Is Smart Grid Good News for Consumers?

Big announcement yesterday from the Department of Energy:

President Obama Announces $3.4 Billion Investment to Spur Transition to Smart Energy Grid

Applicants say investments will create tens of thousands of jobs, save energy and empower consumers to cut their electric bills

ARCADIA, FLORIDA – Speaking at Florida Power and Light’s (FPL) DeSoto Next Generation Solar Energy Center, President Barack Obama today announced the largest single energy grid modernization investment in U.S. history, funding a broad range of technologies that will spur the nation’s transition to a smarter, stronger, more efficient and reliable electric system. The end result will promote energy-saving choices for consumers, increase efficiency, and foster the growth of renewable energy sources like wind and solar.

The $3.4 billion in grant awards are part of the American Reinvestment and Recovery Act, and will be matched by industry funding for a total public-private investment worth over $8 billion. Applicants state that the projects will create tens of thousands of jobs, and consumers in 49 states will benefit from these investments in a stronger, more reliable grid. Full listings of the grant awards by category and state are available HERE and HERE. A map of the awards is available HERE.

My first reaction: while the improvements in monitoring capability, transmission efficiency, carrying capacity, and reliability are all welcome, one other aspect of the plan leaves me divided.

Currently, the vast majority of consumers and businesses in the U.S. are monitored with technology that is approaching its centennial. Most people would recognize an electric meter if they saw one. They record total energy usage consumed by one residential or commercial customer – but not the time of day it was used. The meters cannot transmit data and must be read manually. They do not provide price information to the customer, nor do they need to – rates are fixed.

Smart meters, on the other hand, will allow limited two-way communication between the utility and the consumer. In theory, this capability will permit utilities to discourage consumption by charging higher rates during periods of increased demand. The smart meter will notify the consumer in real time of current demand conditions and the rate being charged by the utility. Conceivably, that feedback could be configured into a power profile, allowing consumers to program air conditioners and other appliances to automatically go into power saving mode when rates go up, and activate again when overall usage drops and rates are acceptably low. This would have the effect of shifting some usage to later in the day and distributing consumption more evenly.

Of course, making this cost differential work will require some dramatic changes to the way electricity is currently priced. Most rate commissions have traditionally viewed their mission as consumer advocates, keeping rates as low as possible. That role will have to change, as Energy Secretary Steven Chu noted at a Smart Grid conference in September.

Electricity costs should move to reflect demand: Chu | Reuters

Tue Sep 22, 2009 3:35pm EDT

By Ayesha Rascoe

WASHINGTON (Reuters) – As the United States’ power grid becomes more sophisticated, electricity rates will need to rise to reflect periods of intense energy use and to encourage consumers to change their electricity habits, U.S. Energy Secretary Steven Chu said on Monday.

Chu said currently most local electricity rate commissions view themselves as consumer advocates and try to keep electricity prices as low as possible.

“Hopefully that will evolve somewhat, so that they begin to fold in some of the real costs of electricity generation and electricity use,” Chu said at conference focused on creating a “smart grid.”

For instance, on hot summer days when air conditioning use is high, utilities would charge customers more for electricity. Chu said those who set rates should be more lenient with electricity generated from cleaner sources such as wind or nuclear power.

Chu also pointed out that during periods of low energy consumption, electricity prices would be cheaper for consumers.

I must admit to some ambivalence on this development.

  • I wrote earlier about the need for a more robust transmission system, and my opinion hasn’t changed.
  • Naturally, I’m excited about the favored position renewables should have in the new regime. (In theory; if nuclear-generated power and power from renewables are put on the same footing, the utilities will likely favor nuclear – despite not having a long-term storage facility for waste, and the fact that there has never been a nuclear generator built on time and on budget in this country. But I digress.)
  • I’m all for encouraging consumers to make informed choices about their energy consumption.
  • Reducing the use of “peaking plants” –  among the costliest to run, and are only brought online to meet the periods of highest demand – is a good thing for consumers and producers.

However, I worry about the implementation, and the level of sophistication needed ot take advantage of the new system.

  • I am particularly concerned about the elderly. Will some choose to disable their air conditioning, in the interest of avoiding the highest tariffs during peak consumption periods, and put their health at risk?
  • I also wonder what the mechanism will be for deciding how much to charge, and when rates will be allowed to fluctuate.

Perhaps some protection is needed, similar to the Homestead Exemption, which would offset rates for qualifying individuals. Another option would be to give seniors credits that would be applied against their electricity bill, much as the HEAP program does for heating during the winter months.

So is the Smart Grid a good thing? Is it needed? Will it benefit consumers?

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3 comments so far

  1. John Ettorre on

    Lord knows that we in this region understand the importance of this next generation of technology only too well, having suffered through an historic and calamitous multi-state electricity outage about six years ago that was touched off by failures of the grid in our own region. The time has long since come for this.

  2. Mark Keating on

    John:

    Oh, I absolutely agree. I doubt if there has been any expenditure on the transmission system in these parts in the last twenty years, other than routine maintenance. I like that the Obama administration treated this like a matching program, very similar to the way highway construction projects are handled. The difference being highways are held in the public trust and the grid is still privately owned. But that’s a another topic for another day.

    Mark

  3. John Ettorre on

    Public infrastructure isn’t sexy, but it sure is crucial. And private ownership is certainly not the answer. Some states have crept toward that with the sale of bridges and toll roads to private contractors, a trend which thankfully hasn’t picked up much momentum. Ohioans had the good sense to vote down privatization of the Ohio Turnpike not long ago.


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