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Section 6: Constraints to Deployment Section 6: Constraints to Deployment
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Section 6: Constraints to Deployment
There are constraints to the rapid and optimized development of Perfect Power
solutions for behavioral, institutional, regulatory, financial and technological reasons.
In particular, the status quo can often be perpetuated by incumbents who do not want
to lose the level of control they have today, the existing business model to which their
management techniques have adapted over a century and the existing incentive to sell
kilowatt hours given a fixed, regulated price. In spite of the major changes in the
utility industry in the last two decades, selling kilowatt hours remains the primary
source of revenue and profit for most players. Even for some of the most
competition-driven companies, market share pushes them to expand kilowatt-hour
sales as their core business. Their reliance on this business model feeds into their
interaction with regulatory institutions and encourages the utility to persuade
regulators that expanding kilowatt hour sales at a fixed rate is in the best interest of
end-use customers, particularly residential customers who also are voters.
As a result, even for innovative new entrants with great solutions, it can be difficult
to break into the market, reach their target customers (even if they have been
correctly identified), gain market share, market a standard product and services and,
thereby, achieve critical mass where they can benefit from economies of scale and see
their investment pay off.
Nonetheless, the pervasive nature of many of the new technologies that will enable
Perfect Power solutions is such that we expect many of these constraints to be
eventually overcome, even if it happened in an uneven manner across service areas
and market segments.
6.1 Customer Behavior
In many instances, customers may not be willing to invest in Perfect Power solutions
because they do not understand the value of these solutions, do not perceive how they
could adjust their behaviors to take advantage of such solutions, do not have access to
capital to deploy these solutions, or believe the payback is too long or are too
conservative or enough savvy to invest in and manage new technologies.
In many market segments, there will be a fraction of early adopters, but they may
only represent 15 percent or so of the market. However, early adopters help kick the
market by being willing to take more risk, being more engaged in the success of their
purchase and thus, provide success stories that can then help propel adoption by other
more risk adverse customers (followers). Still, higher market penetration will be
achieved only if the new value propositions yield quick paybacks, often in the one to Section 6: Constraints to Deployment
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three year range. There are many differences, though, between the residential and
commercial sector.
Residential Sector. The value proposition to a homeowner may not just be based on
dollars and cents or payback. It also may involve judging the new offering or solution
based on what it does for security, convenience, comfort, satisfaction, etc. As has
been the case with green power sales, there is an affluent segment willing to pay more
for better or Perfect Power, especially if it has positive social attributes, such as
reducing overall emissions, using advanced technology, giving the customer control,
etc.
In addition, the ability to Web-enable many of these solutions wirelessly is a major
facilitator to penetration because it is an inexpensive, plug and play approach that can
help overcome customer reluctance in the residential sector, for example:

Well-designed intelligent controls have a way to engage the
consumers by providing the right price, energy usage or
environmental signal in the right format. Branding may be an
important element.

A well-designed energy portal can have default profiles that can make
energy management more automatic and almost self-managed. In
some instances, the software can self-learn (for example, a smart
storage system will learn the energy usages of the building where it is
located and can thus, be programmed to adapt its response
accordingly). There is a debate about the use of PC interfaces,
remotes and dedicated energy handheld controllers.

The use of powerful graphics and communications interfaces can help
illustrate the value of these propositions by reinforcing the message of
how quickly and how often savings, productivity gains and enhanced
customer service are indeed being achieved. Some energy
management offerings are designed to convert in dollars, the impact
of every single control strategy, demand response action or fault
clearing. Several vendors are talking about a 10 foot presentation of
the results of a residential energy management system. For example,
by having these results emulated under an icon labeled My Energy
on the same plasma TV screen used for calling the cable subscription
or video-on-demand services).

Web-enabling also can allow the quick mobilization of entire groups
of customers via a variety of communication means (e-mails, cell
phones, PDAs and digital signage). In some of the pilots that are
currently going on, pilot participants e-mail each other to exchange
ideas or compare results. Section 6: Constraints to Deployment
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In addition, as is the case in the commercial sector, the development of efficient,
green building standards will be needed to provide vendors and customers with a
solid benchmark against which to measure their performance.
As a result, we believe that the residential demand-response pilots of tomorrow will
have much more impact because, if they are well designed, they will engage,
empower and reward their participants much more than they ever did in previous
pilots, too many of which were conceived from a utility-centric perspective and were
too administrative in nature.
For example residential-aimed pilots and demand response programs of the future
could:

Have electricity savings directly deposited in a savings account that is
interest bearing, like the credit cards have started to do.

Savings could be tied to environmental causes or converted into free
green energy including greenhouse gas credits.

Savings could give rise to smart power points, redeemable for other
services.
Such motivation tools may be increasingly used by energy retailers. For example,
Direct Energy has had for a while a loyalty program that allowed customers to earn
mileage points.
Commercial Sector. Fortunately, many building intelligence solutions can meet that
test but more capital intensive solutions such as HVAC retrofits, energy storage
systems or DG applications have in most cases longer paybacks of four to five years
or more.
Nonetheless, even when it involves quick paybacks, some segments will be more
reluctant than others. For example, the leased real estate market is a very
conservative segment of the commercial real estate market. For this reason, we can
anticipate, at first, a much higher market penetration in owner-occupied buildings or
in buildings owned by Real Estate Investment Trusts (REITs), rather than in leased
buildings under the supervision of property managers. Such managers are the first to
recognize that they have no particular energy management vision as it is difficult for
them to reflect their tenants often very diverging needs and desires. At the same
time, property managers do not always make the effort to provide the right level of
accountability to empower the tenants. That is why submetering has encountered
considerable opposition.
There are other factors that hamper quick adoption of new technologies and
approaches in the commercial sector: Section 6: Constraints to Deployment
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Lack of key performance metrics to gauge the perfection, intelligence
and performance of buildings;

A dysfunctional building specification and construction process;

A limit to how quickly new business intelligence system (BIS)
technology can be adopted;

A lack of building management and maintenance follow-through; and

The fragmentation of the industry.
On the first front, there is a need to have better and more acceptable metrics to help
define the level of performance of a bui