Impact of Customer Segmentation on Smart Grid Deployment

Smart Grid Deployment Faster Among Industrial and Commercial Segments

The costs of deploying a smart grid can vary dramatically by customer segment. Industrial and commercial customers combined represent only 12 percent of an average electric utility’s customer base, but they typically consume between 65 and 70 percent of the electricity. This large per capita power consumption (and resulting revenues) compares favorably to the cost of deploying and maintaining Smart Grid infrastructure, resulting in both low risk and shorter investment recovery periods when compared to low usage residential consumers. Consequently, the procedures and technologies for managing demand and optimizing delivery for these two customer segments are largely in place in many electric utilities.

Residential Customers Provide the Greatest Opportunity and Highest Risk

The residential customer segment is dramatically different.  It represents eighty-eight percent (88 percent) of the customer base of a typical electric utility, yet the residential segment only represents between 30 and 35 percent of the electricity sales.  The lower amount of revenue per residential customer implies limited potential savings are available as a result of fairly significant investments.

In order to receive meaningful benefits from deploying Smart Grid for its residential customers, an electric utility must do so on a large scale basis over a significant portion of its residential customer base, thereby maintaining a fairly low per capita capital and operating costs profile. Since smart grid deployments of any significant size have yet to be implemented, there is a scarcity of reliable information as to the magnitude of these cost and subsequent return-on-investment. The financial risk represented in the residential segment is the primary reason for the preponderance of pilot studies, requests for external funding, and a conservative posture with respect to guaranteed recovery before moving ahead with any significant smart grid and AMI-related deployments.