Is Groupon the missing revenue model for Smart Grids

Background

Groupon is in the news on account of the 6B USD offer Google made which they declined

A few weeks ago, while it was still not in the news, I referred to the Groupon model in another context – As a revenue model for Smart Grids. The idea was proposed by Elizabeth Hartman at a Talkstandards event in Boulder Colorado which I attended and spoke at in a discussion. I am elaborating it in more detail here.

Firstly, here is some background about my view on the Basics/fundamentals of Smart Grids.

I elaborate more on Smart Grids in the conversation with Dr George Arnold who is the National Coordinator for Smart Grid Interoperability. The full transcript of the conversation is HERE

The problem with Smart Grid acceptance by end users

Coming from a mobile/telecoms background, the uptake of Smart Grids is a very familiar problem. If you build it, will they come? Well, not necessarily. At least, not immediately. When 3G networks were built initially after spending billions of dollars, it was not very clear as to what the applications were likely to be. In hindsight, the money spent on 3G auctions was indeed well spent and today, in many parts of Europe, even that 3G bandwidth is not enough.

There are parallels with Smart Grids. The pioneering city of Boulder(the first Smart Grid city) has some faced some faced some interesting Smart grid challenges

Part of the problem is not the technology, or the various positioning within the industry – it is simply that customers don’t know what they are getting. They cannot ‘see’ the product. They cannot see the value. But the benefit of hindsight brings some ideas ..

Customers understand a game .. and many network services, including Smart Grids (and in this case, I treat Smart Grids as a network) can be packaged as a game.

Take the case of location based services,

When created as a game (foursquare), customers do not seem to mind sharing their location. Foursquare is a location-based service where users “check-in” at venues using a mobile website, text messaging or a device-specific application. They are then awarded points and sometimes “badges.”. You could extend this idea in many ways for example ‘objects’ could have four square locations. In a Jimmy Choo shoes foursquare promotion, One pair of Jimmy Choo trainers will check in at various locations and those who follow the campaign and are lucky enough to arrive at a venue before the trainers leave will get to pick a pair in the style and size of their choosing.

So, location could be a game and is more acceptable by customers in that form.

And that’s where groupon comes in

The Groupon model for smart grids

So, what is Groupon?

The basic idea behind Groupon is very simple – if a certain number of people sign up for the offer, then the deal becomes available to all; if the predetermined minimum is not met, no one gets the deal that day. This reduces risk for retailers, who can treat the coupons as quantity discounts as well as sales promotion tools. Groupon makes money by getting a cut of the deal from the retailers.

So, if ‘energy’ were a commodity, then would customers ‘group’ to ‘buy’ it?

This suits the providers to create ‘spot deals’. The idea of energy markets is also not new. Energy markets already exist but on a much more grander/corporate scale, like PJM Interconnection

We are speaking here of involving the customers more directly in energy markets much like the Groupon model. I also see a greater role for Telecoms and mobile in this space since the mechanism lends itself very well to mobile devices. It will also benefit the energy providers and thus the whole value chain.

Image source: consumerenergyreport

Comments

  1. Peter Gray says:

    Ajit, I think this it definitely an interesting solution but I wonder how this would work in practice?

    Offering daily on the spot deals strikes me as overly complicated and time intensive for a regular energy consumer.

    However I could envision an opt-out scheme operating across a longer time horizon, say monthly (akin to a billing period). This would still facilitate demand aggregation while providing a more substantial discount (compared to the daily discount) to consumers.