by Kenny Belcher, Tampa Electric Co., and Bud Vos, Comverge
A central promise of a real-time, proactive and intelligent grid, or smart grid, as it is widely known, is that it will create a two-way dialogue between utilities and consumers.
As the idea goes, consumers want to take control of their energy use, and once empowered with real-time information and the appropriate tools, they will invest the time required to manage their energy consumption.
To help turn this promise into reality, a market called home-area networking (HAN) emerged around 2004. HAN vendors focused on building devices that would provide consumers with timely, accurate and actionable data and enable them to control their appliances.
In theory, these devices would help consumers cut their energy bills up to 15 percent, help utilities balance supply and demand, and deliver environmental benefits.
It all sounded so perfect. But as time has shown, it will take more than one device to transform the way consumers have managed their energy consumption for 100 years.
One of the biggest lessons learned is that consumers don’t want to invest significant time in managing their electricity usage. A 2010 Accenture study showed that consumers spend on average 6 minutes each year reviewing their utility bills. That equates to about 30 seconds a month, or 1 second a day.
As a result, the industry is beginning to re-evaluate how it engages consumers. Consumers are willing to cede some control to utilities if it means they can reduce their energy bills substantially.
This concept represents a significant shift from the initial consumer empowerment drive but it doesn’t mean the HAN market is dead. More likely, the opportunity is too big. Homes consume some 20 percent of all energy in the U.S., and it could be used more efficiently.
As energy costs and demands continue to rise and complexity increases with the introduction of renewables and electric cars, we can’t afford to ignore one-fifth of the nation’s energy usage because the first attempts to improve management and efficiency didn’t go to plan.
Instead, we must move on and look at alternatives that can deliver on the promise of the smart grid and provide consumers and utilities with benefits.
Demand-side resources and more advanced control systems are two viable alternatives that could provide the best of both worlds. Namely, they give consumers control over their energy consumption while giving utilities a reliable, predictable view into energy demand.
What’s more, they overcome the key challenge encountered by the initial efforts by not requiring significant, ongoing time investments from consumers.
Granted, these solutions are a lot more complicated than putting an LCD screen or similar device on a consumer’s kitchen table. Properly implemented, however, demand response programs can cut peak energy use to help utilities save costs by avoiding the need to purchase expensive electricity on wholesale markets while increasing customer satisfaction by helping consumers save money on electricity bills. Demand response programs also can provide a foundation to build tomorrow’s smarter energy infrastructure by enabling advanced energy management programs such as dynamic pricing.
Dynamic pricing programs, which have many names-critical peak pricing and time-of-use (TOU) pricing to name a few-work on a similar premise to the way many other services are charged, such as mobile phone services. That is, price fluctuates with demand and consumers are rewarded with cheaper prices for using electricity when demand is low.
In the case of home energy management, charging less for kilowatts during off-peak times encourages consumers to run certain appliances during nonpeak hours. Armed with the information, some people will spend more to run their air conditioners all day on a 95-degree scorcher. At least with dynamic pricing, consumers makes more informed decisions on when they use energy. Consumers are empowered to control their energy costs but in a much more automated way. Consumers program their appliances to run at certain times of varying electricity prices set by their utilities. It’s automated empowerment and has the potential to deliver the best of both worlds.
Tampa (Fla.) Electric Co. provides service to some 677,000 residential, commercial and industrial customers over 2,000 square miles of Florida. In 2007, Tampa Electric introduced the Energy Planner program to help the utility better manage peak demand and provide residential customers with the ability to take a more active role in managing their energy consumption.
The Energy Planner program offers residential customers four pricing rates for electricity-low, medium, high and critical-based on usage, time of day and the day of the week. The critical rate can become active at any time and reflects the increased cost of providing electricity during extremely high demand. Participants program their major home appliances to respond automatically to the pricing tiers and take advantage of lower utility rates, which are available 87 percent of the time.
This is enabled through the use of smart thermostats and intelligent load control relays, which provide residential customers with the ability to control the operation of central heating and cooling systems, electric water heaters and pool pumps based on times when electricity costs are highest.
Since 2008, the Energy Planner program reliably has shed 3.1 kW per customer during winter peak and 2 kW during summer peak demand.
Today, nearly 2,000 customers are saving money on their energy bills-average savings is 8 to 10 percent annually per customer-by programming their thermostats and high energy-use appliances to respond automatically to the price tiers and dynamic price signals sent by Tampa Electric.
Put another way, the program is achieving similar savings originally promised by the initial wave of HAN devices.
Aside from savings alone, it is important to look at how consumers respond to the program, particularly given the impact of not engaging consumers in similar energy management initiatives. In the case of Tampa Electric, more than 90 percent of customers are satisfied with the program and likely to remain enrolled. More than 80 percent reported that participation in the program required no significant adjustments to their lifestyle.
The premise of automated empowerment could be one of the keys to realizing the smart grid. As the Tampa Electric implementation demonstrates, programs of this nature simplify and streamline the consumer experience. By making it easy to participate and customize one’s level of engagement in dynamic pricing programs, utilities can deliver significant cost savings to customers while enhancing grid reliability, security and efficiency.
Kenny Belcher is senior load management analyst at Tampa Electric Co. Reach him at firstname.lastname@example.org.
Bud Vos is chief technology officer and senior vice president of utility sales at Comverge. Reach him at email@example.com.