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Do Smart Home Devices Cut Electricity Usage in Texas?

Tech-savvy millennials comparing Texas electricity rates are doing more than chasing a trend. They’re part of the “internet of things” (IOT) revolution in retail electricity. There’s no wonder the smart home or IOT market hit about $12 billion last year. With giants like Google and Apple going head-to-head, the market has been forecast to grow even larger — up to $1.29 trillion in consumer spending by 2020.  And any Texas REPs kvetching about it ought best get off their haunches before they get stomped in the stampede.

Texas consumers expect smart home devices, such as smart thermostats, to make their home’s more energy efficient. Several studies have shown that smart thermostats do in fact reduce your energy usage, depending on how it is used, home occupancy patterns, structural characteristics, heating and cooling equipment, and climate. Those savings can run between 4% and 12%  for heating and up to %15 for cooling. Yet, apart from the value to the individual household, there’s a much larger value hovering over all smart homes. For Texas electricity customers, it’s not only catching on but also it’s reducing the price of electricity.

Demand Response is a Thing

Electricity customers that own smart thermostats can choose to sign up with a Demand Response (DR) program with their local utilities or retail energy provider. Customers allow the DR program to access their smart thermostat via the internet to raise the temperature settings by 3 or 4 degrees Fahrenheit until the peak demand period ends. Customers are usually notified between 10 and 30 minutes of a demand peak, which can last for 2-4 hours. Customers are then compensated in the form of a rebate at a rate of $/kWh of energy reduction. While other smart appliances could be controlled as well, most DR programs are limited to smart thermostats, such as Honeywell’s Lyric, Google’s Nest, and Ecobee. 

Not only do customers reduce their energy usage and save money, each household that participates helps reduce the demand for electricity during a peak demand event. This keeps electricity wholesale prices down  —which reduces the price of electricity for everybody. According to a 2014 EIA report, some 9.3 million customers, most (93%) of them residential, participating in DR programs each saved about 100 kWh annually and received an average of $40. Commercial and industrial customers that also participated also received between $600 and $9,000.

How Much Does Demand Response Reduce?

Because DR programs are incentivized, the number of participants and the amount of electricity conserved is growing.

  • According to ERCOT figures, from 2013 to 2014, participants in residential DR grew from 151,793 to 721,273. Participating commercial and industrial customers also grew from 30,275 to 50,205.
  • In 2012, when WeatherBug Home started its “Bring Your Own Thermostat” program with CenterPoint Energy, they conserved .6 MW of residential air conditioning load. Next year as more customers joined, that amount grew to 2.83 MW. By 2015, they were able to pass 8.9 MW  to CenterPoint. On average each participating home reduced their demand by 1.76 kW, an energy efficiency increase of 13%.
  • In San Antonio, CPS Energy’s DR program is currently capable of shedding 100 MW of residential load per hour. That spares CPS customers from having to pay more for electricity when hot weather sends wholesale prices into the stratosphere.
  • Generator companies are beginning to regard DR as a form of generation capacity because it’s more rapidly deployable, less polluting way of meeting peak capacity requirements, and a whole lot cheaper than building new power plant. Beyond 2017, AEP predicts its demand response will grow to provide 7% of its generating capacity portfolio.


Beyond Demand Response

Since summer is the high demand part of the year in Texas, the period from June to September is when utilities issue demand response events. But because smart thermostats and other devices can track energy use year round, Texas electricity customers are looking for more ways they can take advantage of those capabilities to safe even more.

To cash in on that growing demand, the best Texas REPs are finding ways to empower their customers to stay on top of their electricity usage by offering them access to easy-to-use applications and online tools. Several such systems already taken advantage of using weather forecasts to remotely tweak settings on customers’ smart thermostats to coax further efficiency. Customers can also see which smart appliance is using the most energy and remotely control them. Some REPs send out alerts when usage has hit a certain preset level (handy especially for No Deposit Houston or Dallas plans) and to help customers better manage their energy usage and budgets.

In the near term, customers may no longer need to be tech-savvy to see how they are benefitting from the changes demand response brings to the Texas grid. They’ll be able to see the convenience and savings not only on their on their monthly bills but also on their phones.

Neil Bowery's picture

Thank Neil for the Post!

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