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The electricity delivery industry is likely to see several utilities use advanced metering infrastructure (AMI) for demand response programs on an unprecedented scale over the next five years.
According to Chartwell’s recently-published report, AMI-Enabled Demand Response 2007, more than half of electric utilities interested in advanced metering are considering or planning for demand response programs of various types.
For example, of the 73 utilities that Chartwell interviewed with an electric service component in 2006 for its annual report, almost three-quarters said they were considering using AMI for residential programs that use time-of-use (TOU) rates. Even without defining specific programs by type, i.e. TOU, critical peak pricing (CPP) and real-time pricing, more than half of the respondents said they are looking to use future or existing AMI systems for load control or demand response programs.
For numerous reasons, the marriage of AMI and demand response is taking place. Many utilities believe the technology – and cost has caught up with their expectations. Several of the industry’s larger investor-owned utilities have included demand response in their AMI acquisition plans. Some of the larger utilities (or provinces) that are eyeing large-scale, AMI-enabled demand response programs include:
Southern California Edison (SCE);
San Diego Gas & Electric (SDG&E);
Con Ed;
CenterPoint Energy;
PEPCO;
BG&E;
TXU; and
Ontario.
Three of these utilities – SCE, SDG&E and Con Ed – stand out because they are projecting large recoveries in their AMI cost benefit analyses. For example, according to SCE’s recent Public Utilities Commission filings, it projects a positive cost benefit recovery through its AMI project, Edison SmartConnect. SCE estimates that through the life of its project, it will have spent nearly $1.9 billion (present-value dollars) but retrieve more than $2 billion through operational and demand response/load control benefits. Of that $2 billion-plus, demand response/load control will account for $941 million.
Technology Will Change the Approach
Traditionally, demand response programs have centered on utilities installing special interval meters at customers’ homes. Because these meters are limited in the complexity by which utilities can offer programs as well, as the absence of being connected to any advanced communications infrastructure, participation on a residential level has been low.
Plus, because of the potential to curb demand, many of these programs have been geared primarily toward commercial and industrial customers. However, AMI technology promises to open up demand response to residential customers. While individual residential customers represent low potential for demand offset, en masse, the potential could have a large impact for a utility.
With AMI, every customer potentially will have a digital meter capable of delivering interval data. As a result, utilities will be able to offer a host of time-dynamic rates (CPP, TOU and real-time pricing). Moreover, some utilities will raise the bar even higher by deploying meters with secondary communication chipsets, such as those enabled with Zigbee standards.
These Zigbee chips will create a Home Area Network (HAN), or localized low-power RF network. Through the HAN, customers (or utilities) will be able to remotely use the meter has a key-head device to communicate and cycle various in-home appliances and devices. For example, customers will be able to adjust their thermostats during critical peak days effectively cycling their A/C units, control lighting systems or switch off pool-pumps.
Supply Issues Likely a Factor in Determining the Future of Demand Response
Another contributing factor to the growing interest in demand response is a perceived shortage in future energy supplies, according to Chartwell’s recent report.
According to the North American Reliability Corporation’s 2006 Long-Term Reliability Assessment, electric utilities forecast demand to increase over the next 10 years by 19% (141,000 MW) in the United States and 13% (9,500 MW) in Canada, but they project committed resources to increase by 6% (57,000 MW) and 9% (9,000 MW), respectively.
Building new generation facilities will continue to become a larger task in coming years, especially as more attention is given to environmental stewardship. The U.S. Supreme Court recently ruled the federal government, specifically the Environmental Protection Agency, has powers to regulate greenhouse gas emissions.
While much attention is given to renewable energy generation, such as wind, solar, hydro and bio-mass, it is unknown what level of offset these technologies will be able to deliver or what the price-tag will be.
It also should be noted that federal, state and provincial governments seem to be among the main entities pushing AMI and demand response programs. For example, California, Texas, Idaho, New York and Ontario, have instructed investor-owned utilities to look into advanced metering with the purpose of offering energy efficiency programs. Last year, the New York commission told utilities to submit plans for smart metering. Con Ed, National Grid and Energy East have submitted preliminary plans. In Ontario, the government has been more proactive with its plans, ordering utilities to have smart metering in place for all customers by 2010.
