by David K. Owens, Edison Electric Institute
Studies show that dynamic pricing can benefit customers and electric utilities. The lower off-peak prices represent a savings over regular electric rates. If customers can shift demand from peak to off-peak hours, they can benefit further. Combining a price signal with an automation technology benefits customers typically twice as much. Utilities, by encouraging customers to shift some demand to off-peak hours, can defer building additional capacity.
Caution, however, has been expressed about applying dynamic pricing to low-income customers. Some people say dynamic pricing would harm low-income customers with little power-usage discretion. They would have less to work with in shifting demand to off-peak hours. Others say low-income customers use less energy than typical residential customers and would benefit from a rate that charges more during a few peak hours and less during most other hours. If low-income customers were to shift some demand from peak to off-peak hours, they would benefit even more.
To learn how dynamic pricing affects low-income customers, the Institute for Electric Efficiency (IEE) released a white paper, “The Impact of Dynamic Pricing on Low-Income Customers.” The IEE paper looked at five recent studies on how dynamic electricity prices affected residential customers. In each study, low-income customers benefitted.
In one study, low-income customers were twice as responsive to higher price signals as higher-income customers. In two studies, low-income customers were equally as price-responsive, and in the two others, they were half as responsive but still saved money compared with their old, flat electric rates.
Even without responding to dynamic rates, a large percentage of low-income customers would benefit from dynamic rates because their load profiles are flatter than average. This percentage varies with the specific dynamic rate design, but based on simulation results, more than half of low-income customers would benefit in switching to a dynamic rate.
As the industry moves forward with smart meters, many utilities are creating partnerships with high-tech firms so customers can realize the full benefit of smart meters and the smart grid. Leading technology companies with which the industry is working include OPower, IBM, Cisco Systems Inc. and Silver Spring Networks. These partnerships help customers better manage their energy use. They enable utilities to deploy advanced networking products, software and services rapidly and cost-effectively.
Developing Equipment Standards
With technology advancing so fast, the devices and systems that will make up the nationwide smart grid must communicate and work together seamlessly. To do so, EEI is collaborating with the National Institute of Standards and Technology (NIST) under the leadership of the Department of Commerce and Secretary Gary Locke. The goal is to develop standards that will become the foundation of an interoperable, secure smart grid. Much already has been accomplished.
In January, NIST published its “Framework and Roadmap for Smart Grid Interoperability Release 1.0.” It identifies 25 initial standards and 50 more standards for industry comment. The report also lists 15 priority-action plans that address gaps NIST identified. This year NIST established the Smart Grid Interoperability Panel, a public-private partnership that provides a more permanent organizational structure to support the ongoing evolution of the NIST framework. The panel also will help NIST identify, prioritize and address new and emerging gaps to be filled to ensure smart grid interoperability and security.
The panel has established two standing committees, the Smart Grid Architecture Committee (SGAC) and the Smart Grid Testing and Certification Committee (SGTCC). SGAC focuses on the smart grid architecture and conceptual model. The SGTCC focuses on developing the foundation of the testing and certification, or Phase III, of the NIST process and establishing criteria for testing and certification labs.
A NIST Smart Grid Advisory Committee also has been established to advise the NIST director on the overall direction, status and health of the smart grid implementation. I am honored to be a candidate to serve on this designated committee.
In June, the panel asked the North American Energy Standards Board (NAESB) to develop a basic energy-usage data format standard, which will allow utilities, vendors and customers to exchange detailed electricity usage and pricing information in a consistent format. NAESB has committed to complete the standard before the end of 2010.
As of this writing in early August, the Federal Energy Regulatory Commission (FERC) has set September to begin its rulemaking process on standards evolving from NIST. FERC issued a final smart grid policy statement that addressed its jurisdictional authority, set priorities for adopting the standards, and put in place an interim rate policy. Each action will encourage and expedite investment in smart grid systems. EEI also continues to engage other federal agencies, such as the Federal Communications Commission and the Department of Energy (DOE), to ensure electric utility interests are represented in the numerous smart grid policy proceedings and those making the policy decisions understand the impact on utility customers, including such areas as data access and privacy. EEI also encourages electric utilities to get more involved now as the standards development process moves forward. Early, coordinated involvement is the only way to have a meaningful, utility industry impact on the standards being developed.
One of the industry’s top priorities as it moves toward a more automated electric grid is securing the new equipment that will be integrated into systems, including smart meters. Keeping the smart meter network and customer data secure will require a strong public-private partnership. Toward this goal, EEI is working closely with government partners–the national laboratories, the Federal Bureau of Investigation, Department of Homeland Security, DOE and the Office of the Director of National Intelligence–in many proactive programs to determine and prioritize system threats.
As another protection against cyberthreats, EEI is working with equipment manufacturers to ensure they fulfill their security responsibilities. With digital electronic devices and communication systems being introduced to serve the grid, those suppliers must:
- Adopt security practices in their organizations,
- Build security into their products, and
- Establish programs that can inform utilities about new vulnerabilities as they are discovered and provide technical assistance for solving them.
The electric power industry’s transition to smart meters and the smart grid is under way. With consumer outreach, as well as continued cooperation and dedication among the industry, public and private partners, EEI is confident this transition will empower consumers to get more value from their electricity dollars while helping utilities lower operational costs. It will encourage development of new technologies such as smart appliances, home automation, plug-in electric vehicles and will facilitate integration of variable renewable energy assets such as wind and solar power onto the grid.
David K. Owens is executive vice president of the business operations group at Edison Electric Institute. Visit http://eei.org for more information.