The coming smart grid, part two: smart meters, policies and consumers

Published Tuesday, February 19, 2013 in the New Brunswick Telegraph Journal.

Load shifting, NB Power’s goal of reducing power demand during morning and evening peaks and ‘shifting’ that load to times of lower demand, such as the middle of the night, makes good sense for several reasons. 

Lowering peak demand can reduce the need to start up existing power plants for just a few hours a day – that’s expensive.  It can delay the need for costly new power plants, saving huge amounts of capital and interest.  Remember, anything that saves the power company ultimately saves ratepayers money. 

Lowering peak demand can reduce greenhouse gas emissions too, because the power plants fired up to meet daily peaks are usually the dirtiest ones in the system.

But exactly how do you go about shifting loads from peak times to off-peak times? 

Smart meters
The traditional power meters on our homes and businesses are fine for measuring how much electricity we consume, but they give no indication as to when that power was consumed.  They can’t differentiate between a kilowatt-hour used during the morning peak and one consumed in the middle of the night. 

New so-called smart meters are different.  They not only measure power consumption, but they also keep track of what time of day that power was consumed. 

That’s a critical capability; here’s why.  For NB Power, the cost of producing electricity, or of buying it from a neighbouring grid, varies greatly depending on the time of day.  Electricity is much more expensive to produce or buy at peak times of the day.  But during periods of lowest demand, as in the middle of the night, it can be generated or purchased for pennies per KWH.

Smart meters also have the capability of providing consumers with real-time or near real-time information on their power consumption.  Imagine if you could see what your home’s power usage was at any given moment, whether on your computer or a specialized in-home display.  That would enable you to walk around, turn things off and instantly see the impact on your consumption.

Time of day rates
On their own, smart meters are no more than fancy gadgets that provide consumption information.  On their own, they won’t facilitate load shifting because they don’t give consumers any incentive to change their consumption habits or patterns.  That kind of a push needs to come from a critical parallel policy, time of day rates.

If it costs NB Power more to supply a kilowatt-hour during peak periods, why shouldn’t those peak kilowatt-hours be priced higher?  And if it costs NB Power less to supply a kilowatt-hour during periods of low demand, why shouldn’t those off-peak kilowatt-hours be offered to consumers at a lower price?  That’s essentially what time-of-day pricing is, and smart meters make it possible to do.

Ontario is one of many jurisdictions around the world where smart meters have been installed and time-of-day pricing has been implemented.  In Ontario, the cost of a kilowatt-hour ranges from a low of 6.3 cents evenings, overnight and on weekends, to a high of 11.8 cents during weekday peak periods. 

Smart consumers
“Most consumers live in a black hole when it comes to information about their energy consumption and costs,” Bob Gilligan, a vice president of General Electric, said a few years ago.  It’s true: today, most of us know very little about our power consumption, so we’re in a poor position to learn how we can consume less and save.

But when smart meters are installed and time-of-day pricing is implemented, we have the information and incentive we need to shift some of our power consumption out of peak times.  For example, discretionary tasks like dishwashing and laundry can be done when power is cheap – a win-win situation for us and our power supplier. 

Smart meters and time-of-day rates are a great start to building a smart grid and enabling smart consumers – but there is much more to the story... enough for a Part Three.