Targeting the Customer

May 1, 2012
Smart meters and demand response are adding intelligence to the smart grid.

One of the most controversial issues within the electric power industry today is how does a utility keep up with the customer's growing power demand? It is a timely discussion — even though energy usage has dropped the last few years — because of the recession. The recession is a short-term condition that will be forgotten as the economy recovers. In the long term, a study by the Battelle Memorial Institute projects world demand for electricity will increase nearly 44% between now and 2030. The study anticipates electrical demand in North America will increase by about 26% during the same time period.

Utilities are keenly aware there is a problem. A large portion of existing infrastructure has aged well beyond its expected lifetime. Depending on the expert quoted, hundreds of billions of dollars and euros are needed for new facilities to meet the demand worldwide. Utilities cannot build their way out of this problem. There is not enough time, money or motivation, but there is a solution.

Utilities are turning to technology — not some mythical silver bullet — to come to the rescue. This is real-world technological innovation using existing tools available from demand-response (DR) providers today. GlobalData's “Demand Response - Global Market Sizing, Analysis and Forecasts to 2020” report estimates global DR capacity under management was in the range of 37,000 MW for 2009. Illustrating that, the Brattle Group reported DR technology offset the 2010 peak load at PJM by 6.3%, ISO New England by 5.6%, New York ISO by 6.8% and Midwest ISO by 8.2%. DR technology is delivering significant reductions to utilities and operators daily.

Tangible Technology, Not Vaporware

By combining advanced meters with DR technology, utilities have been able to engage directly with their customers — commercial and residential — through two-way communication. For the first time, it is possible to provide customers tools and real-time information to reduce energy consumption and improve energy efficiency.

Several factors have aligned to make this possible, such as the cost of smart meters dropping like a rock in the past 10 years. Remember when they ran about US$3,000 per customer installation? Today, the cost is running about $100 per installation, and utilities are installing advanced meters in the millions.


The industry also has seen huge improvements in DR technology. It has evolved from direct load control (for example, cycling air conditioners and pool pumps) to constant load management.

According to the Demand Response and Advanced Metering Coalition (DRAM), residential customers account for nearly 40% of the electricity consumption and would provide about 53% of the potential DR savings. DRAM went on to say that several years ago Puget Sound Energy initiated a DR program by deploying digital meters and placing more than 300,000 volunteer customers on time-of-use rates.

According to the DRAM report, the merger of smart meters and DR programs reduced Puget Sound Energy's peak demand by roughly 6%. The total power usage was reduced by about 5%. In the parlance of Las Vegas blackjack players, it is a double down when DR and energy efficiency are combined with advanced metering.

The Gamble

The big gamble is customer acceptance. Last year, the industry witnessed pushback from residential customers in California, Texas and Maryland on the replacement of old mechanical meters with smart digital meters. Almost immediately, customers began reporting electric bills jumping double digits, and many rumors surfaced about the utilities gathering personal information on customers.

Nothing was wrong with the digital meters or the deployment, and there certainly was not a nefarious plan for the utilities to be Big Brother. The problem was a failure to communicate. Now utilities have begun outreach in the community to educate customers about new technologies.

Game On for Developers

The point has not been lost on savvy utilities. As a result, many utilities are partnering with third-party DR providers. These aggregators offer residential and small commercial customers the same energy audits and smart building technologies that have long been available to large commercial and industrial (C&I) customers. Smart building technologies include such things as building management systems, lighting control systems and direct load control (for example, thermostats, pumps and HVAC).

They also provide DR/energy-efficiency software that shows where customers can make easy cuts in usage and control smart building hardware automatically. The customers make their choices concerning the levels of response they are willing to live with and leave the rest up to their energy management partner.

The effect of this new approach has blurred the lines separating all customer segments. Where once only large customers buying megawatts realized energy savings and improved energy-efficiency strategies, now all segments are taking advantage of dynamic pricing.

Not Without the Customer

The Federal Energy Regulatory Commission (FERC) confirms this is the correct direction DR needs to go to realize its full potential. FERC has published a series of DR reports, such as “National Demand Response Potential Model Guide,” “National Assessment of Demand Response Potential” and, most recently, “Demand Response and Advanced Metering.”

FERC estimates that DR programs, with full participation across all segments of the customer base, have the potential to reduce peak load by roughly 20% (188,000 MW) by 2019. FERC points out that, for this degree of reduction to happen, it requires the residential and small commercial customers to take part. If utilities keep doing business as usual (large C&I only), they will not be successful. The residential customer is key to the success of realizing the full potential of DR.

The Electric Power Research Institute (EPRI) also conducted a study titled “Assessment of Achievable Potential from Energy Efficiency and Demand Response Programs in the U.S.: 2010-2030,” which supports the FERC findings. The EPRI report estimates the non-coincident regional peaks will increase by about 39% by 2030.

Customer-Oriented Utilities

Austin Energy has long been a leader in innovative customer-friendly programs. The utility has even developed contests for its customers in its education effort. One of the most successful has been its citywide Kill-A-Watt Challenge, where customers compete to see who can come up with the biggest energy savings over the peak summer months. Austin Energy estimates its various programs saved more than 700 MW between 1982 and 2007, and it expects load reductions in 2011 to exceed 58 MW.

Working with Comverge, Austin Energy offers residential customers a free Comverge programmable thermostat. This Power Partner program includes both installation and warranty for the thermostat. It is estimated customers save between 15% and 20% on their electric bills, and Austin Energy reduces its summer peak by roughly 45 MW.

