by Betsy Loeff, contributing writer
While swapping small talk at a barbeque, I recently wound up trying to convince an average electricity consumer that demand response programs really are good for everyone — not just the local utility — and critical-peak pricing is more than just a ploy to boost utility profits. He wasn’t buying it.
Such negative perceptions are worth noting because many utilities now are considering — or offering — demand-response rates to improve system reliability. The thinking goes that if you expose customers to the real cost of electricity, consumers will shed load when prices spike during peak events.
But, the effectiveness of such programs depends on one element utilities can’t control: consumers. They must “buy into” the idea to make it work. Following are pointers on communicating demand-response rates in ways that encourage consumers to up response and cut demand.
There are many flavors of demand-response, including direct load-control and dynamic pricing such as critical-peak rates, which rise dramatically on those few days when the utility faces severe cost increases to meet consumption extremes. Such rates typically are designed to be in effect only about 100 hours out of the 8,760 hours in a year.
Recent research shows critical-peak pricing to be especially effective at helping utilities cope with soaring peak demand. What’s more, experts say that automation to facilitate load-control is key to making critical-peak price signals truly effective.
Dr. Karen Herter is now a senior program analyst for Heschong Mahone Group, an energy-efficiency consultancy. In 2002, she was one of the architects for a two-year, $20 million statewide pricing study conducted in California. Among other things, that research examined consumer response to simple time-of-use pricing versus critical-peak pricing with and without automation. The automation allowed consumers to preset appliances such as air conditioners and pool pumps so that these devices would use less energy when a critical-peak pricing signal came in from the local utility.
“Time-of-use rates worked for the first year, but didn’t work for the second,” Herter recalls, while critical peak rates worked both years. Without automation, those rates delivered around a 13 percent reduction in usage. With automation, critical-peak pricing dropped usage between 27 percent and 34 percent.
Even when time-of-use rates were new and on customers’ minds, those rates never inspired more than around a 4 percent drop in usage. Herter thinks she knows why: “Customers aren’t getting any information. No one is beeping them or calling. With a critical-peak price, every now and then you’re sending a signal. It’s like reaching into a customer’s home, shaking that person and saying, ‘Hey, you need to do something right now.'”
“Flipping off the lights — that’s a big price for the consumer to pay,” says Roger Gray, vice president of business development at GoodCents, a company that runs energy-saving programs for several large utilities. “If you don’t include automation in a price-responsive program, I don’t think that program has a great chance of succeeding.”
Gray is an expert at communicating demand response, and he offers these tips:
Lose “control.” The word “control” does not sit well with consumers, he says. Play up the idea of shifting load to off-peak hours. “It helps the utility avoid building additional power plants. It relieves strain on the transmission and distribution system.” Focus on the benefits of the program, not the load-shedding mechanics of it.
Think green. According to Gray, load-shedding programs that promote the money consumers will save are less effective than those that promote environmental issues. Why? “If you make it about the money and the consumer is getting uncomfortable, he may say it’s not worth the $5 he’s saving that month to participate. But, if consumers join the program because they believe it’s important to protect the environment and save valuable resources for their children, why would they defeat load-shedding devices? They’d be going against their own principles.”
Sell proudly. Gray says he’s seen consumers thank utilities for offering demand-responsive rates because those customers understand the environmental benefits. Don’t be bashful when promoting demand-response pricing, he says. Pitch it as a way the utility helps consumers do something good for the environment. “I don’t know if utilities consider these programs a customer service, but they should,” he maintains.
Heschong Mahone’s Herter adds another communication pointer. She recommends that utilities relate their pricing programs to something consumers already know: time-of-use telephone rates. According to her, “Consumers understand that, during certain times of the day, using the cell phone may cost more.” With demand response, so will electricity, she concludes.
Betsy Loeff has been freelancing for the past 14 years from her home in Golden, Colo. She has been covering utilities for almost four years as a contributor to AMRA News, the monthly publication of the Automatic Meter Reading Association.