Smart Grid, Smart Customers

The electric utility industry has focused primarily on the latest smart grid technologies and speculations about exotic advantages for end users. There may be unprecedented opportunities ahead for educated electric customers, large and small. However, the bigger questions are: How are customers being kept informed of features and benefits of the smart grid? Where do smart customers come from, and what are they deciding to do?

Smart Residential Customers

In Naperville, Illinois, U.S., the municipal electric utility has more than 57,000 residential and business customers, and an US$11 million matching grant from the Department of Energy (DOE) to upgrade to a smarter grid. Naperville has not installed a single smart meter yet (aside from a 200-meter pilot deployment), but it has a team of 28 well-trained smart grid ambassadors spread out across the city. This all-volunteer corps is doing everything it can to create a community of smart customers, prior to the full smart meter installation program.

For the past 20 years, Naperville has been operating under a continuous improvement model. The utility has been upgrading its supervisory control and data acquisition system, improving its system average interruption duration index and automating its distribution system, among other such benefits.

“We've been working towards a smarter grid for years, but, thanks to the $11 million DOE matching grant, the project will be complete in April 2013, instead of 2020 or beyond,” says Nadja Lalvani, community relations manager for Naperville. “Our smart grid project is all about empowering our customers with more information and options, increased reliability and better customer service.”

The Naperville Smart Grid Initiative (NSGI) begins with a simple mission statement: “To provide Naperville and its utility customers with increased reliability and technology that empowers customers to control energy use.”

The city also outlined a customer bill of rights:

The right to be informed
The right to privacy
The right to options
The right to data security.

Creating Smart Customers

When Naperville learned it was receiving the DOE smart grid investment grant, “we realized that this was going to take an extensive amount of external communication to build awareness, educate our customers, get people engaged and, ultimately, get them to participate,” Lalvani explains. “In Naperville, we always say our greatest asset is our residents. They are active, well educated, and they care: They really care. So, that is where the idea for the smart grid ambassadors came from.”

The city put a call out for smart grid ambassadors and was very pleased with the results. “We were amazed by the caliber of people who volunteered. They roughly fall into two demographics. The first is the highly technical group, like engineers and IT people. The second group is made up of people who were already active in the community. We have some very strong opinion leaders, community leaders, thought leaders. They are already well respected,” Lalvani says.

Even though the ambassadors are volunteers, they go through the same vetting process all full-time city employees go through, and they receive smart grid training. Naperville then used its geographic information system and plotted each ambassador's location. “It actually worked out beautifully because we have representation in virtually every area of our city,” Lalvani says.

The ambassadors receive a polo shirt and an ID badge, and are supplied with handouts and flash drives with PowerPoint presentations, videos and documents. “The smart grid ambassadors go out to different neighborhoods and spread the word. It could be as informal as sitting at a table at an environmental fair or a sidewalk sale or going to a block party. Or, it could be a formal presentation,” Lalvani says.

“First and foremost, this system is all about choices,” Lalvani notes. “Later this year, we will be launching an e-portal, which will provide usage data to the customers. With this information, customers can track and manage their energy usage, and, if they choose, they can modify their behavior and energy consumption. We are proposing a number of different rate plans, including a flat rate, time-of-use rates and voluntary demand-response rates. Customers will have the information to better decide which plans would be best for them and fit their lifestyle.”

Smart Commercial Customers

While Naperville is busy creating smart residential customers, some larger end users need a third-party service to help sort through all the available choices.

Dennis Moran had a problem. As plant manager for GreenFiber's Waco, Texas, U.S., plant, his focus needed to be on producing cellulose insulation, but he was spending a lot of his time fielding calls from energy providers. “I was getting calls from more than 10 energy providers,” Moran recalls. “I have nothing against any of them. Over the years, I had been with several of them, but I have a plant to run. I need to focus on everything from the procurement of the raw materials, to manufacturing, to the delivery of the final product. The bottom line is this: I just don't have time to listen to all of them.”

Moran did give it a try, and, in the past, he negotiated his own contracts, but the process was complicated and time-consuming. So, he found a better way. “I ended up going with Texas Energy Aggregation (TEA). It is a local company in Waco, and they get the offers for me. When it is time for a new contract, I am now looking at one sheet of paper with a list of companies, programs and options,” Moran says.

With a load that ranges from 200,000 kWh/month to 300,000 kWh/month, Moran was looking for a low rate and a long-term contract.

“If we know what we will be paying for electricity 24 months out, it makes it easier to forecast and budget. But the electric market seems backward to me,” Moran says. “Normally, if you are willing to commit yourself to a long-term contract, you get a better rate. With electricity, it is exactly the opposite, and that was a big shock. We get a better rate on a 12-month contract than on a 24-month contract. For us, price stability in the long term is important — as long as we can get a deal at close to the lower rates.”

Working with an energy consultant and aggregator has provided several advantages for GreenFiber. “When I started here a couple of years ago, and I was doing the bidding, the rates were typically over $0.08/kWh. When I let TEA take over, the offers were closer to $0.06/kWh. When I take everything into account, it works out to about a 15% savings,” Moran says.

TEA also simplifies Moran's job. “Now when I get the calls, I refer them to TEA. And when it is time for us to renew our contract, I just have to deal with one person at TEA, not 10 different providers,” Moran explains.

Aggregating Success

While residential customers can take steps to lower electric usage, they typically have to research energy conservation methods themselves or rely on recommendations made by their local utility. Commercial facilities, if they are big enough, have the money and time to hire an energy manager. This approach is not new, but with rising electric rates, it is becoming more cost-effective for many commercial facilities.

