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The Information River

Information has become one of the most valuable commodities as emerging technologies help individuals manage data with ease and reliability. For utilities, the smart grid is creating opportunities to learn more about customer behavior and energy usage. While adopting these capabilities, insightful utilities are strategizing about their use of data to communicate with customers and industry partners, and address challenges facing the power industry including capacity constraints, reliability, local management and energy conservation.

Mike Ingram, senior manager of demand response at the Tennessee Valley Authority (TVA), points out that data availability relies on the extent to which technologies are utilized. Utilities may adopt a supervisory control and data acquisition system or advanced metering infrastructure (AMI), but they do not always function as smart grid components that provide the most data possible. "It depends upon the depth of deployment," said Ingram. "If AMI is used for meter reading, it's not part of the smart grid. If it is used to improve reliability and outage management -- important elements of customer service -- then it is."

Business goals inform how utilities choose to invest in technologies. TVA is working to value the impact of implementing demand response for its distributor partners against relying on new generation to meet customer demand. The valuation considers the short-term cost of acquiring more data about customer usage against the long-term value of benefiting from that knowledge by executing energy conservation programs.

Ingram's point about various technologies is taken up by Dan Rogier, director of utility group systems at American Electric Power (AEP), who explained there is no easy way to determine how to maximize data use across a company. "You can't buy smart grid in a box," he said. "The good news is that utilities often know what data can best serve customers. The bad news is that getting it to the right people to solve the right business problem at the right time means figuring out how to integrate various technologies into a smarter grid. "Business priorities make that happen," Rogier said.

AEP has now automated many customer orders, including its outage management system, so that customer phone calls to identify a problem are unnecessary; the utility can respond more quickly, and issues can sometimes be resolved remotely.

Baltimore Gas & Electric (BG&E), which serves a capacity-constrained market, acquired valuable data in a smart grid pilot program that helped it learn how customers are willing to reduce power usage during peak hours. After deploying smart meters to 1,000 residential customers, BG&E tested two pricing strategies in response to savings incentives. "Customers were equally motivated by the opportunity to receive rebates by lowering power usage as they were about the ability to avoid higher charges by cutting usage," said Mark Case, senior vice president of strategic and regulatory affairs.

"We cut peak-time demand between one-fourth and one-third, and savings averaged $115 per customer. Ninety-seven percent said they were satisfied with the program," Case said.

Ingram at TVA wants to cut future generation by utilizing smart metering and distribution automation to acquire load information within the transmission system, and transfer it from areas of lower to higher demand. By communicating the cost savings of managing load already in the system, TVA can pay lower generation costs, and pass savings on to the distributor customers and consumers. TVA wants to cut 1,400 MW of peak demand through 2012.

Often the data utilities seek isn't entirely new. "The smart grid is a communication network laid over a power network," said Ingram. "The information has been there -- it's a matter of investing in the benefits of gathering and communicating it quickly and efficiently."

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Intelligent Utility magazine is the new, thought-leading publication on how to successfully deliver information-enabled energy. This article originally appeared in the September/October 2009 issue.

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It's nice to hear BG&E attempted to study the effects on peak demand reductions of different Time-Of-Use (TOU) pricing strategies. But I would have expected this subject has already been studied to death in the utility industry since TOU metering is the intended primary function for the roll-out of smart meters across the country.

I thought it was common knowledge throughout the utility industry that TOU pricing does produce load shifting hence peak demand reductions, where the amount of load shifting depends partly on the pricing ratios between on-peak, mid-peak, and off-peak hours, and also partly on the nature of individual customer's abilities to load shift easily.

Another concern I have had, and I'm sure is shared by other readers, is that utility business goals are not necessarily always going to help consumers practice greater levels of conservation or demand response (DR). For example as the article states it is commonly a business goal of a utility company to potentially lower its costs by improving response times and efficiencies in outage management. The degree of cost reduction can (then) be used to justify some of the expense of deploying an AMI network with outage reporting capabilities, and outage information management within the utility.

AMI networks are also capable, if so equipped, of communicating real-time power demand and energy consumption data from smart meters into residential customers' homes, for things like real-time energy display monitoring and home automation networks to practice much more DR. But implementing this capability with all customers would cost the utility company far more than they would ever benefit from it, since most of the financial benefits would be realized by customers from lower energy bills and smarter energy management. There is no utility business goals that would justify the costs in this example.

There therefore must be, in my humble opinion, widespread regulatory reforms that will allow utility companies to make (or save) money from the commercialization of deploying smart grid plus the in-home consumer technologies for DR, or conservation and efficiency upgrades. Otherwise its widespread commercialization may take a very long time, like many years or decades of “pilot studies”, before it happens, if it happens at all in some places.

Bob Amorosi, M.Eng. Resident of Ontario Canada

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Bob, the first ingredient in a smart grid system is for customers to feel the appropriate amount of pain for using expensive peak electricity. All will follow from there. BUT regulated prices are political prices. Short-term pain for major long-term gain is not politically acceptable. So regardless of how much we spend on the smart grid, most of the benefits will not be achieved. By the way, a sizable part of the benefits of the smart grid, perhaps half or more, could be achieved with smart marketing and pricing, without the cost of the smart grid. But that is way beyond the comprehension of the electric industry.

Some day the problems will get bad enough that the regulators will get the boot. It was Ted Kennedy and Jimmy Carter that appointed people who literally tore up the rule book in US transportation. The electric industry's day is coming. The question is how many of us will live to see that day. In the meantime don't get too big a headache by expecting more than can be accomplished in an increasingly political environment.

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I must agree with you.

Just to enable consumers to see and feel real-time peak electricity prices requires at the very least customers to be able to monitor real-time energy prices. A real-time energy display in the hands of customers could perform this if by design it could communicate with a smart grid, like through a smart meter AMI network. But unfortunately equipping customers with such technology is not even on the radar screens of utility companies for they have no business cases to justify the massive costs to do so.

Your comments Dick on the other article "Energy Market Imperfections: Sizing the Fixed Price Penalty from DSM Expansion" says it all with your statement "It is a regulatory failure to allow a functioning market."

Reprinting my comments from there also;

Regulation is intentionally designed as a failure in a sense, to effectively prevent a functioning market. This is because a common purpose, among others, for regulation is to intentionally shield consumers from real-time prices. The fear has always been the general public could never reasonably handle the fast changing real-time price nature of generated electricity.

This is the underlying reason why I believe Len Gould's proposals for an Independent Market for Every Utility Customer (IMEUC) detailed on this website is worth considering as a way out of this problem. It would at the very least expose everyone to real-time prices, and more importantly equip consumers with the proper high-tech tools to properly deal with real-time prices.

Without something similar to or the same as Len's IMEUC, the only other way around the problem in my humble opinion is to change regulation to open the door for utility companies to make money from commercializing conservation technologies, efficiency upgrades, and DR programs. Otherwise not very much is going to change other than the slow rollout of Time-Of-Use billing being enabled by smart meters rolling out.

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