duke energy: bridging the gap between smart meters and users


DUKE ENERGY: BRIDGING THE GAP BETWEEN SMART METERS AND USERS

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TABLE OF CONTENTS

PROJECT CONTEXT & SCOPE

Students from the Institute of Design and Rotman School of Management come together to create consumer solutions for Duke Energy

EXECUTIVE SUMMARY

This project aims to bridge the gap between the smart meter technology and current user behavior

MACRO TRENDS

Industry, technology, environmental and behavior trends all influence the development of the smart grid

BUSINESS CONTEXT

Potential solutions must be a match with Duke Energy’s current capabilities and goals

USER CONTEXT

Potential solutions must address current user behavior and needs

STRATEGIC DIRECTIONS

Solutions cluster into five higher level directions

STRATEGIC DIRECTION EVALUATION

Duke must select which directions are the best fit to move forward with now

CONCEPT ILLUSTRATION

User values and business values are illustrated in more detail across two specific concepts

APPENDIX

TABLE OF CONTENTS

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Students from the Institute of Design and Rotman School of Management come together to create

consumer solutions for Duke Energy

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This project aims to bridge the gap between the smart meter technology and current user behavior

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Industry, technology, environmental and behavior trends all influence the development of the smart

grid

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Potential solutions must be a match with Duke Energy’s current capabilities

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Potential solutions must address current user behavior and needs

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Solutions cluster into five higher level directions

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Duke must select which directions are the best fit to move forward with now

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EXECUTIVE SUMMARY

The electricity industry is receiving a lot of pressure to change. The grid infrastructure for electricity has evolved very little in the past century. But today, with growing concern for the environment, difficulty in meeting demand, and a government stimulus plan for infrastructure development, utilities are compelled to look for efficient and conscientious opportunities for delivering electricity. New technology is also making it possible for consumers to become more involved in their energy consumption.

Utility companies are responding. Duke Energy, has made conservation a strategic imperative. They are in the process of updating infrastructure and engaging consumers in conservation initiatives with new technology. An advanced metering system enables Duke to monitor energy consumption accurately and provides consumers with access to real-time consumption and pricing information. In return, Duke is hoping for user conservation behaviors to meet strategic aims.

PROJECT CONTEXT & SCOPE

This preliminary concept report has been written for Duke Energy (Duke) and its internal stakeholders. This report highlights a contextual understanding gained through the analysis of the macroeconomic environment, the Duke Energy annual report and interviews with residential electricity users in Chicago and Toronto. Using publicly available information, this report is intended to highlight the strategic positions developed to assist Duke with successfully bridging the gap between Duke’s smart meter technology and residential user behavior.

Students from IIT Institute of Design and University of Toronto Rotman School of Management have worked together to identify potential business opportunities and develop strategies to enable Duke to engage consumers in conservation and capitalize on the added information provided by the introduction of the smart meter. The team developed strategies from a deep understanding of user needs, Duke’s financial context and industry trends. Innovation methods developed by the Institute of Design combined with business analytical frameworks from Rotman School of Management were used to develop strategies that served both residential user and Duke’s needs. Our scope was to develop small scale qualitative wins for the company that could be taken to the prototype stage for futher iteration.

Utilities are providing consumers with usage information through the smart meter and expecting conservation behaviors to return. But, consumers are more than their data.

consumption and pricing data

conservation behaviors



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MACRO TRENDS

With the responsibility of generating energy for 4 million people in the Carolinas and employing over 18,000 Americans, Duke has a responsibility to take action in the midst of economic, environment and social pressures. While these macro trends do not solely drive strategy, it is important to understand the constraints and the drivers behind some of the choices that Duke needs to make.

Aging grid infrastructure cannot support the electricity needs of the 21st century.The current grid has effectively powered the United States for more than a century. As energy demand increases and carbon emissions are prescient, the infrastructure is ill-equipped to meet the needs of 21st century generators and consumers. With demand for electricity expected to grow 30% by 2030, the antiquated energy infrastructure can neither carry the increasing volume of energy nor generate as fast as consumers deign to consume. Governments and utilities alike recognize the need to upgrade and modernize the infrastructure. Simultaneously, utilities recognize that building capital infrastructure is not the only solution. With current innovations in the energy sector and the assistance of government grants, the United States is creating the opportunity for electricity to be more reliable, affordable and better for the environment.

There is an increasing concern about the impact electricity consumption has on the environment.Special interest groups have been effective in creating public concern about the impact fossils fuels have on the environment. This new awareness has spurred policy makers to increase regulation on carbon emissions and create new incentives for renewable energy generation. At the same time, we are becoming increasingly aware that efficiency and conservation are important aspects of green energy. Breakthroughs in efficiency and changes in consumer behavior slow down energy demand growth, allowing more time for renewable energy technologies to mature.

Consumers are more than their data. While understanding current consumption will inform consumers of their use, this does not guarantee that they will alter their behaviors for the future. Many people do not understand their electricity system or understand their impact on the system as a whole. In addition, conservation feels like a sacrifice that compromises their quality of life. In order to engage consumers in conservation, Duke must provide consumption data meaningfully and leverage alternative ways of framing conservation.

The Institute of Design and Rotman School of Management has worked together to create business opportunities for Duke Energy to engage consumers in conservation. The teams developed these solutions through a process of industry, business and user research, insight analysis, and idea generation. These ideas were used to develop five strategic directions for Duke to pursue conservation with consumers successfully.



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The current recession has consumers concerned about energy costs.The recent recession affected nearly every industry, and electricity is no exception. Budget conscious consumers are postponing big purchases, trading down, and buying less. This trend creates an interesting and useful alignment between the conservationists and the thrifty that may be sustained given the current economic forecast.

Smart technology is creating new opportunities in the electricity industry.Smart technologies are technologies that enhance and create new interactions between consumers and their devices. Devices themselves are able to collaborate amongst themselves to provide more valuable information to the user. Users no longer expect information to be delivered in an excel file, but in meaningful visualizations. Moreover, networked smart devices create smart systems that are able to learn and self-correct as situations arise. Within the context of energy, manufacturers like the Whirlpool Corporation are working to create “smart grid compatible” appliances to be able to help consumers become more energy efficient. Focused on a total solution, other companies are racing to release the winning smart home management system to be able to revolutionize home energy use.



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BUSINESS CONTEXT

Duke is a publicly traded company in the business of providing regulated residential energy generation and distribution to consumers primarily in the Carolinas. Founded in 1916 and operating in a recently deregulated industry, Duke confronts a highly regulated operating environment. With approximately 27,000 megawatts of generating capacity, Duke operates in a service area that covers over 50,000 square miles with an estimated population of 11 million. Providing service to approximately 4 million residential, commercial and industrial customers, Duke operates 151,600 miles of distribution lines and a 20,900 mile transmission system. Duke also provides natural gas transmission and distribution to 500,000 customers in southwest Ohio and northern Kentucky.

