It is very tempting to say from the analysis in Part 1 of this article that it is always best to be in the second quadrant where the risk/benefits ratio is the lowest, which makes it the safest bet.
Unfortunately, it is not that easy. The gap between quadrant 1 and quadrant 2 is the place where a lot of development is happening and change is constant. Utilities need to realize this mini-gap and make adjustments in order to utilize the available service/product offerings from both the quadrants and make the best risk/benefit investments. Early adoption techniques can prove to be beneficial in many cases. In some cases, companies need to drive the design of technologies in order to achieve the maximum benefits. In the world of business intelligence (BI) and analytics, if BI is the stepping stone to harvest meaningful analytics out of operational data, Business performance management (BPM) is the next area to derive value out of the data warehouse infrastructures.
BPM is a holistic management approach that promotes business effectiveness and efficiency while striving for innovation, flexibility and integration with technology. As organizations strive to attain their objectives, BPM attempts to continuously improve processes. In the industry, this process optimization is synonymous with financial performance management, but finance is only one aspect of BPM.
BPM in finance can be applied to take advantage of the summarized financial data in the data warehouse and use it for following processes:
- Integrated operational expense planning
- Integrated capital investment planning
- Cash flow planning with long-term view and
- Financial consolidations, both legal and management focused.
Most BPM vendors have already positioned their products in this space to address the integrated budgeting and planning applications for utilities. BPM can also be applied to host of other operational issues that utilities deal with, however. The generating power of utilities is, for example, limited given the rising pricing pressures of fuel and also environmental concerns. One of the key approaches is demand management to understand and analyze the demand and initiate programs to effectively promote energy efficiency to its customers. The more thats known about customers energy usage, the more a utilities company can effectively plan for demand. Utility customers are implementing advanced metering initiatives (AMI) to get real time customer usage data. Consider the following example from Californias policy and organization:1
- With CA PUC section 454.5 (b) (9) (c) Utilities first meet unmet resource needs through all available energy efficiency and demand reduction resources that are cost effective, reliable and feasible. It also provides a large portion of green house gas emission reductions as part of the National Action Plan for energy efficiency.
- California investor owned utilities are administrators of rate payer funded programs and maximize the potential of those programs by engaging in collaborative efforts with the many other entities involved in planning and delivering energy efficiency savings.
- The state moved from short-term savings to a more strategic focus on long-term goals, including market transformation through continual incorporation of energy efficiency gains into codes and standards and increasing privatization of cost effective energy efficiency services in competitive market activities.
- The state has three areas of focus: new residential construction, commercial construction and HVAC.
- California has a CEC goal of zero net energy for new commercial and residential construction.
- Energy efficiency should be measured at overall portfolio performance rather than individual program performance.
- Market transformational activities should compliment long-term resource acquisitions.
- Strategic planning will facilitate identifying ways to use energy efficiency programs to better match differing load profiles and will promote long-term energy efficiency measures and activities that reduce peak demand.
- There is an outlined need for strategies to define when market transformation has occurred, so it is obvious when rate payer energy efficiency funding has succeeded technologies or programs no longer need rate payer subsidies.
Application of BPM/ BI in the Future
The utility industrys clear focus is on collaborative long-term strategic planning rather than short-term initiatives. There can no longer be a focus on the low-hanging fruit of exchanging incandescent lighting with compact fluorescent lighting. There will be a need for sophisticated models that track interval usage data, such as with advanced metering infrastructures or smart grids and their integration into enterprise decision-making analytics. Energy efficiency success will no longer be defined by program enrollment or cost-effective funding utilization; commissions and the industry will need to measure and quantify actual load decreased by energy efficiency and demand response.
Looking forward, customers will require increased access to usage and billing data in order to respond to critical peak pricing events or compare alternative rates and load reductions. BI models for customer rate analysis will have to utilize extensive operational data with what if modeling scenarios that are Web enabled so customers can be self-reliant when choosing energy efficiency or demand-response programs.
The marketplace can be expected to look for higher degrees of collaborative planning for designing energy efficiency portfolios and strategic objectives. This will not only include the IOUs but also other players in the marketplace, such as metering technologies, HVAC manufacturers and designers of building standards and codes. Utilities can use the wealth of BI information to analyze new construction tracts, as higher efficiency goals minimize the need for additional resources. With the potential need to analyze additional data sources, as a result of collaboration, the expected benefit is greater efficiencies and economies of scale that can be utilized in delivering programs. Insights gained by one collaborative partner can be shared with other players in energy efficiency.
The marketplace must undergo a transformation. In other words, energy efficiency technologies and programs have to become self-sufficient in order to become part of a self-sustaining competitive marketplace rather than a rate payer subsidized program. Measurement and valuation of the benefits will become crucial in achieving these long-term goals or market transformation. As previously mentioned, success will no longer be measured by program enrollment.
Today many customers sign commitments to implement energy efficiency of demand response programs.In the future, tools such as BI will need to monitor customer usage patterns to quantify the exact amounts of avoided or shed consumption. Programs are likely to be bundled and targeted as with any customer relationship management (CRM) application that looks at market segmentation based on customer preference or socioeconomic patterns. The CRM opportunity for the future will be to design program bundles that match changing load profiles to the most cost-effective programs.
Leading-edge companies will develop energy efficiency and demand response dashboards or executive cockpits that will provide real-time or near real-time data on total system load against total system capacity with available load that can be shed. These companies will also incorporate long-term investment models that factor in strategic energy efficiency and demand response programs as part of their investment plans. There will continue to be a need for cost-effective program administration. Energy efficiency portfolios will require key performance indicators (KPIs) that provide management with business performance insights that will ensure long-term success. KPIs will have to influence operational processes in order to focus on strategic objectives rather than short-term goals. This will allow for greater innovation and risk taking.
Overall, the portfolios of energy efficiency and demand response will require extensive modeling capabilities leveraging a robust BI-based ecosystem that allows for extensive modeling of what-if scenarios. These scenarios will have to provide insights for individual situations as well as entire customer populations, such as new residential constructions. BPM will provide a systems thinking approach to access the entire spectrum of programs and their contribution to the complete energy picture going forward.
- "Energy Efficiency Proceedings." Web site of the California Public Utilities Commission (PUC). http://www.cpuc.ca.gov/puc.
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