This guest post was written by Matt Smith, senior director of Silver Spring Networks' demand-side management business.
Rather than building new power generation to meet the rising demand for energy, utilities are increasingly turning to the latest smart grid technology to help reduce energy use during peak consumption times. These programs will profoundly change how all American households and businesses think about and consume energy. Once invisible to most people, electricity consumption is now poised to enter our day-to-day lives, driving deeper awareness and potential savings for all utility customers.
The Brattle Group recently released a survey of more than 200 energy industry experts who predict U.S. peak demand for electricity will decline by 7.5 to 15 percent compared to what it would have been without demand management programs. The anticipated reduction results from a combination of factors, including policy drivers that have dramatically increased the cost to build new generation, cutting-edge technologies that enable new capabilities, and shifts in consumer attitudes that encourage behavioral change. But of all these factors, the adoption of new technologies will likely create the biggest impact on people's lives.
To understand this shift, we need to look back a decade or more to the programs that arose following the California energy crisis and in other areas where utilities needed to address energy shortages caused by extremely hot weather. These demand response programs relied on remotely controllable "switches" installed on air conditioners to enable utilities to reduce energy consumption during periods of grid instability. Utilities typically leveraged one-way paging frequency modulation communications to send signals to these switches to turn off for a short time to reduce load.
In exchange for enrolling in the program and allowing the utility to control the operation of their air conditioner, customers received a one-time or ongoing discount on their monthly energy bill. The systems' one-way communications often meant customers had no choice on whether to participate in a given event. While participation rates rose as high as 20% at some utilities where the incentives where high, many programs achieved very limited customer penetration.
Flash forward to today, where the deployment of smart meters means utilities and customers gain robust, two-way communications. Now both parties can understand how much energy is being consumed and utilities can send not only load control signals to devices but also the current price of electricity. These two-way communications leverage standards that allow any manufacturer to develop compatible products. Standards enable a robust ecosystem of interoperable devices, and consumers can create smart energy homes that can automatically respond to price or load control signals. Such systems reduce usage or shift usage to times when electricity prices are low.
Utilities are empowering their customers with these new technologies in increasing numbers. In 2012, Oklahoma Gas and Electric (OGE will be the first utility in the country to offer a smart grid-based demand response program to all its customers. OGE has proven the technology and consumer acceptance through extensive pilots over the past two years. The results show an average peak demand reduction of 33% compared to a control group that did not have the technology. OGE believes that by deploying these solutions, it can avoid building two new power plants.
OGE customers enrolled in the program will receive a smart thermostat, which can modify its settings based on electricity pricing. Customers can opt for a variable peak rate plan, where electricity costs more during the hottest hours of summer days but is priced much lower than average during "off-peak" times. The smart meter will send the current electricity price to the thermostat, and the customer can program it to change temperature settings automatically when the price of electricity is high, reducing consumption. But customers can also choose to pay more for energy at that time of day if they need maximum cooling.
That customer choice is key – that element of customer understanding and control comes from the two-way communications with the smart meter, delivering clear value to the consumer and helping utilities keep more customers enrolled in these programs. Utilities can now leverage customer engagement solutions to provide advanced insights, delivered via a website as well as devices such as a smart thermostat. The real-time feedback from a website gives customers choice and control and helps utilities understand customer behavior much faster. The smart grid enables more robust direct load control programs, but experts predict more rapid growth of price-based programs moving forward.
With improvements to the products that consume energy, we will gain choice and control on how and when we consume energy. Thinking about the price of energy at any given moment would be daunting, so we'll adopt "set and forget" solutions to automatically achieve our personalized balance between comfort and savings. In-home technology, combined with smart grid communications, will ultimately – and automatically – let us align energy use and our values, both environmental and economic.
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