“Duke is changing out century-old distribution systems to a new state-of-the-art digital two-way communication system,” explains Tim Abbott, a Duke Spokesperson. Duke is one of the first companies in the United States to implement smart grid technology, and has received regulatory approval to deploy more than 700,000 smart meters in Ohio over the next five years and is expected to expand this deployment to 800,000 smart meters in Indiana. In addition, Duke has also applied for $200 million in Department of Energy smart grid stimulus grants, which would help them to install the meters about two years faster than otherwise planned. The traditional cornerstone of all utilities is providing reliable energy. Duke is no different and this overarching criterion underscores Duke’s strategy. To overcome some of the challenges inherent in a utilities business model driven by providing reliable energy, Duke is pushing quickly to make changes as demand is out pacing asset acquisition. Understanding these business challenges will provide specific criteria for any solution to be relevant to Duke.



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Source: Duke website

BUSINESS CONTEXT (CONT.)

1. The flexibility of Duke’s business model is limited by the regulations of the residential electricity market.Duke’s primary value proposition is providing regulated residential energy generation and distribution activities that create reliable energy. As with the legacy of most utilties, Duke’s rates are set by government regulation and the business model is similar to any large utility. Duke is guaranteed a set return on assets for the generation and distribution of power. Since 77% of Duke’s business is regulated and 77% of earnings are generated in the electric and gas market, Duke has very little room to improve profit margin. This suggest that the Duke business model must concentrate on asset turnover as a viable option to meeting corporate aims.

The public perception of utility firms indicated by our research suggests that the public perceives large utilities as bureaucratic legacy institutions that are not relevant to the customers daily routine.

Criteria for solutions: feasible within industry regulations

Duke operates in a heavily regulated market.Duke’s revenue and net income are primarly from the U.S. domestic electric and gas markets.



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2. Capital investment is an expensive solution.Duke’s stated strategic goal is to modernize infrastructure by replacing the analog grid with a digital smart grid to increase reliability and energy efficiency and to reduce costs. However, generating and distributing energy is a capital intensive business. With regulated residential rates, utilities need to carefully manage capital investment in order to maintain shareholder value. Not only must Duke forecast energy demand, Duke must also manage the seasonality of the demand and as result cannot simply add infrastructure to solve the problem. With pressures of shareholders and government incentives in the balance, Duke must carefully consider each investment and provide return in order to deliver value.

Criteria for solutions: provides return on investment

Duke’s main source of generation is traditional coal.Coal power plants are capital intensive to construct. Long term returns on charged rates are set by the government.

Source: Duke website



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3. Conservation is a primary strategy to meet energy demand. One compelling way for Duke to provide reliable energy to meet consumer demand is for Duke to invest in infrastructure while simultanously encouraging consumers to reduce and moderate demand. Duke aims to accomplish this goal in part by generating revenue through residential energy conservation while building a relationship of trust with customers. As a result, conservation represents a key component to Duke’s strategy and Duke considers conservation as the “fifth fuel”. This strategy is in line with current research on the effects of conservation. One study suggests that the impact of U.S. consumer conservation could reduce energy consumption by 23% or saving $1.2 trillion in infrastructure improvements as a result of reduced demand. Further, in studies conducted by McKinsey & Co. conservation programs consisting of information campaigns integrated with conservation tools save approximately 2.7% KW/h per family per year. Not only does investment in conversation result in saved costs for Duke, but also helps Duke be a part of positive environmental change.

Criteria for solutions: Promotes conservation and efficiency

Profit Margin is not the only way for Duke to improve returns.Since profit margins are relativily fixed, Duke by not investing in capital assets, can improve asset turnover through conservation and consequently hold or increase return on assets.

Source: Stickney, Brown & Wahlen



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4. An alternative to capital intensive infrastructure is seeking out conservation.

On average conservation programs cause families to reduce household KW/h consumption by 2.7% a year. In the absence of the conservation program Duke would have to generate this extra electricity at a cost of approximately $15 a year per household if the national averages are used as a proxy. The average cost to implement conservation programs that result in a 2.7% reduction in household consumption run about $7.50 a year per household to implement and maintain. This results in a saving of $15 in generation costs and an expenditure of $7.50 on programs for a net benefit to Duke of approximately $7.50 a year per household.

Criteria for solutions: Program should cost less than $15 per family a year to implement.

Cost BenchmarksTwo and half cents per KWh is the benchmark for required return on any conservation effort. Source: Energy and Energy Policy by Hunt Alcott and Sendhil Mullainathan March 19, 2010

Source: McKinsey Analysis



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5. Duke’s numerous energy efficiency and conservation programs are fragmented and confusing for the residential consumer. Introduction of programs must address market contraints.

Duke is confronted by numerous challenges in implementing effective energy conservation initiatives. Although Duke has numerous energy efficiency and conservation programs they are fragmented and confusing for the residential consumer to navigate.

In addition, a July 2009 McKinsey study titled “Unlocking Energy Efficiency in the U.S. Economy” proposes general market characteristics that confront all organizations who have a mandate of energy efficiency which must be addressed by a Duke program. The McKinsey characteristics include:

1. A large initial outlay of capital with returns that occur over long periods of time.

2. Fragmented energy efficiency opportunities exist across an economy. Collectively net present value projects exist, but on the individual level the projects are low priority and no technology has been able to capture the total effect. The smart meter presents a potential opportunity for data gathering that may mitigate fragmentation.

3. The consumer has low awareness and low attention to energy programs. Utilities like Duke primary strategic focus is reliability first, not energy efficiency or conservation. Residential consumers are focused on other priorities in life. Businesses have not existed before that focus on energy efficiency on a large scale. This presents a potential opportunity for Duke.

4. Since reducing consumption is not a product it is difficult to measure. Saving energy is an abstract concept because the consumer must be able to differentiate what would have happened had they chosen differently.

Criteria for solutions: accessible to consumer

McKinsey has oulined some responses to the fragmented effort toward conservation.Programs that are implemented by Duke must operate in the context of the fundamental attributes as identifed by McKinsey.

Source: McKinsey analysis



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6. Smart Meters can provide Duke with more consumer data.Duke can benefit from an alignment of programs, partnership with data management firms and the measured use of the smart meter. The introduction of the smart meter represents an opportunity to track near real time data and enhance the programs Duke already has in place.

Criteria for solutions: leverage smart meter capabilities

7. The Incentive for Duke to invest in energy conservation programs, wrapping it up.So why would Duke not just find more capital , build more infrastruture, charge the normal rate of mark up and earn a healthy rate of return? Simple. Years of infrastructure neglect means the cost of building and operating new infrastruture far exceeds Duke’s regulated allowable mark up on each new assets. It would take many years for Duke to begin to earn a reasonable return off any new assets constructed. Public money is needed to build new infrastructure which potentially could mean a return to state owned utilities.

So although Duke is motivated by profit, profit can only be created by increasing the efficiency of current assets or by reducing the variablity in demand. Why the variability in demand? Because the infrastructure is operating at near capacity regularly in peak months, any surge in demand can cause a collapse of the system. Since Duke’s primary business model is reliable energy, Duke must maintain enough generation capacity to meet demand surges. That means when demand is forecasted to exceed traditional power generation sources Duke must turn on alternative sources of power. The cost of turning on the alternative sources (start-up, wear and tear) far exceed the normal operating costs experienced by the systems that are routinely operating.

Duke, like most industries, is focused on reducing variablity in demand. The 2.7% reduction in household use is enough to move Duke back from the brink of having to turn on expensive generation plants that eat into profit margins. So if Duke can reduce variablity and keep these plants off line then profits are actually higher than if they had been turned on. Hence the study by McKinsey that suggested, on average, conservation programs costing under $15 per household actually increase profit margins for utilitity companies. Duke is no exception. Duke has a strong incentive to spend cash on conservation programs over new capacity or expensive back up capacity in order to maintain profit figures.