In the United States alone, there are dozens of organizations for all types of energy professionals, some with tens of thousands of members. There also are dozens of different certification programs. A large facility can hire a full-time energy manager, rely on an energy consultant or hire a company like TEA.

Companies like TEA can aggregate load to get better rates. “If I have a customer that is operating Monday through Friday, the load pattern is going to be different than, let's say, a church,” says Walt Fenoglio, CFO of TEA. “A church's highest electric usage is over the weekend and maybe at night a few days a week. So we find clients with different load shapes and aggregate them. Now, we have a more consistent and bigger load. If we put that combined load in front of an electric provider, oftentimes, we end up with a better overall contract that we can offer to that pool of customers.”

“We can also help with energy efficiency — recommend better lighting, new ways to power work processes. Some companies have an energy manager, but that is still a big job, because the energy manager is not just there to track the electric bill,” Fenoglio explains. “He or she is also looking for ways to cut consumption and improve efficiency.”

The need for aggregation and consulting services continues to grow. “With deregulation, the industry and its dynamics change every day. What drives the prices? It is weather. It is hedging practices. It is the price of the commodity. It is the supply and the demand. You have speculators in the market now, driving prices up and down,” Fenoglio says. “All those dynamics make it very difficult for any given business owner to understand the market. And, even when they do, to effectively deal with the market, you have to track it all the time. Our clients are not in the business of being electricity experts; they are in the business of being experts in whatever their business is.”

Smart Industrial Customers

Some large-industrial customers have a level of technical and market sophistication that rivals the best-run electric utilities. So, what are their options and what are they deciding to do? There is always full integration of company-owned generation with the open power market.

Alcoa's Warrick Operations covers more than 300 acres (121 hectares) near Evansville, Indiana, U.S., with power generation, aluminum smelting and rolling — all in one integrated facility. The Warrick Power Plant, which provides power to the operation, has four steam-powered, coal-fired turbines with a combined generating capacity of 791 MW. The five aluminum potlines have an average total load of 550 MWh.

With its large load, the aluminum smelter is a unique opportunity to provide stability to the grid. If there is a problem on the system — a generation shortage — the facility can drop load at its smelter and jump into the market and supply power. Considering its energy use, compared to the surrounding community, Warrick is a big fish in a small pond.

Reliability and Revenue

“We put system reliability before profitability,” explains Brian Helms, energy services coordinator at Alcoa's Warrick Power Plant. “We don't have our own sync source; the plant can't maintain frequency on its own. If the grid goes down, we are going down with it. So, we do whatever is necessary to enhance the reliability of the system. We also found that we could reduce our costs, while improving reliability. It is an added incentive.”

In June 2007, the Midwest Independent System Operator (MISO) market was expected to launch in January 2008. “We designed our whole system between July and December of 2007, but the market was delayed and delayed, and didn't launch until January 2009. So, we took advantage of the delay and ran tests on the system,” Helms recalls.

In the beginning, Warrick only offered 20 MW of controllable power to the market, but it now provides more ancillary services, using the potlines as a unique resource.

“In the United States today, you do not see much new generation coming on-line. However, demand continues to rise,” Helms says. “[The Federal Energy Regulatory Commission] recognized that the large-industrial consumers could make an impact, if given the opportunity, simply by reducing their load at times. We also generate power, so in April 2005, when MISO announced that it would open an ancillary services market, we immediately saw a benefit of it.”

Aluminum smelting is an electrochemical process. High DC current is sent into the smelting pots, which are lined with carbon. Alumina is dissolved in a cryolite bath, and more electricity equals more molten aluminum. “If we reduce the amount of power going to the lines, we make incrementally less aluminum,” Helms says. “At Warrick, we tell the market, ‘Here is our production schedule and this is where we want to run, if you don't need us.’”

In return, the market tells Warrick what it needs. “They set my load level where they need it to be. If the market needs more generation, they lower my load, diverting power to the market. If the system load is down, like at night, they will increase my load,” Helms explains.

Regulation

“No system is perfect: There are always mismatches between load and generation. So, there is another service — regulation — that we offer,” says Helms. “Our generators will constantly follow the system load and make minor adjustments to power output.”

“Over time, power used in regulation should average out to zero. There will be times when the potlines are running under target, when the system needs more power, and there will be times when we are running over target. But, over the course of the day, the effect of regulation should be neutral,” Helms explains.

Spinning Reserve and Demand Response

Warrick also supplies spinning reserve. “Today, we offer two varieties of spinning reserves. We offer normal (10-minute) spinning reserve generation, and we offer Type-Two demand response, which is, in essence, a pot line interruption. An intentional and brief interruption of power to the potlines can provide 70 MW of load instantly by this method,” says Helms. “These services not only benefit the system, they also benefit Alcoa. If we can shave a few cents off of our product price, it keeps us be a little bit more competitive.”

Smart Grid Success

Historically, residential customers have had few choices, and it is not clear what options and benefits the smart grid might provide to them. Industrial and commercial customers have had options and have been making smart decisions for years. Therefore, they are poised to benefit the most from the new opportunities the smart grid will provide.

Regardless of the customer sector, continuing and progressive education and cooperation between the end users and utilities will determine smart grid success — at least as much as, if not more than, technology development and deployment will.

Patricia Irwin ([email protected]) started her career as a substation engineer for Potomac Edison. A former editor of Electrical World magazine, Irwin has been writing technical articles about the electric utility industry for 15 years. She holds a BSEE degree, an MBA degree and is a professional engineer.