Distributor Barriers to Entry
The deployment of smart grids, electrical power grids which support 2-way data communication, has encountered numerous barriers to entry. As with any comprehensive infrastructural change, smart grid deployment encounters resistance in the following areas:
- State regulatory agencies
- Federal regulatory agencies
- Lack of standards
Consumer Barriers to Entry
There are also barriers on the consumer side. As consumers are typically passed the cost of new services, it’s important that their pushback issues are addressed. Consumers are often concerned about:
- Data sharing/privacy
- Meter investment
- Startup costs
- Poor pricing signals
Let’s begin by addressing the barriers to entry on the distributor side
State and Federal Regulatory Agencies
The key to overcoming state and federal legislative resistance is overcoming consumer resistance. Consumers are represented by their legislative bodies, so if consumers are supportive of the smart grid project, the likelihood of supportive legislation increases. Smart grid distributors can garner public support by focusing on public education of the benefits, cost savings, and overall vision of the smart grid project. This can be done through mailers, local television advertising, radio and social media.
Lack of Standards
The multiple standards available for wireless communication and geo-location limit interoperability of smart grids, which in turn decreases consumer approval and increases distributor costs. There is currently a big push to an open standard such as IEEE 802.15.4-2003 in order to encourage competition and provide a common platform to increase interoperability among smart grids.
Let’s now look at the consumer barriers to entry.
One of the primary concerns consumers have with the implementation of smart grid projects is that it provides electrical utilities with appliance usage information for each home or building. If the electrical utilities are approached by 3rd parties with an offer to purchase this information, there is currently little clear regulation on what the utilities can and cannot sell. This will likely change as Obama’s $3.4 billion smart grid budget is applied and regulations increase.
Meter Investment and Startup Costs
A requirement of any smart grid rollout is the individual purchase of a smart meter, as well as a startup fee for installation and setup. There is little that can be done about this reality, unfortunately, but one way to offset a negative consumer perception is through education. The more consumers understand the scope and benefits of the project, the costs become more of an investment than an unnecessary fee.
Poor pricing signals
Because electrical utilities will be empowered to alter pricing based on demand, it’s important to the consumer to understand how their energy costs are changing. The key to solve this is improving the communication link to become near real-time. Currently the communication can have as much as 8-12 hours of delay, which is essentially worthless to the consumer. Current rollouts are using quicker communication protocols, so hopefully we’ll see improved communication speeds in the future.
As you can see, although there are a number of obstacles that can hinder the implementation of smart grid projects, for each obstacle there is a way to overcome it. Some obstacles are more difficult to overcome, but in each case it boils down to solving the consumer’s pain points. And isn’t that what every business should be focused on?