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USER CONTEXT

Duke is taking active steps to manage consumer demand, however change rests in the hands of consumers. Our research suggests that the public perceives large utilities as a bureaucratic legacy institution and are not relevant to the daily lives of consumers. However, with the implementation of new smart technologies, and in the midst of increasing economic, political and environmental pressures, we should recognize that any lasting change to energy consumption habits must speak to the consumer.

The user case: 7 key insights

Put simply, the current system is overused and overtaxed, and short of large asset expenditures, there is little the utility can do to support the increasing demands. As a result, utilities are looking to the consumer to curb consumption to relieve stress on the system, particularly during peak hours when demand is highest. In order for this plan to work, the utilities must empower the consumer to adopt the “right” or desirable consumption behaviors. One approach utilities are taking involves supplying consumers with smart meters, devices that track real-time fluctuations in energy prices to discourage peak-hour use, when prices are highest and the system is most strained. Therefore, the true value of the smart meter lies in its ability to shift consumption behaviors rather than the information it provides. As energy transitions from a ubiquitous utility to a severely constrained resource, users will require meaningful design solutions to help them make smart choices. Getting to those meaningful designs requires a deep understanding of user values and the current user experience. So what is the user experience? What are consumers really thinking and feeling? After conducting 7 in-home interviews and 4 expert interviews, we arrived at 7 key insights that capture the current user experience.

7 Key User Insights

1. People need context to understand energy use

Currently, consumers understand their current energy consumption relative to their previous energy bill. Therefore, a person who averages a bill of $150 will not question their energy use unless the bill has fluctuated wildly, and especially if it is more. As a result, many consumers feel their consumption is “average”, unaware of what others in similar households may be paying. Highlighting a self-serving bias, research has shown that consumers are more apt to justify slight spikes and dips in their electricity bill rather than shifting future behaviors. For example, when asked about price discrepancies in bills, most participants made claims that they were home more or put on holiday lights, when in reality, the participants had no real idea what actually increased their energy consumption.

User value: Provide meaningful context that extends beyond personal use

“It looks like August to August a year later is about the same; it’s a little higher. It’s kilowatt hours, so I guess I must have been home more, either that or I turned my temperature down or something.”



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2. People do not see their personal role in the system

“Someone else will call” is a sentiment that many research participants expressed when we discussed power outages. Consumers have grown conditioned to rely on their fellow man to take care of system breakdowns. In cases of power outages, consumers either expect some other particularly engaged neighbor to make a phone call to report a power shortage, or that the utility will just know. While these sentiments show an implicit trust consumers have in the community or the technology system, this trust also further reduces the consumer’s already limited interaction with their utility company. Outside of paying a monthly bill, few consumers have any reason to engage with the utility company. As a result, a personal relationship between consumer and utility is nearly non-existent. Consumers remain detached and distant, as they are given little opportunity to identify with their role in energy use.

User value: Provide users with personalized feedback

3. People do not trust utilities

A tenuous relationship with the system compounded with a lack of transparency has created a culture of distrust amongst users. It is only recently that the utilities are interested in offering consumers a window into a consumer’s energy use to provide an explanation of how consumption directly impacts bills. More familiar to consumers is the process of relying on the meter reader to accurately read and capture use information. Moreover, consumers’ inability to read their own meters and translate meter information into cost of use fed anxieties and skepticism. An “us vs. them” culture emerged as it remained nearly impossible to verify or contest charges. This partisan relationship is further weakened by the disjointed service experience that customers may have when interacting with their utility. Without a designed and service oriented customer relations department, consumers have no real advocate and feel alone in fending for their concerns.

User value: Make system more transparent and accessible to Consumer

4. Consumers’ mental states are too taxed to take on another ‘cause’

People are constantly being bombarded with messaging of some kind. Our mental capacity to support the information influx is limited. As a result, people are selective in how they devote their time and energy. By appealing to already existing or established user values, the utilities can relieve the user of the responsibility of adopting a new set of activities and interests. Despite current messaging, conservation does not need to be driven solely by social activism. In fact, most participants showed minimal response messaging driven by environmental or social interests. In fact, even consumers who identify with “green” ethos are not driven to buy energy-saving appliances or otherwise solely because they are good for the environment. Clearly, consumers need more than good intention to change daily

“Even if I read what all these charges meant, it doesn’t register for me how I could possibly change any of those charges. I guess, you could change them by using less electricity, but I don’t even know which item on here is saying specifically, ‘This is how much electricity you used.’ It doesn’t make sense to me. I don’t get it.”

“I understand there is this utility board that will do the fighting for us. I believe in those kinds of watchdog organizations. On the other hand, you hear all kinds of things about it getting politicized. You’re not really sure you can trust people on the board. You don’t know what kind of backroom deals go on. It’s really hard to sort through the mess.”

“There is only so much room in my head, and if I’m going to pay that close attention to issues, believe me the utilities are way down on the list. I’m far more concerned with things like health care and jobs and the economy.”

“What most people relate to is ‘What’s in it for me.’”



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habits. How might the utilities leverage already-existing user values to encourage conservation?

User value: Leverage already deeply-held values, interests, activities

5. Conservation equals sacrifice

Whether it means using less electricity, or swapping incandescent light bulbs for CFLs, conservation requires users to make concessions and compromises. Nearly all participants have either never tried, or have tried and abandoned CFLs, because of their undesirable appearance and “ugly” light. Similar to dual-flush toilets, where users end up flushing twice for more strength, green electricity solutions often feel like weaker, watered-down versions of experiences that we enjoy. Conservation should not feel like a sacrifice. Energy-saving solutions should feel like the preferred choice.

User value: Frame conservation as a value proposition

6. Mental model of energy consumption does not apply to modern technology

Everyone remembers hearing their mother or father yell, “Shut the lights when you leave the room!” Consequently, many users perceive lights as a primary source of energy consumption, and are quick to shut off the lights when pressed to conserve electricity. However, the past 50 years of changing energy use, and an onslaught of energy-sucking technologies energy conservation needs have gone beyond simply turning the lights off. When was the last time your father yelled, Shut down that laptop! or Unplug that iphone? Whether it is because users have grown so reliant on these technologies or find it impractical to unplug each and every device, they are not recognizing these tools as significant sources of energy consumption.

User value: Develop language and build awareness around modern tools and technologies

7. Kilowhat? The measurement of electricity feels foreign to consumers?

Energy is measured and described differently from how we use energy. In our research, participants could not describe what kilowatt represented in terms of use and therefore could not convert their use into the money they spent on energy. More aptly, energy is not meaningful because our mental models limit our understanding. If units of electricity use could be measured in something more meaningful, consumption becomes more meaningful. If consumption is more meaningful then consumers will be able to make the mental connection between use, consumption, conservation and savings.

User value: Measure use in other, more meaningful, terms

“I did try to put one of the energy efficient bulbs in it [lamp], but I haven’t found one that gives me enough wattage, and my eyes are kind of weak.”

“I remember hearing my father scream, ‘turn the lights off,’ and I am good about that. But unless I leave for a vacation, I don’t shut down my computer. I use it to often too many times a day to turn it on and off.”

