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Electricity prices vary during the day. And the thinking in some corners is that while utilities are interested in saving energy during peak periods, they have relatively little incentive to curtail consumption patterns the rest of the time. Exposing customers to real-time prices would then spawn interests in exactly how they use electricity -- a process that would need to become user-friendly and that would operate by configuring all consumer products with the Internet.
"By and large utilities' service now stops at the meter," said Kurt Yeager, with the Galvin Electricity Initiative. "They are compensated for dumping dumb energy at the doorstep. They are rewarded for the amount they sell, not efficiency. But Google, IBM, Microsoft and Cisco, among others, all want to close that gap. They would do this by automatically linking the Internet to all the devices in the home. That would give consumers control, but most regulators are resisting."
According to Yeager, public service commissions have traditionally protected consumers from volatile market conditions and are reluctant to implement real-time pricing. And for its part, the federal government is respectful of the powers granted to those utility officials and will therefore not interfere, even though it has written the guidance by which such market forces could be established.
Consumers, of course, are interested in saving money. But others may be focused on the types of power generation. And through such a high tech system, they could instruct their utilities that they would like to buy renewable energy credits. The key to intelligent energy use, say advocates, is to ensure that the demonstration projects get the proper recognition from activists and regulators alike, all to create a groundswell of support. The technologies will then, in effect, revolutionize electricity markets.
"Customers need near real-time meter data so that they can tell what is going on," said Larry Silverman, chief executive of GridPlex, outside Philadelphia. "They then need exposure to real-time prices. Those two things in unison will give them the incentive to make real changes in lifestyle."
Judicious Moves
Regulators can be forgiven if they have heard these promises before. In the 1990s, unregulated energy enterprises said that electricity deregulation would streamline utility organizations and that such efficiencies would accrue to the benefit of consumers. And as power companies sought to become more competitive, they would then employ a range of technological innovations that would provide a true source of empowerment.
By all accounts, deregulation has been oversold. And while it is also fair to say that the shortcomings have in some measure been tied to poorly considered policies, the whole episode has nonetheless soured state regulators when it comes to risk taking. Along those lines, they will move judiciously before they take any action that could have an adverse effect on the public.
"State regulators are required by law to ensure that any new energy programs result in just, reasonable and affordable rates," said Frederick Butler, a New Jersey commissioner who is also part of the National Association of Regulatory Utility Commissioners. "We all recognize the potential of the smart grid, but this isn't something that can be done overnight. If we start rolling out this new technology along with higher rates to pay for it, we better be sure this stuff works. Rather than view the regulators as 'foot-draggers,' view us as colleagues" -- to prove the ultimate value of the technologies.
The fate of the intelligent utility may, if properly considered, be different than that of retail electricity deregulation. All utilities are now under pressure to limit their emissions. And many power companies are already making investments in various components of the smart grid -- a proposition that is buttressed by the federal government's commitment to the cause and the $4.5 billion in stimulus funding that it is providing.
For now, much of the effort will go toward helping homeowners and businesses reduce their carbon footprint by giving them a greater understanding of how electricity is generated and consumed. Eventually, though, the idea will be to synchronize all energy-consuming products with the Internet. Microsoft, for instance, has developed online software that can chronicle consumption patterns and provide continual updates, tracking such appliances as refrigerators, hi-fi systems and water heaters. The goal is to save consumers 10 percent of their power costs.
Once the economic and environmental benefits of the intelligent utility become more apparent to regulators and consumers, proponents say that the trend toward such modernization will become unstoppable. Utilities will then embrace energy efficiency and work to equip their customers with the tools they need to understand and control all of their energy usage.
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Intelligent Utility magazine is the new, thought-leading publication on how to successfully deliver information-enabled energy. This article originally appeared in the September/October 2009 issue.