Solar Electric Power Association (SEPA) - Paul Alvarez (Wired) Interview

Guest Interview with Paul Alvarez of Wired Group

   Can you tell us about your experience in DR and smart grid?
    I’ve been in the utility industry for over 10 years. I started out by developing energy efficiency and
   demand response programs and rates for residential and commercial customers at Xcel Energy. A
   standard practice in EE/DR program development is measuring costs and benefits, so when I left Xcel
   Energy for consulting in 2006, the jump to evaluating smart grid deployments was not too difficult.

In the past two years, I have led teams that evaluated two large smart grid deployments - Xcel Energy’s SmartGridCity™ project and Duke Energy’s full Ohio deployment. My teams quantified the costs and benefits of various smart grid capabilities, as well as associated cost and benefit drivers, and the effectiveness with which utilities were employing smart grid capabilities to maximize the value of smart grid investments.

What challenges have you faced as a DR professional within your organization and within the industry?
I think engaging customers – particularly residential and small-to-mid-sized commercial customers - remains the biggest challenge for all of us in demand response. Utilities have done a great job providing customers what they’ve asked for (e.g. inexpensive, relative to the value, power and high reliability). In fact, they’ve done such a great job that customers don’t give their energy use a second thought. Getting busy customers to think about and manage their energy use when they haven’t had to in the past is, I believe, one of the greatest challenges a professional marketer will ever take on.

What changes have you seen in the industry as it relates to DR and EE over the last few years?
Well obviously advanced metering and home area networking are opening up huge new opportunities for demand response.

Advanced metering facilitates the time-of-use pricing that will expose residential customers to the same supply and demand dynamics that utilities face, and any economist will tell you that the resulting price transparency is critical to improving the efficiency of electricity markets.

And home area networking – and in particular thermostat controls – provides customers with the tools they need to manage time-of-use prices conveniently. Given the challenge of engaging customers in energy management, making demand response easy for them is critical to time-of-use pricing adoption and energy usage behavior change.

What do you expect to be the biggest challenge with implementing DR in the next decade?
I think the biggest challenge involves the marketing of time-of-use pricing and DR to customers. Market segmentation and messaging will be critical; some customers will be motivated by savings opportunities, others by being part of a shared community effort, and still others by the environmental benefits. We need to get time-of-use pricing and demand response to where recycling is. Ten or fifteen years ago few people recycled. Today, if I had some friends and neighbors over for a barbeque and didn’t offer a separate waste can for recyclables, I’d be a pariah! Recycling offers a lot of parallels to time-of-use pricing – including the convenience factor (curbside recycling) and the peer pressure factor I just mentioned – that demand response and consumer marketing professionals may wish to consider.

What advice or guidance would you give to young professionals who are considering a career in demand response and smart grid?
Well as you might expect given my answers to the questions so far, I think marketing is an under-appreciated discipline in the utility sector that offers a lot of opportunities for people who are creative and courageous.

If you’re analytically inclined, economics and mathematics offer opportunities too, as there is so much we don’t know about time-of-use pricing - from the size and mitigation of free ridership to the relationship between time-of-use incentive size and participant recruiting/retention costs.

And of course there are significant software development opportunities too (e.g. helping customers manage their home area network remotely from their smart phones).

But regardless of which discipline one chooses to enter the demand response industry, the opportunity to make a real impact – reducing electricity costs for customers or environmental impacts for society – should attract some of the best and brightest talent our country can produce.

Paul Alvarez is President of the Wired Group

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