“Electricity is more or less incomprehensible. I don’t look at it with any thought that I’m going to understand what’s happening. I think I can decipher some things on a my telephone bill, but on the electric bill, well it’s the electric bill.”



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STRATEGIC DIRECTIONS

After understanding the needs and behavior of the users and the limitations and opportunities of Duke’s business we can begin to develop corresponding solutions. By clustering the solutions into five higher level strategies, Duke is able to stitch smaller solutions together and thereby strengthen them. It is also easier for Duke to evaluate the solutions at the strategy level than at the granular concept level.

Provide the right data in the right place

Duke as a trusted translator

Provide the right data in the right place is about Duke helping their users to change their electricity consumption patterns, by translating data into an actionable and accessible information for them.

Solutions that would help Duke achieve this goal would provide users with the context they need to make electricity usage decisions in the exact moment that they need to make their decision. Solutions included in this strategy are about maintaining a low barrier for consumers to engage in their electricity consumption and/or conservation with convenient, accessible and relevant solutions.

Solutions fall into three categories, payment, products and services and communication. Below are a few examples.

Payment:• Lump Sum electricity: by selling electricity like cell phone minutes users would have a clear sense of how much electricity they were supposed to use each month.• Pay per use: by bringing the moment of payment closer to the moment of use, consumers would be reminded of the cost of electricity.

RAISE THE STANDARDS OF THE INDUSTRY

ELEVATE THE VALUE OF THE DATA

PROVIDE THE RIGHT DATA, IN THE RIGHT PLACE

CELEBRATE THE BEAUTY OF CONSERVATION

EMBED CONSERVATION INTO EXISTING CONSUMER VALUES

consumption and pricing data

Electricity consumersconservation

behaviors



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• Tiered use: by changing the amount per KWH in accordance to the total amount consumed, users would be encouraged to lower their overall usage to also lower their cost per KWH.

Products and Services:• Appliance leasing: by leasing appliances to consumers, Duke would increase the amount of eco-appliances in their consumer’s homes by lowering the price barrier to replacing large costly appliances.• Wireless appliance censors: by creating a wireless attachment for electric device plugs, users could have the option to close the circuit of many devices at once, remotely, thus lowering the vampire draw.

Communication:• Use widgets: by creating an app for phones/computers or even TVs that provided in place reminders of use paired with suggestions for how to change behavior, users wouldn’t have to be responsible for remembering to conserve.• Metrics that matter: by communicating KWH in measurements that make sense to users, like trees per minute or cents per minute, consumers would be more likely to relate to their consumption.• Reference points: by providing similar comparisons, like the average usage of households like yours, or the usage of your most efficient neighbor, consumers would be able to more accurately gauge their usage.

This strategic direction best addresses the following business and user criteria:

Business

• Feasible within industry regulations

• Promotes conservation and efficiency

• Accessible to consumer

• Leverage smart meter capabilities

User

• Provide meaningful context that extends beyond personal use

• Provide users with personalized feedback

• Make system more transparent and accessible to consumer

• Frame conservation as a value proposition

• Develop language and build awareness around modern tools and technologies

• Measure use in other, more meaningful, terms



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Elevate the value of the dataDuke as the a platform

Elevate the value of the data is about Duke helping users gain unexpected and desirable value from their electricity usage data.

Duke is in a position to facilitate the development of a consumer profile based platform that would connect consumers with related third parties and industry expert services. This will allow Duke to extend their services without increasing operational capabilities by partnering with strategic third parties. It will be extremely important to be sensitive to consumer privacy and information security potentially by creating a opt-in service to maintain consumer control of their data.

Potential solutions:• Remote control app: by connecting people to their appliances when they are out of the home, users gain increased control while also conserving, like being able to turn the heat up on their commute home without needing to leave it on all day. • Ad subsidized electricity: by creating a data platform, Duke opens up the possibility of additional business models. For example users could potentially allow ads to appear on their profile in exchange for a lower or free KWH rate.• Electricity advisor: currently the channel for consumer advocacy is the same as for consumer billing, by opening up the platform, users would be free to act as advisors and seek advice from other users without needing to talk to Duke directly.


Business

• Provides return on investment




User


• Provide users with personalized feedback


• Leverage already deeply-held values, interests, activities



• Measure use in other, more meaningful, terms



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Embed conservation into existing consumer valuesDuke as a integrated partner

Embed conservation into existing consumer values is about helping consumers conserve while still doing the things they find most important.

In order to increase conservation without forcing, guilting or punishing users into conserving, Duke needs to support the activities that their consumers are already engaging in and then embed conservation into those activities. By addressing other values like community, competition, comfort, fun, Duke will not only increase conservation but also build a more trusting relationship with their consumers, thus acting more like a trusted partner. Though these concepts may not reach the highest conservation goals per individual they will reach many more individuals. For each of these solutions, the main goal is to engage consumers in activities that offer them an added value and the secondary goal will be to incorporate a conservation initiative.

Potential solutions include:• Goal not KWH: by asking people to pay up front for electricity, users have the option to use less electricity that the allotted amount and then are given the ability to roll their slush fund into a savings for an alternate goal like saving for a vacation or just paying next months bill. • Security add-on: by teaming up with home security systems, it allows users to install the necessary home area networks to get the benefit from their smart meters by combining it with their already scheduled security infrastructure installation. • Green neighborhood park: by creating a reward competition between communities, users will have the desire to lower their consumption to win a reward for their community, like perhaps a new playground in the park.


Business



• Program should cost no more than $15 per family a year to implement.


User







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Celebrate the beauty of conservationDuke as a desirable brand

Celebrate the beauty of conservation is about Duke helping consumers equate conservation with getting more rather than getting less.

This strategy will showcase advanced and beautiful conservation solutions for the public. The ideas will make sustainable options transparent, engage renowned designers and build demo sites. This strategy will also target early adopters of distributed generation to enable their “leaving the grid” while still maintaining a relationship and connection with the utility and the community. By creating solutions to better enable those users already interested in conserving, Duke can try and build momentum. By making conservation an added value, Duke can help users that are already interested in conservation, but who don’t want to sacrifice to do so.

Potential solutions:• Demo homes: By developing and encouraging homes, schools, communities that demonstrate the state of the art conservation Duke can raise awareness of conservation advancements. Conservation tours of the demo sites could be curating by Duke.• Green belts: by creating conservation certificates and levels, Duke can celebrate conservation by acknowledging the efforts of their users.• Energy gift certificates: by allowing consumers to purchase and gift energy certificates, users can share efficiencies with their friends without needing to convince their friends to conserve. • Green teacher: By providing a curriculum for schools, students can learn about conservation at a young age and bring conservation information back home to their families.


Business




User







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Raise the standards of the industryDuke as a conservation vanguard

Raise the standards of the industry is about Duke building credibility with consumers by defining the new frontier of the electric industry.The utility industry is made up of legacy companies that have survived on the same business model, and infrastructure, for decades. This industry is not seen as forward thinking, users are not expecting to hear progressive thoughts from their electricity provider. Though this means Duke needs to work twice as hard to be heard it also means that there is a large opportunity become known as the most progressive company in the industry.

