what would amazon do? enabling a customer-centric future · • cool rewards (smart t-stat demand...
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www.peakload.org
What Would Amazon Do? Enabling a Customer-Centric Future
Lon Huber and Tom HinesSeptember 2019
www.peakload.org
MEGA TRENDS IMPACTING THE US ELECTRICITY INDUSTRY
1. Flat or declining traditional usage2. Historically moderate energy prices but
still high fixed infrastructure costs3. Advanced metering and on-site tech4. Low cost grid scale renewable energy5. Climate destabilization
Coming soon - Electric Vehicles!
www.peakload.org3
WHY DO WE HAVE THE SMALL-CUSTOMER RATES WE HAVE TODAY?
Mostly two-part volumetric rate designs detached from cost causation
WHY: Risk and technology
1. Price risk is on the customer 2. Rate design is simplified3. Simplified rate design is causing more and more issues4. Even though metering is improving, rates are stubbornly the
same
The conditions that formed these rates are no longer holding….
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Value of energy is not the same for all hours of the year
• Significant reduction in net load during the daytime, non-summer seasons from solar DG
• Low or negatively priced energy during mid-day with more expensive prices ramping to late afternoon/evening
RE LARGE AND SMALL CHANGING RESOURCE NEEDS (ARIZONA EXAMPLE)
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2032 Rooftop Solar 2017 Net Load 2022 Net Load 2027 Net Load 2032 Net Load
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GRID NEEDS ARE increasingly dynamic and COMPLEX
• Intermittency support• Load balancing• Valley filling• Utilizing excess generation• Peak shaving• Reducing late afternoon
ramping needs• Frequency and voltage
support• Energy storage
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• Cool Rewards (Smart T-Stat Demand Response)• >18,000 T-stats to date• Multiple T-stat brands• Achieved load shift/reduction with limited opt outs
• Reserve Rewards (Interactive Heat Pump Water Heaters)• 200 Rheem HPWHs• Controlled to store midday excess solar generation• Deployed on specific feeders, requires TOU/demand rate
• Storage Rewards (Batteries)• 40 Sunverge batteries• BTM utility owned and operated• Benefits customers on TOU/demand rates
• All technologies in the Rewards program are connected and operated through the EnergyHub platform
APS Residential Rewards Program
Storage Rewards Batteries
Reserve RewardsWater Heaters
Cool Rewards Thermostats
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How can rates help align grid needs with customer value
• Traditional rate designs provide no time differentiated price signals• TOU and Demand rates improve alignment but they are static and grid needs
are increasingly dynamic• A new approach is needed……and we need to Keep It Simple for customers!
"People don't want raw kilowatt-hours….they want hot showers, cold beer, comfort, mobility, illumination.“- Amory Lovins
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WHAT DO CUSTOMERS LIKE?
• Taxi-meter effect: customers want to avoid the discomfort of knowing they are charged for each use/incremental increase
• Insurance effect: customers want to protect themselves against charges for instances of high use
• Convenience effect: flat rate costs are easier to track
VS.
• Desire for increased control over a (personalized and digitized) bill
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ENERGY SERVICE SUBSCRIPTION MODEL• The Energy Service Subscription Plan is an offering that would allow customers to pay a
fixed monthly bill for energy use• Price is custom to each customer, based on historic usage and selected perks
• The Subscription Plan allows the customer to swap their volumetric price risk in exchange for a fixed monthly bill
• Can be a long-term lock• The customer would be outfitted with DSM technology – the more control they give, the
more they save• While there is some risk associated with overconsumption, that risk is confined to fuel and capacity risk
during certain times of the year (if capacity short)• Can be designed to give middle- and lower-income ratepayers access to newer, more
efficient technologies and appliances • Stabilize their bills
• Subscription Plan option gives the provider a portfolio diversification benefit with respect to revenue recovery.
