Smart grids and nodal markets spark the emergence of a transactional grid. In fact it’s already happened, and we’re just becoming aware.
Set and Forget
This kind of interaction carries through to other efforts of demand response, including financials and pricing.
Following the old model for direct load control programs, customers would receive financial incentives in exchange for their participation in DR programs, but this was typically a fixed amount that was tied to the level of participation they initially agreed to.
New DR pricing structures and AMI usage data open doors to incentives based on performance or price, which allow and encourage consumers to better manage their energy use. The key to these platforms’ success is flexibility: they offer an array of options, as there’s no one-size-fits-all approach. For example, utilities can provide pricing plans like peak time rebate (PTR) programs that reward customers for voluntarily reducing consumption during peak or other pre-determined times. Another option is to implement critical peak pricing (CPP) plans that work more like penalties, charging more if customers don’t opt to make certain power reductions. In practice, a combination of the different pricing strategies tends to work best, as it lets consumers make the choice about how they want to engage in energy conservation. But in all cases, consumers perform better and exhibit higher satisfaction when automation is available to aid the response. A set-and-forget choice, as demonstrated in the Gulf system, provides better satisfaction to customers and more reliable load drop to the utility.
The two-way communication infrastructures that now are built into sophisticated DR technologies make dynamic pricing programs such as PTR or CPP manageable and affordable for utilities. Web-based control panels that can be accessed across a range of different devices – computers, smart phones, tablets etc. – facilitate dialogue and deliver variations on pricing structures to different customers, all at the same time.
One of the most significant benefits of two-way programs for consumers and utilities is automation. The web portals, smart thermostats, and smart switches now available to consumers allow them to set a control schedule for all high-energy use appliances, such as air conditioners, pool pumps, and water heaters. This set-and-forget capability makes it easy for customers to participate, and also provides a more predictable load drop as the two-way automated information exchange enables a utility to aggregate all adjustments to a participant’s control schedules, providing advanced insight into the capacity made available by all program participants. As a recent Brattle Group study has shown, using technology to automate dynamic pricing programs can deliver approximately a 40 percent increase in peak demand reduction, as opposed to relying on the consumer to manually reduce demand.
As public opinion and government influence continue to press for increased energy consciousness, demand response no doubt will remain a crucial piece of the energy management puzzle, as it has a tried-and-true reputation. But the demand response in action in the future will succeed in meeting energy reduction targets because of the work that regulators, utilities, and customers do together. Two-way communication, energy efficiency initiatives, and innovative energy management programs like dynamic pricing set the stage for consumers to fully engage in their energy management. Smart grid