This strategy focus less on consumer experience and more on building a public image of Duke as an industry leader. Ideas push the current offerings, business models and regulations across the industry. The goal is to make Duke the standard for the industry the way Apple and Google are for their respective industries: companies that are constantly and quickly experimenting and advancing their product and service offerings.

Potential solutions:• Duke tours: By creating a Energy Lab on Duke’s campus they can create experiments and exhibitions and bring people in for tours in a similar way to museums.• Duke micro financing: Duke could offer financing and loan options to encourage and facilitate consumers to make efficiency investments and alleviate the wait for the payback.• Communication campaign: By creating a new communication campaign, Duke could be responsible for changing the language and mindset of electricity.


Business





User






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Elevate the value of the data and Embed conservation into existing values are the best strategic directions for Duke to pursue.

USER CRITERIA

Provide meaningful context that extends beyond personal use

5 4 5 3 2

Make system more transparent and accessible to consumer

3 4 3 3 5

Provide users with personalized feedback

5 4 4 3 1

Leverage already deeply-held values and interests

1 3 5 4 3

Frame conservation as a value proposition

3 4 3 5 3

Develop language to address modern tools and technologies

4 3 2 2 5

TOTAL 21 21 22 20 19

BUSINESS CRITERIA

Feasible within industry regulations

2 2 5 3 4

Promote conservation 5 3 4 4 3

Improves return on capitol invested

1 4 3 2 4

Creates cash flow 2 4 4 4 1

Accessible to the consumer 5 4 5 5 3

Leverages smart meter capabilities

2 5 2 1 2

TOTAL 17 21 23 19 17

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ry

STRATEGIC DIRECTION EVALUATION

BUSINESS VALUE

US

ER

VA

LUE

A B C

DE

EVALUATION CHART

A. Provide the right data in the right place

B. Elevate the value of the data

C. Embed conservation into existing values

D. Celebrate conservation

E. Raise the standards of the industry



23

STRATEGIC DIRECTION EVALUATION (CONT.)

While each of our five strategic directions scored positively for both user and business values, two of them scored higher than the rest: Elevate the value of the data and Embed conservation into existing consumer values.

While Provide the right data in the right place scores very high on the user value, it would require Duke to acquire too many new capabilities, it is preferable for Duke to achieve that level of transparency and communication through partnerships with third party vendors that specialize in this area.

Celebrate conservation is incredibly helpful aiding the users that are already interested in conserving. While this is helpful, the audience it targets is small and already motivated. It would be a better strategic decision for Duke to focus on the larger market that doesn’t care, through Embed conservation into existing consumer values. Then, once Duke has a larger market conserving, following up with Celebrate conservation would have a larger impact.

Duke understands the value of developing profitable conservation programs and has put a lot of money and time into research and smart infrastructure. While Raise the standards of the industry have strong ideas for how to communicate Duke’s existing industry vanguard methods, this direction is the most closely aligned with what they are already doing and therefore isn’t a top priority moving forward.

Moving forward Duke will be able to expand it’s market reach, increase conservation and make a profit on it’s user’s conservation by focusing on Elevate the value of the data and Embed conservation into existing consumer values.



24

The success of the platform depends on user engagement. This presents a challenge because in the past customers have not typically been engaged with their electricity. Fortunately, the platform lends itself to user friendly interfaces, customization, and compelling experiences.

1 Target online bill payersConsumer participation with the platform requires web access. Therefore, Duke will target their customers that currently pay their utility bill online. They will use the digital bill as the channel for the initial introduction.

2 Attract with dynamic graphicsUser research revealed that while electricity customers understood very little about the charges on their bill, they liked and understood the 13 month usage graphic. People are naturally drawn to pictures, and are fascinated by information about themselves. Therefore, Duke will introduce them to the capabilities of the platform with a visually engaging usage graphic.

3 Create quick winsWhile consumers will be drawn in by a slick graphic, a long or complicated sign up process will quickly dampen their enthusiasm. Therefore, Duke will automate the process as much as possible and help the customer skip to the fun part.

Duke smart meter app storeTo maximize the potential of smart meters, Duke can open the platform to allow outside developers to build custom applications for the smart meter. Much like Apple’s iPhone, this will create an ever-evolving and dynamic user experience. .

Your smart meter gets better with every new app.Explore some of our favorite apps here and see how they allow your smart meter to do even more.

Apps for Everything

Apps for Pet Lovers

Apps for Seniors

Apps for Saving Money

Apps for Families

$

CONCEPT ILLUSTRATION: ELEVATE THE VALUE OF THE DATA



25

Platform value webDuke makes money in two ways. Duke will keep a percentage of every app sale. And since most apps will encourage conservation, they will make money from the decrease in electricity consumption.

4 NavigateUser research revealed that consumers do not engage with their electricity. Therefore it will be difficult for customers, no matter how interested they are, to know what applications might be useful to them. Like Amazon or Netflix, Duke will use consumer data to make appropriate suggestions.

5 Connect Social networking is an important capability of the internet. Therefore, Duke will utilize this and connect users with each other, providing them with a channel to discuss their experiences with the new offering. This will encourage customers to become engaged in the electricity conservation discussion and help them discover new applications.

Application platform

Application developers

Appliance manufacturers

% of sales

user data

conservation tools

creation of smart appliances enhanced with applications

purchase of smart appliances


behaviors

Appliance retailers

online community



26

The following scenario illustrate how these applications will create new value for electricity consumers

The Platform in Action

Ellen’s brother Todd was delighted to find out that his sister’s house had a newly installed smart meter. As an avid fan of technology, Todd had been waiting for his own home to be updated with this exciting new advance. Furthermore, Todd had been closely following the applications Ellen’s electricity provider, Duke Energy, had been promoting to help their customers understand and control their utility costs like never before. When he spoke with his sister about these developments, he was surprised to find out that his sister, who had never showed any interest in technology, electricity, or conservation, was already taking full advantage of the new possibilities open to her. She invited him to come over the next night and show off the host of applications she found to help her monitor and adjust her energy usage.

When Todd came over for dinner, Ellen couldn’t wait to show him how well the new applications were working out for her. As Ellen answered even his most detailed questions, Todd had to confess that he didn’t expect his low-tech little sister to have such a clear understanding of the new tools. As Ellen enjoyed the bafflement of her condescending brother, she thought back on the experience with her new smart meter.

Ellen had taken little notice when she was informed that the utility company would be installing new hardware. She had hardly noticed her old meter, and couldn’t imagine caring about the upgrades on the new one. But when she went online to pay her bill, instead of the usual impenetrable invoice, she saw the most interesting graphic, showing the electricity her house was using at that very instant. Ellen was surprised when a question appeared on the screen, asking her if she’d like to know how her usage compared to other similar households. Intrigued, Ellen followed the prompt, leading her to a trial version of the “Smart Curve” application. She was then asked to input the size of her house, the number of occupants and other pertinent information. Ellen was rewarded with another fascinating graphic that charted where her usage was compared to similar houses – either much lower, about average, or much more. Ellen was amazed to see that she was using much more electricity than those with comparable living

Smart CurveWith real-time data capabilities, the smart meter has the potential to give consumers feedback on their usage at any given moment so they can see where they fall on the usage “grading curve.”