Kansas City Power and Light (KCP&L) has developed an Energy Optimizer program, managed by Honeywell, that reduces energy demand from air conditioning. The customer is provided the Honeywell UtilityPRO programmable thermostat. More than 30,000 of the thermostats were installed initially. Honeywell expects to have more than 50,000 installed in homes, apartments and small businesses by the end of 2011. KCP&L estimates this will result in the reduction of approximately 80 MW at peak energy use.

KCP&L also has given the customer more control over personal energy consumption by selecting Siemens for a smart grid demonstration project. The project will include two-way metering infrastructure to demonstrate time-of-use pricing and state-of-the-art customer end-use tools. It also will include electric vehicle charging and management of rooftop solar technology. KCP&L expects the Siemens technology to reduce energy delivery costs, provide more efficient energy consumption, improve its carbon footprint and enhance information flow.

Indianapolis Power and Light Co. (IPL) and Silver Spring Networks have an agreement in place to develop IPL's smart energy project. Part of the Department of Energy (DOE) smart grid investment grant, this project is designed to develop energy efficiency, improve reliability and deploy advanced meters to IPL's customers.

A Social Networking Utility

Baltimore Gas and Electric (BGE) website visitors will see links to Facebook, Twitter, Flickr and YouTube. BGE is using the technology its customers are familiar with to educate and keep them informed. BGE is customer friendly, so it not surprising to see the utility team up with Tendril. Tendril is supplying BGE with a platform for its smart energy pricing pilot program. In return, BGE has provided Tendril a group of advanced metering infrastructure-enabled customers to inform of pending DR events. The customers will be given direct feedback on how an event affects them, and they will receive rebates for voluntarily reducing their energy consumption.

Tampa Electric started developing DR programs in 2006. The programs were successful and continue today. Early this year, Tampa Electric extended its partnership with EnerNOC for an additional five years. This will give the utility 40 MW of firm dispatchable DR capacity.

PJM recently announced it will take part in a demonstration price-response demand project with Tendril and Utility Integration Solutions. PJM says this project will test the end-to-end integration of the near-real-time price of an automated residential DR program in the home.

Through this program, PJM hopes to work with residential customers more closely. By controlling customers' thermostats one or two degrees throughout the day, PJM seeks to lower overall demand and save customers money as a result.

Southern California Edison (SCE) has been a leader in DR for years. Using an $11.4 million DOE grant, SCE and Honeywell (Akuacom) are developing an OpenADR technology system to automate the SCE critical peak program that will include about 700 of SCE's C&I customers.

In addition to that project, SCE has been working with EnerNOC since 2008 on a 40-MW DR capacity project. SCE has expanded this project to 110 MW of DR capacity, which will take effect in 2012. By working directly with SCE's customers, EnerNOC offers customized DR technology to automate load reductions and perform energy-efficiency audits of customer facilities to reduce consumption.

Shifting Load Beats Dropping Load

Southern California Public Power Authority (SCPPA) points out that DR includes shifting load to non-peak hours as well as load interruption. SCPPA signed an agreement with Ice Energy, a provider of advanced energy-storage solutions, for the first utility-scale distributed energy-storage project. The 53-MW project will permanently reduce California's peak electric demand by shifting about 64 GWh of on-peak electrical consumption to off-peak time using Ice Energy's Ice Bear technology.

Several years ago, Tennessee Valley Authority (TVA) awarded a contract to EnerNOC for a 160-MW DR program for C&I and institutional customers to reduce their electric usage. It has proven so successful that TVA awarded the second phase of the contract to EnerNOC. Phase two will add 400 MW of DR capacity for an additional 10-year period.

Pepco offered its Washington, D.C., customers a pilot program with smart meter and enabling technology (programmable thermostats). The PowerCentsDC pilot was so successful Pepco opened it up to all customers in the District of Columbia in 2011. Customers who participated in the pilot were provided with information on electricity usage. They selected one of three pricing plans: critical peak pricing, hourly pricing and critical peak rebate. Pepco reports that more than 90% of all participants saved money and peak loads were reduced.

Targeting the Consumer

At this year's DistribuTECH, companies such as Comverge, Tendril, Silver Spring Networks, Control4 and others displayed DR products specifically for home energy-management systems. These products were designed to work as a customer portal or a utility portal.

In fact, many included not only energy monitoring but also analytics to compare one homeowner's energy consumption with that of other homeowners in their neighborhood. Through comparisons, the system shows the homeowner what others are doing and makes recommendations for energy savings. This is made possible by such technology as cloud-based computer systems. They provide customers with a simple and inexpensive interface including the customer's smartphone. This is possible because the computing power is in the cloud.

The Journey Has Begun

The technology of DR is real, it is being used and it is growing. In many jurisdictions, regulators are supporting dynamic pricing and other innovative rates and tariffs needed for these programs. Pioneering utilities in North America, Europe and Asia are deploying load-controlling technologies and gaining customer support as they go.

DR providers are energy managers for their clients interfacing with utilities, providing hundreds of megawatts of DR capacity for system relief. The industry has a long way to go to realize the 188,000 MW FERC identifies as the total DR potential, but all the surveys and studies show the industry is moving in a positive direction.

Does this mean the winds of change are blowing? When it comes to demand response, yes, they certainly are.

Companies mentioned:

Battelle Memorial Institute |

Brattle Group |

Comverge |

Control4 |


EnerNOC |

Electric Power Research Institute |

Federal Energy Regulatory Commission |

GlobalData |

Honeywell |

Ice Energy |


Siemens |

Silver Spring Networks |

Tendril |


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