Smart Grid Pilots Require Regulatory Change and Better Consumer Focus, Concludes Accenture and World Economic Forum Report
TIANJIN; Sept. 13, 2010: A joint report issued today by Accenture (NYSE: ACN) and the World Economic Forum finds policy makers need to transform regulatory incentives to accelerate smart grid investment. Accenture and the World Economic Forum also warned that the benefits of smart grids are unlikely to be fully realized without utilities improving their engagement with the consumer.
The report, “What makes a successful smart grid pilot?” assesses some of the world’s 90 smart grid pilots and engaged 60 industry stakeholders. The report, which was unveiled at the “Summer Davos” in Tianjin, China, identified two key challenges facing smart grid pilots:
- Utilities are struggling to create smart grid business cases as regulatory incentives are failing to reflect the low carbon agenda. The fragmentation of deregulated energy markets, in particular, is holding back investment by complicating the allocation of risk and reward.
- Some consumers have shown resistance to smart grids, with examples of pilots being halted by regulators due to the lack of clear consumer benefits. Data privacy and security concerns continue to threaten consumer acceptance.
The report concludes that the combination of clear and stable regulation and proactive consumer engagement will help create the profitable business models for the utilities, information technology, telecommunications and other industries involved in creating smart grids.
“There is a risk of lowest common denominator smart grid rollouts, with basic functionality and limited consumer response,” said David M Rouls, managing director, Accenture Smart Grid Services. “Regulatory conditions must be changed to reward investors for the risks they face and to encourage utilities to integrate multiple low carbon technologies to demonstrate the art of the possible for smart grids. And if utilities want to improve the success rate of smart grid pilots, they will need to set clearer objectives and improve consumer engagement.”
Accenture and the World Economic Forum have defined a new Smart Grid Pilot Framework to address these challenges. The report makes three key recommendations to improve smart grid pilot success:
1) Use pilots to improve regulatory incentives
Utilities should help change regulations by sharing continuous pilot evaluation data with regulators, enabling them to include a broader range of outcomes in the regulatory framework.
Policy makers should allow utilities higher rewards for the risks associated with implementing immature technologies. This is critical where funding for pilots comes from bodies other than regulators. Regulators should also align desired low carbon outcomes to investment incentives.
2) Apply analytical rigour in the scoping phase
Pilots must have clear parameters and objectives, and the implementation of technologies should be separated from the introduction of new price tariffs to better understand which is causing consumer responses.
Utilities must distinguish between smart grid capabilities that rely on consumer behavioural change and those that are focused on network performance.
3) Improve consumer insight and engagement
Utilities must deploy more advanced behavioural segmentation techniques and begin pilots by targeting small-to-medium sized enterprises (SMEs), who are likely to be the most responsive early adopters.
Utilities must also address data privacy and security concerns and future grants should be conditional on local regulatory compliance.
Roberto Bocca, Senior Director, Head of Energy Industries World Economic Forum, said, “To make a smart grid a sound investment for electric utilities and other companies, the business case in many countries must be strengthened – regulation will be the key. By acting now, decision-makers can increase the chances of success and avoid having the electricity infrastructure become a bottleneck to delivering a low-carbon, efficient and secure energy future.”
Accenture is a global management consulting, technology services and outsourcing company, with more than 190,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.
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