Related User Values• Provide meaningful context that extends beyond personal use• Provide users with personalized feedback

Related Business Values• Promote conservation• Improves return on capitol invested• Accessible to the consumer• Leverages smart meter capabilities

Your Smart Curve grades:Current: BWeekly: BMonthly: CAnnual: C

AF D BC

Keep up the good work!

Smart Hint: When working from home, save on air-conditioning costs at peak hours by lowering window shades and using a ceiling fan.



27

situations, quite sure that she was always conscientious about turning off the lights when she left the room.

Baffled by this revelation, Ellen anxiously followed the suggestion on her screen to consult “The Usage Monitor” application, which would tell her exactly how much she was using electricity, including the times of the heaviest usage and the exact location in her home that used the most electricity. Completely floored by this new information, Ellen wondered aloud what she could do to stop these expenditures that she was largely unaware of.

Ellen was delighted to see that the personal information she released allowed her to access a forum of customers, similar to herself, to discuss ideas and tips for lowering electricity bills. It was there she found “Appliance Check,” an application authored by Whirlpool that evaluated the appliances in the home and suggested replacements that could be more energy efficient.

While all these new tools were fascinating, Ellen lamented to her new forum friends that there was no way she would be able to stay on top of all this information on a day-to-day basis. They were quick to assure her that she did not have to, and that most of these applications would only be necessary if she noticed a problem with her usage. They went on to explain that she could simply check the “Spending Goals” application from her phone to make sure that her electricity usage was on par with the monthly goal that she set for herself. She would only need to consult the more powerful diagnostic tools if she

Usage MonitorThis application tells users exactly how much electricity they’re using, including the times of heaviest usage and the exact location in the home that is using the most electricity.

Related User Values• Provide users with personalized feedback• Make system more transparent and accessible to consumer


76.55total charges

992usage (kWh)

.077rate ($/kWh)

see room by room

0% 100%

Appliance CheckThis application provides users with a personalized evaluation of the appliances in their home and offers appropriate recommendations for efficiency and cost savings

Related User Values• Provide users with personalized feedback• Frame conservation as a value proposition




28

noticed an unexpected spike in consumption.

In the following weeks, Ellen began to consider herself a bit of an expert, happily giving advice to all the newbies on the forum. She even found herself browsing the more advanced applications, such as the “Energy Marketplace” application, which located cheaper, cleaner sources of energy. By tapping into those that had the equipment to generate their own electricity, Ellen was delighted to learn she could further reduce her energy costs. And, if she ever installed solar panels or similar devices, she could use the same application to sell the electricity she made and stored.

Ellen rejoined the present to the sounds of her brother’s wonder and disbelief at her intricate setup. Though she had no idea how to go about it yet, she even went as far as to suggest to Todd that she was going to begin developing her own applications that she would share with the community.

Spending GoalsThis application would enable users to set their optimal monthly spend based on their past usage. This could be driven by the want to decrease electricity usage or to save money.

Related User Values• Provide users with personalized feedback• Make system more transparent and accessible to consumer


Used: $80 Remaining: $40

April Spending Goal: $120Current Usage: April 19, 2010

You’re on target to meet your goal. Good job!



29

DUKE AS PLATFORM BUSINESS MODEL PROTOTYPE

Embedded in the strategic position of Duke as a Platform are numerous revenue prototypes. Each variation of the strategic position can affect the necessary changes in the prototype. Exploring the variations in the value proposition will offer insight into the different revenue streams.

Assumptions that Drive one possible Revenue/Cost Model PrototypeDuke will capture revenue in two ways. One revenue stream will be through a percentage of sales from individual applications, up to 100% for Duke applications. The second stream will be realized in much the same manner as current conservation programs, through generation savings caused by reduced energy consumption.

Estimates of the Revenue ModelBased upon data from the smart phone store a rough average number of applications downloaded by an individual in a year is five with the average price being $3 (source: http://techcrunch.com/2009/04/23/zero-remains-a-popular-app-download-number-among-non-iphone-owners/).

Business Model PrototypesDuke will leverage the consumption data made possible by the introduction of the smart meter.

DukeasaPlatform

ValueProposition KeyBusinessModel

Variations

KeyAssumptions SuggestedPrototypes

Applicationsmay

enableconsumersto

reduceenergyuse.

ITtocreateappsthat

integratewithDuke’s

monitoringsystems;

broadenbehavioural

dashboardandincrease

integrationintopresent

analytics

Consumerswill

purchaseapplications

fromDuke

Createamanufacturer

appanddetermineifit

encouragesconsumers

toupgradeappliances

tosaveenergyandif

thisdoesdecrease

energyconsumption

Consumerswillincrease

engagement

Deepen/create

partnershipswith

manufacturersto

integrateappsbetween

thesemanufacturers

anditself

Consumerswillaccess

Dukeonline

Createanapp,similar

toonlinecellphone

trackingtodetermineif

real‐timedata

decreasesenergy

consumption

Applicationsaccessible

fromDukewebsite

Newchannelof

relationship

managementbetween

Dukeandtheconsumer

Appuserexperience

enticesuserstoengage

withtheappand

changebehaviour

Createanappthat

detailstheareasofthe

homethatconsumethe

mostenergy(andcost)

todeterminewhether

consumerswill

decreaseenergy

consumption

Dukeprovideseasier

accesstoservicesthat

helpconsumers

conserve

Newcost

centers/revenue

streamstobalancewith

existingfinancialmodel

Appsdevelopedare

valuedandneededby

consumers



30

THE REVENUE MODELGiven the above the following rational is applied to prototype for each stream

Stream One

Average number of apps – 5Number of Duke apps – 3Average price per app - $3Percentage of sale for non-Duke apps – 30%Revenue from app sales per customer - $11Number of residential customers – 4 mil l ionPercentage of residential customer buying apps – 30%

Therefore total revenues from app sales – $13.2 mil l ion

Stream Two

Reduction of consumption due to apps – 2.7% per household.Average consumption per customer – 936 KWh/month.Total yearly consumption savings (at 30% of 4 mil l ion customers) – 363,916,800 KWh/year

Assuming this energy was created @ $0.05/KWh.

Total consumption savings – $18,195,840/year

THE COST MODEL

Implementation Costs Stream One

Development costs for the platform – 6 Person Years (PYs)Average salary for developer ( includes benefits) - $125,000Total costs for the platform - $750,000Development cost/app – 0.5 PYNumber of apps introduced with the platform – 3Total costs for the apps – $188,000

Total development costs - $938,000

Consumption data hosting costs – $0.15/customer/monthTotal hosting costs - $7,200,000/year

Implementation Costs Stream TwoNo additional costs.



31

LONG RUN PROJECTIONS

All Added Up

Assuming after the init ial platform development cost in the f irst year of the new program the only costs that remain are:

$188,000 for the apps (assuming Duke wil l continue to create ~3 apps/year)

$7,200,000 cost for hosting the data

Total yearly costs - $7,388,000

Total yearly revenues (assuming people continue to download apps at the same rate) – $13,200,000

Yearly profit from apps - $5,812,000

Yearly savings from consumption reduction - $18,195,840 Total yearly profit from platform - $24,007,840




% of sales

user data

conservation tools

creation of smart appliances enhanced with applications

purchase of smart appliances


behaviors

Appliance retailers

online community



32




REVENUE MODEL

application purchase

60% of sale

30% of app sale


behaviors

Revenue stream #1

Revenue stream #2avoided distribution costs

Appliance retailers



33

CONCEPT ILLUSTRATION: EMBED CONSERVATION INTO EXISTING VALUES

PHASE 1

Conservation CompetitionWhile most people don’t usually think about their energy usage, framing conservation as a game may be one way of engaging users. One such game could take the form of a competition to see which school’s student population can reduce the most energy usage in their homes.

