Giles Parkinson has an in-depth look at Origin Energy's interest in smart grids - Origin of an energy revolution.
The roll-out of in-house display systems for energy use promises to revolutionise the way the consumers understand and consume energy.
Origin, the largest retailer in the country, has kicked it off by announcing the largest pilot scheme of in-home displays in Australia – one that will involve 5,000 households over the next six months. But the rollout has far greater implications than consumer experience: it also promises to revolutionise the way that energy utilities conduct their business.
The basic business model of the energy utility has not changed for decades. It’s a simple model that revolves around selling as many electrons to as many customers as they can. But technology has caught up with the industry and, combined with the need to respond to rising costs, conserve energy and reduce emissions, the rollout of the “smarts” – meters, displays and appliances – is poised to cause as dramatic a restructuring as occurred in the banking industry in the 1980s and the telecommunications industry in the 1990s.
How the utilities manage that transformation could decide how they evolve and maintain influence over their industry, as the major banks have managed to do in theirs, and how much third party corporates such as Google, Intel and others come to play a dominant role, as a range of new companies have done in telecommunications.
“We’ve been in one paradigm for the last 100 years,” says Phil Craig, the head of retail at Origin Energy. “The electrons came down the poles and wires, you got the bill in the mail and you went into the post office and wrote the check. That hasn’t changed much, but we re now looking at a whole different model.”
A report released last year by Ernst & Young entitled Seeing Energy Differently described the challenge facing energy utilities in dealing with the providers of new “smart technology” and responding to the demands of improved efficiency. Basically it came down to two options: either the utilities form partnerships with third parties to help consumers manage their energy and evolve the model into a new, sophisticated form of energy service; or they stonewall and come under competitive attack all along the value chain.
Origin has clearly decided to evolve rather than having change thrust upon them. “The telecommunications industry is not like it was 15 years ago, it has experienced radical change,” says Craig. “That‘s what is going to happen to energy over the next 10 years, so we want to be in the best position to manage that.”
Origin has chosen as its partner the Colorado-based Tendril, which provides an in-home display that allows customers “unprecedented visibility” into energy usage, personalised estimates of monthly electricity bills and the ability to control household consumption. It allows communications over the web, mobile phone and home area networks, and can link with smart appliances and electric vehicles. And, of course, the energy company can see this information too.
Exactly how that business model will evolve is not yet clear because there are so many different factors that can still be brought to bear. But for Australian energy consumers, in-house displays – which look something like the dashboard displays in your car – are not far away. After the six-month pilot, Origin intends to then roll out the displays to all its 4.6 million customers – although the extent to which this can happen will depend on the rollout of the underlying infrastructure, which in this case is smart meters.
Craig says that by the end of the decade, consumers can expect to have smart appliances in their home that can respond to a pricing signal and turn themselves off. There will be charge points in the garage where the plug-in electric vehicle can choose the best time to charge itself, or even send electrons back into the grid. And, says Davis, there could be much larger solar systems on our homes.
And just as electric vehicle batteries will be able to be purchased under a leasing phone, just as people buy plans for their mobile phone, consumers might want to negotiate similar packages with their electricity supplier, possibly via third parties such as electrical retailers.