, distribution automation and distributed generation, over a single, unified network.

The smart grid should operate like the Internet for energy, without proprietary networks built around a single application or device. In the same way that one can plug any laptop or device into the Internet, regardless of its manufacturer, utilities should be able to “plug in” any application or consumer device to the smart grid. SSN’s Smart Energy Network is based on open, Internet Protocol (IP) standards, allowing for continuous, two-way communication between the utility and every device on the grid – now and in the future.

The IP networking standard adopted by Federal agencies has proven secure and reliable over decades of use in the information technology and finance industries. This network provides a high-bandwidth, low-latency and cost-effective solution for utility companies.

SSN’s Infrastructure Cards (NICs) are installed in “smart” devices, like smart meters at the consumer’s home, allowing them to communicate with SSN’s access points. Each access point communicates with networked devices over a radius of one or two miles, creating a wireless communication mesh that connects every device on the grid to one another and to the utility’s back office.

Using the Smart Energy Network, utilities will be able to remotely connect or disconnect service, send pricing information to customers who can understand how much their energy is costing in real time, and manage the integration of intermittent renewable energy sources like solar panels, plug-in electric vehicles and wind farms.

In addition to providing The Smart Energy Network and the software/firmware that makes it run smoothly, SSN develops applications like outage detection and restoration, and provides support services to their utility customers. By minimizing or eliminating interruptions, the self-healing grid could save industrial and residential consumers over $100 billion per year.

Founded in 2002 and headquartered in Redwood City, Ca., SSN is a privately held company backed by Foundation Capital, Kleiner Perkins Caufield & Byers and Northgate Capital. The company has over 200 employees and a global reach, with partnerships in Australia, the U.K. and Brazil.

SSN is the leading smart grid solutions provider, with successful deployments with utilities serving 20 percent of the U.S. population, including Florida Power & Light (FPL), Pacific Gas & Electric (PG&E), Oklahoma Gas & Electric (OG&E) and Pepco Holdings, Inc. (PHI), among others.

FPL is one of the largest electric utilities in the U.S., serving approximately 4.5 million customers across Florida. In 2007, SSN and FPL partnered to deploy SSN’s Smart Energy Network to 100,000 FPL customers. It began with rigorous environmental and reliability testing to ensure that SSN’s technology would hold up under the harsh environmental conditions in some areas of Florida. Few companies are able to sustain the scale and quality of testing that FPL required during this deployment, including power outage notification testing, exposure to water and salt spray and network throughput performance test for self-healing failover characteristics.

SSN’s solution has met or exceeded all FPL acceptance criteria. FPL plans to continue deployment of SSN’s Smart Energy Network at a rate of one million networked meters per year beginning in 2010 to all 4.5 million residential customers.

PG&E is currently rolling out SSN’s Smart Energy Network to all 5 million electric customers over a 700,000 square-mile service area.

OG&E, a utility serving 770,000 customers in Oklahoma and western Arkansas, worked with SSN to deploy a small-scale pilot project to test The Smart Energy Network and gauge customer satisfaction. The utility deployed SSN’s network, along with an energy management web-based portal in 25 homes in northwest Oklahoma City. Another 6,600 apartments were given networked meters to allow remote initiation and termination of service.

Consumer response to the project was overwhelmingly positive. Participating residents said they gained flexibility and control over their household’s energy consumption by monitoring their usage on in-home touch screen information panels. According to one customer, “It’s the three A’s: awareness, attitude and action. It increased our awareness. It changed our attitude about when we should be using electricity. It made us take action.”

Based on the results, OG&E presented a plan for expanded deployment to the Oklahoma Corporation Commission for their consideration.

PHI recently announced its partnership with SSN to deliver The Smart Energy Network to its 1.9 million customers across Washington, D.C., Delaware, Maryland and New Jersey. The first phase of the smart grid deployment will begin in Delaware in March 2009 and involve SSN’s advanced metering and distribution automation technology. Additional deployment will depend on regulatory authorization.

The impact of energy efficiency is enormous. More aggressive energy efficiency efforts could cut the growth rate of worldwide energy consumption by more than half over the next 15 years, according to the McKinsey Global Institute. The Brattle Group states that demand response could reduce peak load in the U.S. by at least 5 percent over the next few years, saving over $3 billion per year in electricity costs. The discounted present value of these savings would be $35 billion over the next 20 years in the U.S. alone, with significantly greater savings worldwide.

Governments throughout the EU, Canada and Australia are now mandating implementation of alternate energy and grid efficiency network programs. The Smart Energy Network is the technology platform that makes energy efficiency and the smart grid possible. And, it is working in the field today.