1 Introduce competitionDuke sponsors month-long energy-saving competition between schools. The school whose students save the most energy per household get a new playground and school-wide pizza party.

2 EducateLeading up to event, Energy Awareness Teachers (trained by Duke) come into the classroom to teach kids about “vampire” appliances, what a kilowatt hour is, and provide information to take home about how much energy an average household uses.

1 Introduce competition

CONSERVE FOR OUR SCHOOL!!

Greenleaf Elementary

Weekly kWh

91 Greenleaf FairmontOak

We’re winning!

2 Educate 3 Engage parents

4 Provide access 5 Maintain engagement 6 Announce winner

Congratulations!Keep up the good work

Related User Criteria-Provide meaningful context that extends beyond personal use-Make system more transparent and accessible to consumer-Leverage already deeply-held values and interests

Related Business Criteria-Promote conservation-Accessible to the consumer-Leverages smart meter capabilities



34

3 Engage parentsChildren bring home information, and with parents, go around the house putting stickers on “vampire” appliances and explore ways to reduce energy usage.

4 Provide accessSmart meters and a web interface allow for real-time usage information. Having learned to read usage information, children submit their households’ kilowatt hours each week via an online form, with the aid of a parent or other adult. Additionally, the web interface computes how much money the household has saved on energy for the week.

5 Maintain engagementWeekly announcements and graphic representations of progress in high-traffic areas at schools are crucial to maintaining engagement of students, parents, teachers, and others in the community.

6 Announce winner Winner announced. Duke thanks families for participating, provides information about how reducing energy use keeps energy prices low, how much energy and money was saved by all participating in the competition. Duke encourages continuing energy efficient behavior.

In shortPhase 1 focuses on schools because of their central position in many communities. This position can potentially to aid in engaging a large group of users in conservation practices. By taking an interest in helping schools obtain something they need, Duke connects to its customers at a community level, thereby building trust between the user and utility. Additionally, designing information that is simple and engaging for children ensures that most people can understand it.

Vampire energy stickersIndicating which appliances in the home use energy even when off is an informative activity for parents and children. The stickers are a visual reminder to unplug energy vampires and serve as the first step to raising a household’s awareness of its energy usage.



35

PHASE 2

Conserve for chances to winShould the school competition prove engaging for users and make financial sense for Duke, the next step may be another game-like approach to conservation with the community at large in which household reduction of kilowatt hours is tied to chances to win a prize. For every kilowatt hour a household saves below a rate of usage defined by Duke, a virtual ticket is added to a drawing for a prize. In short, the more kilowatt hours saved, the more chances there are to win.

1 Introduce contestDuke announces annual “Conservation Raffle”, a month-long competition aimed at motivating consumers to conserve energy. Each kilowatt hour saved becomes a virtual ticket in a drawing for a prize.

1 Introduce contest 2 Identify customer groups 3 Engage in existing programs

4 Provide access 5 Announce winners

1 kilowatt hour = TICKETconserving now

solo occupants medium families

Your usageCongratulations!

Thank you

You saved

$15

Related User Criteria-Provide meaningful context that extends beyond personal use-Measure use in other terms-Conservation does not mean green

Related Business Criteria-Promote conservation-Accessible to the consumer-Leverages smart meter capabilities



36

2 Identify customer groupsCustomers register for raffle by providing information about themselves, such as size of house, number of household members, and current energy usage. With this information, Duke identifies user groups. As different users have different capabilities (and with a small number already practicing conservation), simultaneous drawings for each group introduces conservation to a larger audience while continuing to encourage the positive behavior of those already conserving.

3 Engage in existing programsParticipating in Duke’s energy efficiency programs can earn customers additional tickets. Providing an incentive to making one’s house more energy efficient directs customers to currently existing programs on Duke’s website.

4 Provide accessProviding access to real-time usage via website, giving email updates, and communicating progress through commercials and print ads, Duke can maintain engagement for the duration of the contest.

5 Announce winnersDuke announces winners and thanks those who participated. Participants are given information highlighting the amount of money each household saved as well as information about how to continue conserving energy.

In shortLike the school competition, the potential for the user to get something valuable for conserving energy is an added bonus to a reduced monthly bill. Defining tickets by kilowatt hours begins to bring language commonly used by those in the electricity industry to the masses, making it more familiar and less abstract. Being grouped with users who have similar electricity usage profiles gives the consumer a more objective view of his own electricity usage.

Earn tickets through existing programsDuke already has a number of programs people can enroll in to make their home more energy efficient. By offering additional tickets for participating in the programs, Duke further encourages customers to take part.

Earn tickets when you enroll in our programs!



37

EMBEDDED CONSERVATION BUSINESS MODEL PROTOTYPE

Assumptions that Drive One Revenue/Cost Model PrototypeRevenue is drived from the energy savings Duke does not incur as a result of the ‘fifth fuel’ strategy. An annual 2.7% reduction in household consumption is possible. A one month prototype cost and revenue structure would be as follows.

1. Average school size in N. Carolina is 515 students per school. 2. 75% participation rate of Student Body.3. 387 students participate.4. School is located were majority of familes are Duke customers.5. 300 families participate. 6. 2.7% reduction in electricity consumption per household due to program.7. Average family uses 936 KWh per month.8. Savings of 25.8 KWh per household.9. Total savings 25.8 x 300 = 7740 KWh for Duke in the month.

The cost structure is high due to the small scale of the prototype, be-ing around $7.75/KWh saved.

Business ModelDuke will leverage current programs and key activities,

DukeasaTrustedPartner

ValueProposition KeyBusinessModel

Variations

KeyAssumptions SuggestedPrototypes

Contestscanencourage

changesinbehaviour

(canwecombinethis

withtheonebelowand

callthisoneContests

canencouragelong

lastingchangesin

behavior)

Publicrelations

departmenttoassist

withmanagingthe

contest

Contestparticipationis

attractivetothe

consumer

Createasmallpilot

studywithone

elementaryschoolclass

todeterminethe

numberoffamilies

interestedin

participating.

Changeinbehaviouris

lasting

Monitoringof

continuedbehavioural

changes

Onceparticipationin

thecontestforaset

periodoftime,the

behaviourchangeis

lasting

Monitorenergyusage

before,duringandafter

thecontest.

Schoolsarethe

appropriategroupfor

creatingacontest

Publicrelations

departmentthatworks

withschools

Childrenserveasan

appropriatefocusfora

conservationcontest

Createsmallpilot

contestwithalternate

groupstoexamine

appropriateness

Childrenarechampions

forchangeina

household

Buildingarelationship

withthewhole

household,including

thechildrenisapartof

thevision.

