Consumers Click with Energy Savings
January 21, 2008
Ken Silverstein
EnergyBiz Insider
Editor-in-Chief
Consumers respond to retail sales. And so the thinking goes they might react
in kind to changing electricity prices - if they could track them. After
studying this concept for one year, the Department of Energy's Pacific
Northwest National Laboratory proclaimed that, on average, participants
saved 10 percent and during peak periods, they saved 15 percent.
It's never been a question of whether the tools would develop to allow such
efficiencies. It's always been an issue over whether consumers would respond
to the supply and demand curve that electricity follows. Researchers now
conclude that by using relatively simple web-based programs, they will do
so.
Nationally, those scholars say that "smart grid" technologies could save
about $120 billion by foregoing the need to build expensive power plants and
transmission lines. They also say that over a 20 year period, the technology
could displace 30 large coal-fired generators.
For now, it's mostly the bigger utilities with the deeper pockets that are
shelling out for advanced meters and demand response technologies. Market
intelligence firm Chartwell says that about 9 percent of all major companies
last year installed such analytics, although that figure could rise
significantly in the coming year. Longer term, the prospects are much
greater. According to IBM, which developed the software for the latest
study, advanced metering technologies will be available to as much as 15
percent of the country in five years and to more than half the country in 10
to 15 years.
"Overall, the smart grid technologies and approach used in this project have
the potential to transform the way power is delivered, managed and used,"
says Ron Ambrosio, senior researcher at the Watson Research Center of IBM,
in a conference call. "We're talking about information technology and
consumers playing an active role in managing the electricity grid of the
future, minimizing the need for inventory and infrastructure and maximizing
productivity, efficiency and reliability."
The demonstration project, funded primarily by the Energy Department, looked
at 112 homeowners located in the Olympic Peninsula in Washington State. They
each received new electric meters, as well as thermostats, water heaters and
dryers -- all of which were connected to advanced meters using a gateway
device inside the home. One part of the study allowed homeowners to use the
Internet to make an optimal selection between comfort and economy. Then,
every five minutes, the settings would automatically adjust in accordance
with overall supply and demand levels. A second aspect showed that everyday
household appliances can automatically reduce energy consumption at critical
moments when they are fitted with controllers that can sense stress on the
grid. Both studies helped ease the flow of power over the grid.
New Paradigm
Currently, utilities generate electricity based upon projected demand.
Through new information technologies and modern gadetry, consumers are now
given increasing power to control grid traffic. In an era of supply
shortages, environmental pressures and community activism, those demand
response programs give consumers an opportunity to curtail their energy
usage during high demand in exchange for lower prices.
"These kinds of controllers can make the difference between problems that
spin out of control, like the 2003 black out on the East Coast," says Rob
Pratt, project manager for Pacific Northwest National Lab's demonstration.
"Nipping such an event in the bud is critical, when those kinds of events
can spread from Ohio to New York in nine seconds."
The possibilities for advanced meters are huge. There are now about 130
million meters in the United States alone. Of those, only about 10 million
or so have high-tech gadgetry to facilitate remote temperature control. A
utility may provide the meters or it may retrofit older ones. The "smart
thermostats," meanwhile, are now commercially available.
While advanced meters hold lots of promise because of the benefits they
would bring, they still have major hurdles to overcome. Namely, utilities
are tightly regulated and are accustomed to passing along their costs. By
extension, consumers generally pay a flat rate that covers a utility's cost
of production and transmission. They are therefore shielded from a sharp
divergence in the supply and demand curve. At the same time, the price to
deploy smart meters is high and utilities are reluctant to make those
expenditures unless they know they can recoup their investment in a short
period.
Both federal and state policymakers recognize those obstacles and have tried
to encourage the implementation of time-of-use rates. The idea is for
"demand response" centers on "smart meters" to collect energy usage data and
price it accordingly. If people become price sensitive, they will shift
their usage patterns. Utah's public service commission, for example, worked
with Utah Power to find a way to implement a cost-effective demand response
program near Salt Lake City -- something that the utility says has resulted
in the saving of 90 megawatts of power a year, since 2003.
"When prices are set by regulation or law and change infrequently, consumers
are largely insulated from frequent and short-term changes in the cost to
generate electricity," says a report by the General Accountability Office.
The market is continually trying to calculate energy demand and to determine
how to allocate its portfolio of fuel options. The Energy Department's
latest study indicates that energy efficiencies can help avoid not only
expensive capital outlays but also the release of harmful emissions. While
the consumer mindset is not accustomed to following price curves in the
electricity market, policymakers must work harder to construct a new
paradigm -- one in which utilities and their customers are moved to become
involved in the implementation smart grid technologies.
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