Achieving the smart grid’s potential requires a revolution in electricity pricing. Smart metering and smart rates might yield surprising and beneficial changes in the U.S. utility industry. But...
Engaging customers will require more than TOU pricing.
improve power quality more efficiently and effectively than making the adjustments on the generation supply side (see PNNL study) . It might be possible to do away with spinning reserve from generators by providing this service at lower cost on the load or demand side. For example, if a utility’s grid experienced a sudden jump in demand or drop in supply due to a generator or transmission outage, the price would rise, leading energy managers to curtail demand. A 5-cent rise would prompt the most price-sensitive customers to curtail use by allowing temperature to change by a few degrees and curtailing other appliances. If more responses were needed, a 10-cent price increase would lead to further temperature changes for the price-sensitive customers and some temperature changes for the less-sensitive customers. This adjustment mechanism likely would reduce sufficient demand for long enough to start a gas turbine and get it synchronized with the grid, obviating the need for spinning reserves. Similarly, with a bit more sophistication, reactive power needs could be supplied by demand-side management of air conditioners, pool pumps, and air handlers. In order to provide these services, customers would be offered a payment for giving the utility the right to allow momentary, probably imperceptible, interruptions to these devices.
Perhaps the greatest benefit of managing demand in this manner is the resulting increase in energy-system reliability. In each of the most recent major cascading blackouts, demand exceeded generation by only a relatively small amount. If that amount could be shed on the consumer side, the utility would avoid a cascading blackout. At present, a utility could cut off a major customer with an interruptible contract or could black out a substation. But interruptible contracts call for warning periods, and blacking out a substation is an extremely costly solution since everyone served by the substation would lose power. The cost of all customers losing 10 to 20 percent of their power for a limited time via targeted curtailments would be significantly lower than the costs associated with having some customers lose all power for a longer time.
An ancillary benefit of these electronic energy managers is that they would support the introduction of more wind and solar power to the grid, as well as aggressive electricity reduction programs in California, New York, Vermont, and several other states. In today’s utility system, maintaining power quality with a substantial amount of generation from intermittent renewable resources would require fast-reacting storage, such as batteries, which would be expensive. The customer side of the meter offers much less expensive control with which to compensate for the intermittency of these growing generation sources. Finally, demand reduction, particularly at peak times, would be facilitated by these energy managers, since they would inform consumers and enable them to translate their desires into concrete action. By shifting demand from peak to off-peak, these energy managers would allow the installation of more baseload units. In contrast to gas turbines, the nuclear generators and new coal plants with carbon capture and sequestration can’t be cycled. To introduce these new units into the dispatch