(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
Technology for the Masses
The consumer-centric smart grid and its challenge for regulators.
grid can reduce greenhouse gases from electricity generation by up to 12 percent by 2030.” The FCC also seeks to help consumers who “lack access to and control of their own energy data to understand and manage their energy use, which limits innovation potential and energy savings of smarter homes and smarter buildings.” The FCC recognized that access, privacy, and real-time data are the core requirements and necessitate changes in current “state and federal policies.”
In June, the White House released a report calling on the nation to expand and embrace a more interactive smart grid. This report supports a policy framework to modernize energy information and communication technology through new smart investments for the nation’s utilities. It also calls on states and their regulators to design policies that provide consumers with timely, predictable machine-readable information in a standard format to enable consumers to conserve energy and use it more efficiently. 9
A Quandary for States
New utility investments in smart grids or advanced meters with smart technology and built-in communication capabilities require regulatory approval. 10 This means approval for reasonable cost recovery of the utility’s rate base investments in either grid improvements or smart meters. The choice of specific options and the performance requirements is a joint utility and regulatory matter. The benefits include improved network reliability, better access for renewable energy sources such as wind, as well as reduced operating cost and more accurate monthly utility bills. Some regulators have or are considering approving such upgrades for just these reasons alone.
When smart grids are authorized and added, the utility will be able to establish two-way communication with its customers without the Internet and independent of the number of IP addresses available. It would, however, be shortsighted to make these investments without at least considering the emerging technology of the future. As the emerging technology expands and energy-using devices are made smart with their own IP addresses, it will become apparent that the smart grid and smart meter are inputs, and likely not the ultimate purpose. This would make the decision to add smart grids or meters somewhat more significant than the rather narrow operating cost saving and reliability reasons regulators currently use to justify their decisions.
It might turn out that a utility upgrade of the grid or the meter won’t be necessary or sufficient to capture the full benefits of a market in which consumers can either actively, or passively through some third party, embrace the new technology to take control of their energy use and better manage how much they pay for the energy that utility pipes and wires companies deliver. Given this fact, innovating enterprise companies such as Microsoft, Google, Verizon, Apple, Amazon, and others aren’t waiting for utility companies to join the party.
Coupled with IP addresses assigned to appliances and energy using devices on the other side of the meter, smart meters provide a direct path for utility companies and regulators to take center stage in the digital energy management and efficiency market. Working with software designers and manufacturers, utilities and regulators potentially could