At the U.S. federal level, although the Energy Policy Act of 2005 lacks teeth as it merely mandated states to open dialogue on the subject of AMI and demand response, a majority are currently exploring the issue.
Penetration is Still Low
While interest is high, utilities using AMI for demand response are rare and limited to mostly a small number of IOUs and cooperatives, according to Chartwell data. Although Chartwell estimates the current North American AMR penetration to be around 83 million endpoints, only a fraction of those represent endpoints with two-way functionality also capable of delivering interval data. Among the utilities with AMI-enabled demand response programs, many have installations that are limited in scope.
For example, per a 2003 mandate by its state commission, Idaho Power deployed nearly 25,000 AMI meters enabled by DCSI’s TWACS power line carrier system and an Itron meter data management system. It is using its limited installation to offer and gauge CPP, TOU and load-control programs.
When it comes to advanced AMI-enabled demand response programs, such as those that utilize the HAN, there is no measurable penetration at this time. As to HANs specifically, preliminary data from Chartwell’s 2007 AMR/AMI survey of 100-plus utilities measured large interest but no utility said it is using or piloting the technology at this time.
For information on purchasing reprints of this article, contact Tim Tobeck ttobeck@energycentral.com. Copyright 2010 CyberTech, Inc.
It's good to see this topic becoming an item of discussion, as its potential benefits to all players are very apparent. Good article. I would just like to further commend those interested to review these two articles which discuss a very advanced meter-based market system I've termed IMEUC.
The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.
Take EWPC Lead & Reap Large Benefits By José Antonio Vanderhorst-Silverio, Ph.D.
Let’s congratulate the author and Chartwell Inc. for a timely reality AMI based article on demand response that also touches energy efficiency issues.
Since, as the author writes, “The electricity delivery industry is likely to see several utilities use advanced metering infrastructure (AMI) for demand response programs on an unprecedented scale over the next five years,” AMI and demand response are getting out from the Bowling Alley and entering the Tornado of Geoffrey Moore’s Technology-Adoption Life Cycle model. To get to Main Street, however, it will be much easier and faster with a paradigm shit to EWPC. For earlier comments on Moore’s model, as it applies to demand response, see IMEUC: Unreliable Service and Price Spikes (please hit read links here and below for more details).
By the way, even though Mr. Len Gould’s opinions about IMEUC do not lead to an acceptable paradigm shift, I have a lot of respect for him, even if he may be considered as a skeptic about EWPC. At the same time, Mr. Gould is one of the most intelligent, important and hard working persons in the debates and dialogues aiming to find the truth here in EnergyPulse.net. As he clearly is not his opinion, he may change it any time soon. However, readers should still expect more negative opinions from him about EWPC in the short run.
The shift to demand response based on AMI is an incremental paradigm shift away from the existing vertically integrated utilities (VIUs) paradigm, which is itself the result of earlier unstable paradigm shifts. The author identifies also energy efficiency based AMI incremental paradigm shift being mandated by governments, which need to be made by artificial means such as decoupling sales from profits, as the VIUs paradigm has perverse incentives on energy efficiency.
Every time an incremental paradigm shift occurs, constitutional rights are transferred to utilities thru a win – lose process, based on the utility business model of winning rate cases to the regulator. The result is higher than normal rates to customers and an extension of the life of the VIUs paradigm.
In addition, decisions taken by regulators on demand response result in a large free riding effect that requires general rate increases discriminating to non-responding customers, without customers ever learning what's going on. Retail competition avoids that altogether.
As the decision to invest by a customer to become responsive for the short run (demand response) is contradictory to a decision to invest for the long run (energy efficiency), incremental shifts will result in a lack of coordination by customer and as a result more costly than necessary for them. How can that be avoided?
The solution is to change demand as an externality, and integrate it to power system control, operation and planning, with a real paradigm shift. Such shift away from the VIUs paradigm, can be done with EWPC, the winning market on the first phase of competition, as can be seen on the downloads, debates, reflexive dialogues and generative dialogues, under the article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill.
