Hold on to your hats. The vaunted and vilified “standard market design”, once thought dead and buried, has been resuscitated, with all attendant chaos and rhetoric, but this time in the guise of a...
Smart Grid in America and Europe (Part II)
Past accomplishments and future plans.
it is difficult to determine if smart grid demonstration projects and technology will result in the anticipated benefits. The U.S. smart grid funding from the ARRA was only distributed in 2010 and evaluations are forthcoming. Clearly work must be undertaken to adequately address the topics discussed above. There are still three important policy considerations in implementing a successful smart grid deployment program, but they appear not to have received sufficient attention: public education, cost recovery, and the aging workforce.
As part of initial rollout of smart grid technology, smart meters have garnered much bad press. Consumers complain that they have not seen a reduction in their bills, but in fact substantial increases. Customers have filed suit against utilities alleging that smart meters malfunction, causing bills to be more than seven times than before. Pacific Gas and Electric (PG&E) customers in California have petitioned for PG&E to stop its smart meter rollouts. 69 This is an example of misunderstandings and inaccurate expectations of smart grid benefits that could be prevented if the utility and third-party contractors explain, from the onset, through public outreach efforts, the advantages and potential disadvantages. One of the disadvantages is that more complex rate structures could increase bills.
In addition to giving consumers realistic expectations about the technology, it is important to introduce other factors that might affect the amount of benefits and how they accrue. For example, it is important to show customers that economic benefits of the smart meter require the customer to be more aware of when he uses electricity. 70 In the case of time-of-use pricing structure, also known as dynamic pricing, electricity at high load times, usually between 6 p.m. and 9 p.m., will be more expensive than electricity after 9 p.m. 71 If a consumer usually runs most of his appliances after dinner and before bed, between 6 p.m. and 9 p.m., then his electric bill will probably increase because he is consuming electricity at a high price period. In order to experience the price benefits, the consumer will have to adjust his electricity consumption to after 9 p.m. It is also worthwhile to take a broader view of consumer education by including other ways to decrease their bills, such as efficient light bulbs and appliances. Even if the smart grid technology is not 100 percent responsible for the benefits, a positive consumer experience will give long-term support to successful smart grid implementation.
Electricity infrastructure is expensive, which contributed to the trend towards centralized generation so as to take advantage of scale and eliminate the need to pay for small inefficient power plants. The appropriate cost recovery must be instituted to facilitate smart grid deployment, especially when some of the existing infrastructure is still depreciating. 72
At first glance this should not be an issue because there is growing consensus that investment in existing infrastructure, and in the right circumstances investment in new infrastructure, are necessary to best serve consumers. Consumers are the main beneficiaries of the grid, so it therefore makes sense that the utility should be allowed to recover both