The procurement and supply-chain functions of today’s utility are the Rodney Dangerfield of the utility cost-cutting paradigm: They don’t get any respect. Supply chains in most industries extend...
Maximizing Customer Benefits
Performance measurement and action steps for smart grid investments.
will result in missed opportunities, needlessly long customer payback periods, and ineffective use of smart grid investment grants funded by U.S. taxpayers.
Though safety and environmental benefits have been documented in smart grid implementations, three types of benefits appear to be the most tangible for customers: economic benefits, reliability improvements, and customer service enhancements.
• Economic Benefits: Publicly available information from comprehensive and independent evaluations of smart grid deployment performance, combined with reviews of publicly available smart grid business cases, make it fairly clear that 80 percent to 90 percent of the economic benefits of full smart grid deployments available to customers come from three sources: meter reading and management savings; time-differentiated rate implementation; and distribution efficiency. Though every utility’s experience will vary with situational characteristics and deployment variables, measuring economic benefits in just these three areas is likely to satisfy the 80/20 rule (see Figure 1) .
Measuring meter reading and management savings from AMI deployment is relatively straightforward. The accounts of departments for which reductions in force are anticipated as a result of smart grid deployments can simply be compared pre- and post-deployment to quantify savings. Dollar amounts can be translated into metrics for additional precision, including, for example, meter reading and management costs per meter.
AMI deployments also offer value through time differentiated rates. The most appropriate performance measurement approach should consider the circumstances under which such rates are offered. For example, performance can be measured through customer adoption percentage—likely more appropriate in the case of voluntary or opt-in time differentiated rate offers—though utilities might argue that time differentiated rate participation is only partly under utility control. Another approach is to measure overall impact on demand relative to a baseline—likely more appropriate for default or opt-out rate offers, but useful for measuring the performance of voluntary rate offers as well.
Getting customers to adopt time-differentiated rate offers on a voluntary basis has proven extremely challenging, as most designs increase customer risk and effort. The peak time rebate approach, which features carrots instead of sticks, warrants strong consideration as a result. Some of the research on time-differentiated rate designs indicates that carrot approaches can be just as effective as stick approaches in modifying customer usage behavior. 2
Integrated volt/VAR control offers significant improvements in aggregate distribution efficiency, reducing the usage of customers located on treated feeders by a couple of percentage points through reduced voltage and optimized power factor. Performance can be evaluated by measuring energy accepted by substations and comparing it to sales volumes billed. Such a measure would also include metering errors, billing errors, and theft, but these revenue capture issues are also subject to improvement through smart grid investments and warrant measurement and performance management efforts.
• Reliability Improvements: Most smart grid deployment plans include improved capabilities in distribution automation and status monitoring designed to improve grid reliability. Independent assessments have confirmed that significant improvements in reliability—moderate double digits as a percentage—are indeed available from these capability improvements. Existing reliability metrics such as SAIDI, SAIFI, and MAIFI 3 are likely sufficient to measure these improvements