Childrencaninfluence

theirfamilytochange

behaviour

Examineother

examplesofbehaviour

changeasaresultof

learningprogramsin

schools

Conservationisa

messagethatschools

wouldliketopropagate

Conservationstrategyis

anopportunityto

reduceasset

investmentsand

thereforeincrease

revenueforDuke

Energy

Conservationisan

educationalmessage

appropriateforschools

Createsample

messagingforschool

boardstoexamine



38

LARGE SCALE POSSIBILITIES

Potential Revenue across Duke’s Customer Base

If the reduction of 2.7% is achievable in the prototype then the potential savings for Duke Energy increase dramatically if the program is rolled out to all customers who are eligible.

1. Assumie a customer base of 4,000,000.2. Assume 4 million * 60% participate who have school age familes and participate in secondary contest 2,400,000 households.3. Assume savings of 25.8 KWh/household * 2,400,000 is 61,920,000 KWh saved a month.4. Assume $0.05 to generate a KWh * 61,920,00 is $3,096,000 in savings a month.5. If conservation is s sustained behaviour then this would save $37,152,000 a year in generation costs.

Potential Costs across Duke’s Cusotmer Base

A reasonable cost per household for reductions has been estimated to be $7.48 per household (from page xxxx). Assuming each customer above is one household, then this would amount to costs for the program around $18,000,000.

Net Gain from Concept

The net gain is therefore $37,152,000 minus $18,000,000 which is around $19,000,000.



39

AssumptionsThese concepts operate under a number of assumptions that should be tested prior to implementation. For both concepts, the primary assumptions are: competition will spur conservation, a significant number of users will choose to participate, and a significant amount of energy will be saved. Additionally, it is assumed in the school competition that children can affect a household’s conservation habits.

In order to evaluate the efficacy of these concepts, each scenario may be tested on a fairly small scale. The school competition may be rolled out in a single school with individual classes competing against each other. Similarly, the Conservation Raffle may be tested in a relatively small pre-existing community such as a neighborhood or church group. These small test beds can aid in determining the most effective communication methods and incentives to participate at a minimal cost to Duke Energy.

Conservation competition

3rd party prize provider


behaviors

School districtSchool district

Partners



40

Next StepsAs previously stated all of the concepts operate under a number of assumptions that should be tested prior to implementation.

Working prototypes of the user and business models should be created in order to test the underlying assumptions that pin each concept. Ideally the prototypes should combine the user and business models, such that, the acceptablitlity of the idea to the user as well as to Duke could be tested simultanously.

The next step in the process is to design how the team might go about buidling a prototype that not only tests the user assumptions but also the business concepts in order to prove or disprove the viability of the platforms developed.



41

APPENDIX

Research Methodology

Note: Described herein is the research methodology as it was designed by the research group. Largely following the ID research methodology, we will only note the uniquely designed elements of the process.

User ResearchEnergy is ubiquitous and is difficult for many users to speak about directly. In order to have the breadth of research on such a difficult subject, the research group divided the stakeholders into three groups: residential users, analogous users and experts.

Experts are stakeholders who work in some capacity for Duke Energy, their competitors or third party participants. Experts were interviewed on a conversational basis to gain an understanding of what stakeholders are attempting and understanding about the consumer marketplace. Expert interviews were used to inform user research.

Analogous users are residential energy users with smart meters recently installed in their household. Analogous interview were completed in Toronto and interviewed based on their experiences with the recent changes to garbage and recycling. During preliminary research design phases, the research team examined the process in which both the cities of Toronto and Chicago were deploying their changes to the garbage and recycling system. During the preliminary research, prior to implementation of new disposal recycling regulations, garbage appeared to be largely ubiquitous.

Residential users are residential energy users with or without smart meters. Located in both Chicago and Toronto, residential users were interviewed using an interview protocol designed to highlight recent changes in energy usage.

In total 4 expert interviews, 4 analogous users and 7 residential users were interviewed.

Interview DesignThe focus of the interview was to design probes to assist with the ethnographic interviews of residential users. This interview design was then modified for use with experts and analogous users.

The high level themes the interview was designed to uncover includes:- Physical and emotional interaction with energy use- Energy use management throughout the day- Role in energy use decision making- Planning energy use- Activities surrounding energy use- Energy motivators involved in decision making



42

The interview was designed to following 5 phases:

1. Opening: Informing and achieving consent2. Introductions: Introducing the subject matter to the interviewee3. Home Tour: Taking a detailed tour around the users provides specific contexts where energy is a focus or a choice. The tour allows us to examine the appliances that they interact most with as well as indications of what hobbies the user has.4. Bill Inspection: Examining the bill allows the conversation to be more conversation to be more closely related to the cost of electricity as compared to the other household items. Examining the changes in the pattern and understanding of the bill was of interest as it highlighted different user perceptions of energy and energy use.5. Card sort activities: The interview was designed with the intention of examining multiple card sorts to highlight electricity, the consumer’s relationship with electricity, and the consumers values as it relates to electricity. The goal with all card sorts is to initiate a conversation with the user in a different capacity hoping to highlight insights not otherwise understood. The “electricity card sort” was designed with a selection of over 40 images, all loosely related to energy in some capacity. The consumer was asked to glance through the images and sort as they saw fit. The “extreme card sort” use the same deck as previous, but the researcher will selection of cards that the consumer has selected and ask the user to discuss and compare. In the final card sort, the “value card” is selected from a set of five potential cards. The user then selects a collection of cards previously sorted in the electricity card sort that most appropriately fits the value card.

In the case of analogous users, their interviews included a discussion centered around their experiences during the transition through recycling including blue box, green box and garbage tagging. As a result, there was not sufficient time during the interview to complete the card sort activity. For analogous interviews, the ethnographic interviews started with a discussion around garbage and recycling and ended with a discussion about the user’s electricity bill.

AnalysisAs a part of the interview, researchers took notes and videotaped the interview. The analysis phase of the ID research methodology includes a debrief and reviewing the videotape using the NOABS structure. The analysis phase was only completed for a limited number of interviews as the research group determined that the majority of interviews did hold the richness of information required to make the NOABS framework valuable. In this light, researchers opted to continue into the clustering phase of analysis to begin discovering Design Principles.

Strategic DirectionsOnce clustered, the insights generated from Analysis were presented and served as a source of ideation. Generative exercises were created as a group and as individuals. This generative phase served as an opportunity to collaborate in unique ways to generate new ideas.



43

These ideas were then clustered to identify Strategic Direction. Using a matrix based on User Value and Business Value, the directions were evaluated on their desirability from both the user and business perspective. The most attractive strategic directions were then developed into preliminary concept illustration.

GLOSSARY

Green Energy Energy derived from renewable sources such as plant matter, solar, wind, wave, geothermal, tidal and dams. Some also include technologies that improve energy efficiency as a part of green energy.

Smart Grid Electricity infrastructure that uses two-way digital technology to communicate between the electricity distribution grid and the metered users. Smart Grid usually includes infrastructure equipment from the point of generation to the smart meter on the commercial and residential consumer.

Smart Meter An advanced electrical meter that identifies consumption in more detail and in most cases communicates this information to the utility network and/or consumer.

Smart Technology Technology that enhance and create new interactions between energy consumers and their devices leveraging data delivered by the smart meter. Examples include appliances and in-home devices that provide the consumer feedback on their energy use.

duke energy: bridging the gap between smart meters and users

Documents

duke energy duke

energy consumption

duke energy2this project

smart meters

smart meter technology

smart grid5potential

current user behavior3industry

consumer solutions