Jose Antonio Vanderhorst-Silverio 9.25.07
Take EWPC Lead & Reap Large Benefits - Continued…
In accordance to the issues that the Chartwell reports, about perceived shortage in future energy supplies, it is energy efficiency that will have the largest impact both in reliability increase and real demand energy reduction. This means that demand response projects incremental paradigm shifts may result from optimistic cost benefit analysis in rate cases presented by utilities. It is important to note that energy efficiency reduces demand at the meter, but does not reduce the useful effects of electricity to the end-customer. Implementing the EWPC paradigm shift can reduce demand and avoid a large percentage of the supply generation forecasted (which are not very reliable anyway) with a very clean solution of integrating demand, thereby lowering the need to build expensive generation facilities.
In the real paradigm shift under EWPC all benefits from the development of the resources of the demand side (demand response, energy efficiency, distributed generation, distributed storage, etc.) are considered at once by a Second Generation Retailer - 2GR under competition, and not under a monopoly by a regulator, which although intelligent and important, may no know enough to understand the non-trivial elements of the proposed solution packages. Instead of letting regulators make bets, it is the competition in the market that finds conclusive evidence of which of the technologies of the demand side is more cost effective.
As can be seen from The BIG California LIE, “The BIG LIE is that retail competition is impossible in electric markets. The implementation of a competitive retail market was the center of the debate in California. Instead of cooperating to implement it, the three big California utilities, that didn't care about the end-customers, acted very irresponsibly. EWPC is the paradigm shift to show that retail competition is not only possible, but absolutely necessary to turn the electricity industry into a vibrant value added business for all stakeholders.”
The LIE has led to an inefficient regulatory compact as can be seen in The Anti-System Utility, which also explains why penetration is still low. However, knowing that EWPC is the best market solution may not even touch at all the present regulatory compact. Mr. Jack Casazza uses the analogy of a scrambled egg to explain that the regulatory compact can’t be unscrambled.
Jose Antonio Vanderhorst-Silverio 9.25.07
Take EWPC Lead & Reap Large Benefits - Continued…
If EWPC were not to have any chance at all, I would have not been invited to Carnegie Mellon University this past march, where I presented A Generative Dialogue to Reach the End-State of the Power Industry (please hit link to download the presentation). As shown in slide 5, the conference had a supply side approach to
Getting adequate resources of the right technologies for generation, transmission and distribution over the next three decades,” missing “the need for the emergent market architecture and design paradigm, where the development of the resources of the demand side take a key role to reach the End-State of the power industry… Venture capitalists know that good money should not be thrown after bad. Now is a great time to shift course… The new paradigm introduces elements that should be researched and taught, on MS and PhD levels education, as well as the training of skilled blue collar workers.
Since then, EWPC has emerged, and is ready for real governement leaders to consider it!
In the slide # 7 of the presentation two small chance events have lead to an inferior solution path, preceded the California LIE. I wrote then that “The events were naturally pulled by strong vested interest communit [of which the BIG LIE is representative], by neo-leberalization, by the debating system approach, and by the regulatory design, which [mutually] reinforced each other.” EWPC has a lot of potential right now, because of very high fuel costs, the necessary integration of demand, and the highly likely integration of the environmental externality to power system planning, operation and control. See also Utility Trends and Real Paradigm Shift.
The US Congress, the European Commission, the state of Ohio, and the Dominican Republic, are some the most likely candidates to start the paradigm shift to EWPC, ending demand forever as an externality. It has been shown that the days of the obsolete VIUs paradigm are counted. A paradigm shift to EWPC is the next source of business innovations, jobs with a lot of future and increasing exports. Those governments that take the lead, and avoid the risks of market implementation failure by retaining high caliber professional team advice, will reap most of the benefits.
Please take a look at Engineers Needed for Lower Prices as the result of the EWPC paradigm shift. The post responds questions asked by Jack A. Casazza that deregulation responded with scams.
