Pilot projects are demonstrating the potential of smart metering and smart rates to make the most of supply and demand resources. But as empirical studies show, not all pricing designs are equally...
Engaging customers will require more than TOU pricing.
to price changes and personalize to their own home energy policy. The utility would send real-time pricing information to the energy manager, which then would execute the customer’s chosen policy, with no further customer attention needed. For example, a consumer might specify that, at 20 cents/kWh, the thermostat be shifted by 3 degrees. At 30 cents, a 6 degree change might be specified. At $1/kWh, the customer might want all appliances turned off, except a few essential lights, clocks, and entertainment equipment. Such a device, capable of receiving price signals from the utility and communicating with appliances throughout a residence or business, is well within the state-of-the-art of electronics. It could be coupled with an advanced meter with two-way communication for an estimated total installed cost of perhaps $300 to $400.
A greater difficulty would be constructing a user interface that most electricity customers could use. The interface software would guide the average consumer through decisions on setting the energy manager, perhaps augmented by phone support. Some programmable thermostats talk to the customer, guiding decisions. A careful study of how people would interact with this device, combined with modern communication devices, could accomplish the task for most customers.
Like time-of-use and critical-peak pricing, this energy manager could efficiently and effortlessly lower peak demand. It has much else to contribute. If an unforeseen event occurred, the energy manager could react to it instantly—helping to maintain the stability and reliability of the grid. For example, weather forecasts might expect cloud cover that would keep the temperature below 90 degrees F. However, the weather front might stall and unexpected full sun might raise the temperature to 96 degrees, significantly increasing the demand for cooling. At the same time, an unexpected supply event, such as a generator or transmission line tripping, could produce an immediate shock to electricity grid. With real-time pricing, a customer would have an immediate incentive to respond to these unexpected events; the response could be large and fast, and each customer might use only 10 to 20 percent of load, if a large number of buildings had an energy manager acting on their behalf. By comparison, time-of-use pricing and day-ahead critical pricing couldn’t react similarly to the situation. At present, the utility must maintain spinning and non-spinning reserves to handle such a contingency, leading to costly amounts of spinning and standby reserve.
In contrast to time-of-use pricing, the energy manager would deal with actual real-time changes in demand by allowing customers to wash a load of clothes during the peak time of use, if the system’s actual demand and prices were less than expected.
A 2007 Pacific Northwest National Laboratory study 5 employed a device that reacted to a drop in frequency to restore power quality. The experiment showed that the device could help to maintain power quality.
The Benefits of Control
Because the energy manager would react instantaneously to price or control signals, it could be used to bring load-side resources into the ancillary services markets. It could help to level demand, hold the power frequency close to 60 hertz and