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CHOOSE A PLAN THAT’S RIGHT FOR YOU
Fixed monthly price based on household profile usage(Your average current bill is $115/month)
$115/month for 36 months
$125/month for 36 months
$145/month for 36 months
30% Clean Energy with energy portal app ✓ ✓ ✓
100% Clean Energy ✕ ✕ ✓
Free Smart Thermostat ✓ ✓ ✓
Access to free or discounted energy efficiency upgrades ✓ ✓ ✓
Unlimited EV charging at home and in community ✕ ✕ ✓
Maximum number of control days 30 15 7
Free control day over rides per year 3 5 7
UnlimitedSavings
Unlimited Choice
Unlimited Premium
+ EV
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CHOOSE YOUR COMFORTSRooftop Solar + $15/Mo Smart EV Charger - $2/Mo
Larger and Smarter AC + $10/Mo10-year guarantee
Battery backup + $20/Mo
Home Monitoring + $10/Mo
Home EE upgrades - $10/Mo
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IS THIS A WIN-WIN-WIN?• Optional!• The incentive to limit usage has not gone away, but has been shifted
to another party, namely the provider offering the Service Subscription Plan.
• Business symmetry, upside and downside for the utility
• Can apply to just delivery or supply• Low-moderate-income benefits
• Predictable bill and access to home upgrades
• Focus on improving the cost of service with shared savings potential • Optimized DSM
• A customer centric portfolio approach
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• Focus on home performance and T-stat optimization• Use smart T-stat data to remotely target homes that are best HP candidates• Direct install model for optimized smart T-stats and advanced water heater controls• Use home performance incentives (insulation, air seal, duct repair, HVAC) to drive
projects that make homes better candidates for pre-cooling• Scale control platform to aggregate DERs (t-stats, batteries, solar, EV’s, water
heaters, pools, etc.) • Expanded behavioral/education/outreach
• Claim attributable savings• Tailored offerings to new construction, MF, limited income
FUTURE DSM PLANS ALIGN NICELY WITH SUBSCRIPTION
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SUBSCRIPTION PRICING CAN HELP ALIGN USE WITH ARIZONA’S CHANGING RESOURCE NEEDS
Value of energy saved is not the same for all hours of the year
High Value DSM Helps lower peak demand; fill midday valley; flatten steeper ramp
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BUSINESS MODEL CONSIDERATIONS
Investors give higher valuations to companies witha subscription business than those withtransactional sales, analysts say.
Investors Business Daily, December 2018
https://www.zuora.com/resource/subscription-economy-index/
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THANK YOUhttps://www.navigant.com/insights/energy/2018/should-utilities-offer-subscriptions
https://www.cooperative.com/topics/power-supply-wholesale-markets/pages/innovations-in-pricing---energy-service-subscription-pricing.aspx
https://www.utilitydive.com/news/utilities-see-opportunity-in-energy-as-a-service-offerings/544973/
https://www.navigantresearch.com/news-and-views/primer-subscription-pricing-for-regulated-and-competitive-energy-providers
https://www.utilitydive.com/news/pge-sce-sdge-pursue-subscriptions-time-of-use-rates-to-drive-more-cali/545907/
https://renewable-energy.energycioinsights.com/cxo-insights/energy-service-subscription-plans-a-winwin-for-utilities-and-customers-nwid-464.html
https://www.navigant.com/insights/energy/2018/should-utilities-offer-subscriptions
https://www.cooperative.com/topics/power-supply-wholesale-markets/pages/innovations-in-pricing---energy-service-subscription-pricing.aspx
https://www.utilitydive.com/news/utilities-see-opportunity-in-energy-as-a-service-offerings/544973/
https://www.navigantresearch.com/news-and-views/primer-subscription-pricing-for-regulated-and-competitive-energy-providers
https://www.utilitydive.com/news/pge-sce-sdge-pursue-subscriptions-time-of-use-rates-to-drive-more-cali/545907/
https://renewable-energy.energycioinsights.com/cxo-insights/energy-service-subscription-plans-a-winwin-for-utilities-and-customers-nwid-464.html
LON HUBERDirector(928) [email protected]