Customer experience drives NV Energy’s overall strategy

If your doubt lingers about the direction the electricity industry is headed, hopefully for your sake you’re close to retirement. That direction is towards the customer end of the production and delivery value chain and away from “big iron,” large centralized power stations and long transmission lines.  

But while the direction is unmistakable, the velocity isn’t. And the change is uneven across different regions and utilities, with an overall vector that is still a bit unclear. Any student of this industry knows that we’ve been through several iterations of electric utilities getting closer to their ratepayers over the last 50 years—the interest invariably coincides with low electricity demand growth (less need for centralized assets) and/or regulatory pressures from abnormally high electricity prices.   

No question we are in a prolonged period of low and even negative electricity demand growth. This time, however, there are several other important drivers – renewable energy costs which are now on par with, or lower than, fossil energy prices, even without subsidies (although still not compensating for the intermittency); and digital data and communications technologies which facilitate instantaneous interactions with tens of thousands of customers.  

One investor-owned utility embracing this path at a rapid pace is NV Energy, Las Vegas, Nev. In fact, it is blazing a trail for the rest of the industry. As you might suspect, the foundation for the shift isn’t hardware; it’s data—lots of data—and all the things you can do with data to enrich the customer experience, save ratepayers money, and avoid investing in big iron, in the short term anyway. It’s called PowerShift, and the best way for readers to think about it is a shift from big iron to the customer’s onsite energy infrastructure.

Why Nevada? Before diving into the specific programs and activities, it is appropriate to ask, why Nevada? One of the foundation reasons is that NV Energy had the foresight several years ago to install “smart meters” at all 1.3 million customer locations. That’s an advantage.  There’s also a regulatory component (naturally, NV Energy is a regulated utility) and an ownership component.

NV Energy is owned by Berkshire Hathaway, one of the most valuable companies on the planet, founded and managed by Warren Buffett. More specifically, Berkshire Hathaway Energy owns NV Energy, along with PacifiCorp, Pacific Power, Rocky Mountain Power, Kern River Natural Gas, MidAmerican Energy, Northern PowerGrid, AltaLink, BHE U.S. Transmission and BHE Renewables.  

Anyone who has noticed Berkshire Hathaway HomeServices signs knows that the holding company also is big into real estate. Just what this impact might be on designing demand-side management programs and home energy options is anyone’s guess, but the smart money would assume there are important synergies.  

NV Energy also is confronting a regulatory climate pushing towards customer choice of electricity supplier.  Nevada voters already passed an “Energy Choice Initiative” in 2016 and the initiative will be up for a second constitutionally required vote at the end of 2018. At the same time, regulators have denied the utility’s recent plan to acquire an existing combined cycle located in adjacent Arizona. So, conscientiously managing demand downward gets the utility involved with its customers, addresses the regulatory threat, and avoids capex upstream in the system.

Catering to the customer? According to NV Energy managers and executives interviewed for this article, the enabling piece of the customer experience are the smart meters installed essentially for every customer, all 1.3-million of them. But the crown jewel is the smart thermostat program, the largest two-way home thermostat program in the country, according to NV Energy.    

Although the program began in 2006, the latest thermostats take customer data every 15 minutes, which is then plugged into a model that calculates energy consumption patterns specific to each home—based on such parameters as air temperature, fan operation, compressor load, and local weather data. In essence, the model creates a comfort profile for that customer’s premises.  

If the smart thermostats are doing all the work, then the smart phone interface (Fig 1) gets all the glory. “We had to design an end-to-end data and information system,” Senior Vice President of Renewable Energy and Smart Infrastructure Pat Egan said, “and because the interface competes in the mind of the customer with retailers and other apps on the device, it better be comparable.”  

Traditional utility benefits were the natural draw to this customer-centric solution—as the company provided thermostats that can be remotely controlled to help balance demand with generation on hot summer afternoons when temperatures in Southern Nevada can go above 110F.  

Although each demand response (DR) participant has the opportunity to override the automatic adjustment, NV Energy has the ability to adjust the temperature setting of customer thermostats to cycle their air conditioners on and off for short periods of time during an “event” (as it is called) on days when peak demand approaches the utility’s maximum ability to meet that demand.  This typically occurs during the afternoons between May and September.  

With nearly 100,000 customers participating, NV Energy can shave demand to the equivalent of about 200 MW, the size of a small-to-medium fossil unit. In turn, NV Energy reports that customers save an average of 11% to 13% on annual heating and cooling costs, or approximately $100 annually.  

