On Thursday, Dec. 8, as natural gas hit $40 at the citygate for Southern California (prices hit $60 that Friday), I found myself in Colonial Williamsburg, a guest of Michigan State University's...
The Next Killer App: Load Management, Only This Time for Real
Tomorrow's Network: A Two-Way Street
The technology is here. What's missing is the will to use it.
Electric restructuring may seem to have unleashed a Pandora's Box of ills. In reality, however, it has opened the door to creative endeavors. The present difficulties--spiking spot prices, congestion in transmission and distribution, unavailable generation, and arbitrage winners and losers--mark nothing but a rite of passage. Simple survival is the watchword. The industry must move through and past these difficulties to get to the promised land of deregulation: .
Following in the footsteps of other now-deregulated industries, such as telecommunications, electricity will evolve into a new paradigm of free-flowing transactions between suppliers and purchasers. In this "Electrinet" (an electric power analogue to the Internet), competition will replace the utility's duty to serve with a shared between consumer and marketer. This evolution likely will take the 15 years or so that true change has taken in sister industries.
During the early stages of this deregulation and transition, the "killer app" will emerge in the form of market-driven load management, in which electricity customers participate actively in the electricity supply-demand balance by shaping their electric demand patterns. And it will take place using today's electric infrastructure--but only for something gotten in return. And that something is real profit and real loss.
Yesterday's Model: Notify and Control
The first heyday of load management, from the late 1970s to early 1990s, stemmed from regulatory directives that sought to defer the need for new generating capacity. The available technologies typically were one-way, open-loop systems with little capability to verify changes in demand patterns, and even less opportunity for the customer to take more than a prescribed role. Load management programs involved activities like these:
- control of residential air conditioners/water heaters,
- control of small commercial air conditioners,
- control of agricultural pumps,
- notification of the need for load curtailment by larger commercial/industrial customers, and
- community programs to reduce total peak electric demand continuously.
In control- and notification-based programs, the communications infrastructures had to be built from scratch, including radio towers, powerline carrier/ripple equipment, and leased telecommunication lines. In most instances, the only way to "verify" demand reductions was by checking samples of customer sites to see if equipment seemed to be working--months after actual load management operation. Meanwhile, the financial incentives were paid, and challenges like "free riders" abounded.
Marketing was simple and effective--participation in the programs was sold on a "for god and country" basis. After all, customers who participated contributed to the preservation of total electric system reliability. And when they expressed concern about discomfort, inconvenience, or specific actions they needed to undertake, a simple reminder about why they chose to participate generally led to their remaining on the load management program. Reminding them of the financial incentives associated with the programs didn't hurt either, although the programs generally weren't sold as a mechanism for bill reduction.
Tomorrow's Network: A Two-Way Street
The next generation of load management addresses market-driven issues that arise in a competitive