More Control Through Meters: Smart meters can be designed to do all sorts of things. For instance, here's what over 27 million Enel customers already have in Italy...
These meters are fully electronic and smart, with integrated bi-directional communications, advanced power measurement and management capabilities, an integrated, software-controllable disconnect switch, and an all solid-state design. They communicate over low voltage power line using standards-based power line technology from Echelon Corporation to Echelon data concentrators at which point they communicate via IP to Enel's enterprise servers.
The system provides a wide range of advanced features, including the ability to remotely turn power on or off to a customer, read usage information from a meter, detect a service outage, detect the unauthorized use of electricity, change the maximum amount of electricity that a customer can demand at any time; and remotely change the meter's billing plan from credit to prepay as well as from flat-rate to multi-tariff.
That sure makes shutting off power for lack of payment more efficient.
The average person doesn't mind helping other power customers who are genuinely in need. The same isn't necessarily true for those who try to take advantage of such generosity to live beyond their means. The prepaying option--if executed well--can motivate some of those folks to manage their money better. Or maybe for instance the kids will suffer for the sins of their parent(s)/guardian.
Notice the reference to multi-tariff. One of the most touted features of smart meters here in the U.S. is dynamic pricing.
Flattening Peaks: One of the key things power companies want to motivate via price is a reduction in demand during peak periods. That brings up the concept of the "elasticity of substitution."
...the percentage change in daily peak electricity usage (relative to off-peak usage) in response to a one percent change in relative peak prices.
It's easier to understand that definition via example. The Niagara Mohawk Power Corporation (NPMC) in upstate New York has had dynamic pricing for non-residential customers since 1998. In the following, that pricing is referred to as the SC-3A rate class. Bear in mind that these non-residential customers had other rate choices--like traditional flat pricing.
NMPC’s is the first and longest-running default-service [real-time price] tariff implemented in the context of retail competition. The mix of NMPC’s large customers exposed to day-ahead hourly prices is roughly 30% industrial, 25% commercial and 45% institutional. They have faced periods of high prices during the study period (2000-2004), thereby providing an opportunity to assess their response to volatile hourly prices.
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As a group, SC-3A customers' price response is modest -– the load-weighted average substitution elasticity of 119 customers included in the model is 0.11, which means that their combined ratio of peak to off-peak electricity usage declines by 11% in response to a doubling of peak prices (relative to off-peak prices). This result is consistent with other studies of large customers facing similar pricing circumstances.
Business Category Number Average substitution elasticity
Government/education 34 0.10
Public Works 17 0.02
Commercial/retail 16 0.06
Healthcare 8 0.04
Manufacturing 44 0.16Total 119 0.11
Doubling the price only drove an 11 percent reduction in demand? Of course, when a utility is facing a peak load that could cause brown outs and/or the purchase of high-priced power on the open market, an 11 percent reduction in demand would be quite valuable. It would also likely reduce the use of fossil fuels and push back the need for additional generating capacity. And don't forget that we expect utilities to satisfy peak demand 24/7, which wind and solar can't guarantee.
Changing Bills: When one digs into the above results, it turns out that the savings were even lumpier than they first appear. Just 18 percent of the customers produced 75-80 percent of the reduction in demand. Meanwhile, 35 percent of the customers showed no reductions. It's not like sewage slows down, hospitals have control over when people need emergency treatment, or successful retailers can provide uncomfortable conditions for shoppers. In other words, the results would seem to indicate that targeting the dynamic pricing rather than inflicting it upon everyone would produce most of the desired reduction in energy demand.
Most utilities that provide retail service have a natural monopoly. Thus over the long run, they're essentially guaranteed enough income to cover their expenses--including the cost of smart meters. Customers who save money by helping the utility save money is a good thing...unless maybe that includes the utility mining and selling the data it gains from its customers' smart meters. However, dynamic pricing brings into play customers saving money at the expense of others. Who loses? Well, just about everyone who can't or won't do much to reduce their energy utilization during peak pricing. It's the "can't" part that can be problematic.
A Foreign Example: Energy Australia, the state-run utility in New South Wales, Australia (home to Sydney), is already rolling out smart meters. At this point, the new meters are just going into new homes and replacing broken meters; however, the government is considering accelerating the process. In the following, I've converted the currency to U.S. dollars.
The Vincentian report may exaggerate, but the Energy Australia data is clearly skewed away from low income earners...those folks generally aren't buying or renting new homes. At $296 per year, that extra $25 a month isn't huge...unless you don't have it.A study by the St Vincent De Paul Society ... found that low-income earners could pay as much as 40 per cent of their fortnightly income on electricity.
The report says smart meters will increase the average domestic electricity bill by an average of $74 a year by changing billing from a flat rate to one based on the time of use, if the NSW Government makes their installation mandatory.
It says the biggest impact will be on low-income households including pensioners, young families, people with disabilities and the unemployed because they are at home during energy-use peak periods.
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"It is reasonable to suggest that if the Government decides to roll out smart meters in NSW, annual electricity bills for households may rise in the order of $296 per annum,'' the report says.
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A spokesman for Energy Australia disputed claims that time-of-use tariffs would force up costs. He said 74 per cent of the 180,000 NSW customers on time-of-use tariffs were paying less than what they paid when they were on the fixed rate. Of the rest, 60 per cent were paying $19 a year more.
Closer to Home: In October of last year, Pennsylvania enacted a law which drives reductions in energy consumption and directed utilities to develop plans (by April 2011) for making smart meters with real-time pricing available to customers upon their request. Allegheny Power, which serves about 700,000 customers in the western part of the state, has pursued this aggressively. From late last month...
Allegheny Power Co.'s plan to begin charging customers $5.86 a month in February to pay for sophisticated electric meter technology has been nixed by the state.
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According to the company, all customers beginning in February would pay a monthly surcharge of $5.86, which would increase to $14.34 a month by June 2011, $15.57 a month by June 2012 and $15.77 each month by June 2013.
"At $15 a month — that's a massive rate increase for consumers," Popowsky said.
Allegheny Power spokesman Doug Colafella referred to the company's PUC filing, which said surcharge changes will be based on forecasted revenue requirements for the next 12 months. He said the total cost to Allegheny Power for its smart meter plan will be $620.4 million, with more than $40 million of the total cost not charged to the utility's in-state customers.
The smart meters--which will include wireless communications--are a few hundred dollars, and there's the cost of installation for both the meters and the supporting infrastructure. While the article says the plan was nixed, it may have only been delayed for more thorough consideration. Meanwhile, maybe Allegheny Power will--like some other utilities already have (example here)--get some stimulus money to subsidize the cost of converting to smart meters.
Wonder if the company is overestimating how much demand reduction the smart meters will drive. What percentage of a drop in peak load will merely be shifted to cheaper hours?
Night and Day: One other thought...if a factory converts to night-shift operations to save on its electrical bills, the workers can end up paying more for their own electricity to sleep comfortably during the day. Hope they get paid more for making that sacrifice.
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