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SOUTH SAN FRANCISCO, CA - AUGUST 30: Towers carrying electical lines are shown August 30, 2007 in South San Francisco, California. With temperatures over 100 degrees in many parts of the state, the California Independent System Operator, which manages most of the California electricity grid, is planning on declaring a minor power emergency later in the day, followed by a Stage 2 power alert during the late afternoon, indicating that power reserves have fallen below five percent. (Photo by Justin Sullivan/Getty Images)

Building the Smart Grid Business Model

<p>The term smart grid was introduced over ten years ago, and it&rsquo;s been discussed, promoted, sold and debated since. But, we are finally at the right point in time to really start discussing what smart grid actually means for the utility, the power industry and its customers.</p>

The term smart grid was introduced over ten years ago, and it’s been discussed, promoted, sold and debated since. But, we are finally at the right point in time to really start discussing what smart grid actually means for the utility, the power industry and its customers.

The technology is here, but hurdles remain to bring a successful smart grid utility business model into the next decade. The main changes we’ll see will be in technology standards, how cyber security is managed, and most importantly, business model changes that will either leverage or require advanced technology solutions.  This change won’t take place overnight, but utility culture is starting to demonstrate the ability to adapt to new smart grid technologies and processes faster than the industry itself is adapting to a more intelligent grid. It's the utility business model that now needs to start evolving to harness new smart grid capabilities.

Mike Carlson


The evolution of today’s grid will also see an increase in the importance of energy efficiency as options and requirements for generation continue to grow.  Responses from a recent State of the Utility Study exemplifies the impact efficiency is already having on the market. Of the over 400 utility executives surveyed, 75 percent expected to see minimal, stagnant or even negative load growth. They also see immense opportunities in energy efficiency, but are unsure on how to leverage it for value.  

The role of energy efficiency lies mainly with the end user. Motivation for energy consumers to be more efficient in their usage will come through a combination of education and benefit realization - primarily financial. Strong consumer engagement efforts and education are the key.

We are developing technologies to help utilities consumers understand their energy usage, options to manage that usage and their relationship with the utility. We hope that intelligent technology can be the key to help build and nurture the customer and utility relationship. For example, Energy Engage Mobile is a new mobile-web app that allows customers to gain insight and take control of their electricity, water and gas consumption on the go. Utilities can provide Energy Engage Mobile to their customers whether they are commercial and industrial clients or residential, which will help meet energy efficiency and customer satisfaction goals, and complement engagement initiatives around smart grid programs.

In order to make significant strides to achieve a truly smart grid, we’ll need the right energy policies to define standards and refine the business model for investment recovery and earnings opportunity. There should be clarification of the role of utilities of the future. How do utilities facilitate distributed energy resources, storage, EV charging, energy efficiency and demand response?

It’s important for policy to include provision of appropriate financial incentives to utilities, including cost recovery of investments to promote the energy future, such as smart grid. Policy should also focus on the chance to enhance earnings when doing a superior job of implementing regulatory priorities such as renewables integration, energy efficiency and demand response. Studies have found that renewables integration can be achieved at half the cost of traditional network reinforcement. Customers should naturally benefit, but utilities should also be rewarded for delivering such benefits.

We know we haven’t reached a true smart grid yet, but with the right technology and plan it’s within our reach. It will take commitment from the utility, technology providers, regulators, policy makers, and the end user to realize the impact a smart grid can have on the energy industry, the economy and our everyday lives.

Mike Carlson is president, Siemens Smart Grid North America.

EDITOR’S NOTE: Mike Carlson addressed The Energy Times Executive Briefing March 19 in Washington, which Siemens sponsored. [Photo gallery.]



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