The smart thermostat is free, and the participant receives a performance-based payment, based on comparing customer event load reductions to a customer-specific baseline that is comprised of the three highest load days out of the prior five non-curtailment days. And while the savings and the rebate may be modest, NV Energy notes that the mobile phone app “has driven the participation rates.”  

A new feature just being rolled out is pre-cooling. The customer premises can be pre-cooled to dampen the effect of the rise in temperature during the curtailment event.

The difference in the current program, compared to the one started in 2006, is that it is now under active management, and in real time. In earlier phases, the utility was dependent on the customer programming the thermostat; about half of them could be counted on to do so. The old technology/approach never could prove it saved energy for customers year-round. Importantly, the new program optimizes the customer’s HVAC year-round. Thus, it’s more of an optimization service that does not rely on customer activity driven by high price signals.  

The benefits of the new program are far-reaching (Fig 2). When combined with other elements of the DR and distributed energy resource (DER) programs, NV Energy can actively manage 260 MW, or 3% of its peak demand.

New Maytag man? The smart thermostats are also able to monitor the performance of the HVAC system. With the right software, NV Energy can then perform predictive analytics and send alerts about when the unit needs service or repair, filters cleaned, etc. Linked to this capability is NV Energy’s high- efficiency AC unit replacement program.  

The smart meters have functionality which disaggregates data such that electrical signatures of individual appliances can be broken out and analyzed. This allows NV Energy specialists to make recommendations and even conduct remote energy audits, and combine that intelligence with a field visit to the premises.  

Which of course lead to NV Energy’s offer of free home energy audits, conducted by certified energy professionals and typically completed in one hour. While NV Energy was required to offer these audits by legislation, over the past year, the utility converted this into an opportunity to “touch” customers. Having reams of data on comparable homes also allows NV Energy to alert customers when their electricity usage is out of line with the aggregate characteristics of similar dwellings.  

Solar photovoltaics systems and electric vehicle hook-ups will be added to the program in time, noted Michael Brown, manager of Demand-Side-Management Services.  

Much of the data necessary to offer the services is stored and analyzed “in the cloud.” EcoFactor, a cloud services firm, provides data analytics and optimization services for residential smart thermostats.  Another cloud provider, Bidgely, provides smart meter data analytics. While the customer owns its data, NV Energy is, contractually, the steward of it.  

Customers are able to access their data, see how much they have spent to date in a given billing period, their kilowatt-hour usage to date, and other information.  A Demand Response Management System (DRMS), built to NV Energy’s specifications and run on its IT infrastructure, serves as a central hub to orchestrate the operation and integration of customer, program, device, and grid location information.  

The information from all the customer data also helps NV Energy better monitor and manage the distribution circuits where these customers are located.

Monumental learning curve. Obviously, there are numerous challenges to overcome, both in transforming a “big iron” culture to handle individual customer services, and in hardware and software development (Fig 3). “At one point, we had 18 different types of technologies in the field—two way switches, one-way thermostats, firmware, and software,” Brown observed, “and we had to streamline the equipment and learn how to integrate the software and maintain it.”

The customer communications challenge is also serious. NV Energy had to educate its ratepayers on how to use the smart thermostats.  According to Kelly Schackmuth, manager of DSM Customer Engagement, “the goal is to make it as seamless to the customer as possible.” Different messages resonate with different customer classes. But keeping them retained and engaged requires frequent communication, such as messages sent the way they want to receive them—email, text, voice mail, etc.

The future is now. None of these challenges appear to daunt NV Energy. In fact, it is pushing DR and DER further. Coming programs will leverage lessons learned from:

      • A partnership with homebuilder Pulte in which 185 LEEDs certified (platinum) homes were built, each with 2-kW solar PV on the roof, demand responsive thermostats, smart meters, and automated intelligent agents. An ongoing pilot is testing the integration and control of 8-kWh Li-ion batteries at 10 customer sites.

      • A statewide pilot that tested new dynamic rate, such as critical peak pricing (CPP) and enhanced time of use (TOU) pricing to further motivate demand response.”  

A variety of programs are also available for small, medium, and large commercial and industrial customers. One of the more innovative opportunities for commercial customers are agreements in which NV Energy sponsors investments in energy-efficiency upgrades and services in return for demand-response event participation. This provides more value for customers than standard cash rebates for DR event incentives.  

What NV Energy’s transformation represents for the industry at large should not be under-estimated. Designing, constructing, operating, and maintaining a 260-MW generating unit, and delivering the electricity to thousands of customers, is quite different from avoiding the need for 260 MW by actively controlling assets at the customer premises kilowatt-hour by kilowatt-hour.

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