Deploying a smart meter has an easier part and a more difficult part. The simplest part is to install the new meters and radios and the associated software. I’m saying this part is (relatively) easy because it’s hard to mess up too much. The hardest part is developing time-based pricing plans that are widely adopted, fair, and that will help customers and the utility save on costs and emissions. This part is pretty easy to mess up; it has happened several times. I’ll talk briefly about both sides here.
Many of you reading this already have smart meters and are starting to use hourly rates. I would love to hear your experience so far. Palo Alto is late in the game. The City of Palo Alto Utilities (CPAU) will begin replacing the 30,000 old electricity meters in two years, as well as the 9,000 old water meters. They will also modernize the 45,000 gas and water meters to detect and transmit hourly usage information. The roll-out will be completed by the end of 2024, when the utility will be able to roll out tariffs according to the hour of use in 2025.
I am really looking forward to this change. The main reason for my enthusiasm has to do with electricity tariffs. The cost (and emissions) of electricity vary widely throughout the day and year. A time-invariant rate does not correctly estimate energy, which means that we are not using energy efficiently. If we want affordable, clean electricity that closely matches our demand, then our tariffs need to include a time component, and smart meters are the infrastructure that allows that.
Demand in California (blue) varies by time and season, as does the amount of solar (yellow) and wind (green) energy available. Summer has greater demand, increasing in the afternoon and evening. Winter has less sun and more wind than summer. The result is large differences in ânet demandâ (red), which is demand minus solar and wind power. We want to equalize (and lower) this ânet demandâ curve to reduce the amount of peak capacity we need to build. Source: CAISO
Once we have well-designed tariff plans, we can expect many benefits from these smart meters. There are even a few benefits that we will reap automatically. Here is my list.
1. The utility and residents can buy electricity cheaply. Electricity is generally more expensive in the evening and less expensive at midday. When electricity rates better reflect the true cost of energy, residents can choose to shift their use, as they see fit, to cheaper times. Residents and the public service will then save on costs. For this to work well, the tariff design must be efficient, which is covered in Part 2 of this article.
2. The utility will be able to reimburse residents’ electricity contributions more accurately. A resident can supply electricity to the grid from rooftop solar power, a home battery, or even an EV battery on time. Electricity contributions are more valuable when supply is scarce, and reimbursement rates should take this into account. This should help make household batteries, for example, more affordable.
3. Residents can save money when the utility warns them of potential water leaks or other significant abnormal uses. During the pilot program of approximately four years for these meters in Palo Alto, water leaks were detected in 30% of the households!
4. Residents can save money by doing their own analysis of their usage, which will be reported on an hourly basis (or finer if they request a ZigBee radio). A resident might be surprised at the amount of electricity they use at night, for example, or the amount of water for irrigation, and be able to make adjustments to reduce costs.
5. The network will become more resilient as the utility is better able to detect, locate and respond to voltage deviations and outages. In addition, hourly usage profiles help the utility maintain and improve its electricity, gas and water distribution networks more efficiently.
Example of display of power grid management. Source: Report of the Palo Alto Public Services Advisory Board, 2021
6. Meters allow more careful management of the voltage on the distribution network, which can reduce the overall energy consumption by 0.5% to 1%.
7. There are also more modest benefits. For example, service transitions can be performed without the need to make an appointment to read a meter. And the new meters are more accurate than some of the older (and slower) meters. (1)
While the utility will save on the cost (2) and difficulty (3) of manual meter reading, I don’t see this as a benefit as they will need staff to manage the new metering infrastructure, and that staff costs more or less balance. (4)
The trick to achieving many of these benefits is a well-designed pricing plan that is aggressive but fair, one that saves most households money but all households break even. . Such a plan will likely have these characteristics:
– Off-peak rates are less than half of peak rates, to better motivate customers to make changes that are right for them.
– The peak period (high rate) is relatively narrow (eg four hours instead of six).
– Customers are made aware of the tools they can use to plan their energy use when they want (eg, a device scheduler).
– Customers are registered by default.
– There is a risk-free period that allows customers to try a rate and opt out if it does not suit them.
– Customers are allowed to waive hourly rates entirely.
Palo Alto ran a poorly designed pilot of hour-of-use rates from 2012 to 2017, which resulted in virtually no change in usage or resident bills. The best and worst rates differed only 5-10% for much of the year, with electricity being slightly cheaper from 11 p.m. to 6 a.m. Even in the height of summer, the highest electricity rate (noon to 6 p.m. on weekdays) was only 50% higher than the lowest. The peak period to avoid was six hours. And since few EV owners were charging during that interval anyway, they had little opportunity to save.
The usage time tariffs for the CPAU pilot were not well designed based on what we know today. Source: Palo Alto Finance Committee Report, 2012
The new hourly rates will be very different. They will encourage midday use and discourage evening use. (Mornings and evenings will fall somewhere in between.) The new rates will be much more aggressive. CPAU spokesperson Catherine Elvert explains: âThe usage period rate differential is expected to be larger than that developed during the 2013-14 period, as the price differential of the market is bigger now. Â»More and more people now have electrical loads that they can easily move (for example, electric vehicles or electric cooling / heating), and more tools are available to help move these loads (for example, programming thermostats).
Sacramento Municipal Utility District made a pilot with aggressive usage rates – 27 cents between 4 p.m. and 7 p.m. versus 8 cents at other times – and found they were able to move 8-10% of their load during off-peak hours. And that was almost ten years ago. Clean energy of the peninsula more recently found that they were able to reduce by 50% the peak energy of charging among the electric vehicles registered in a pilot project of managed charging. It is clear that we can shift demand significantly, and therefore reduce costs and emissions, with the right incentives and tools.
CPAU works with experienced consultants to help design the deployment of smart meters. They have made several deployments and should be able to help residents and the utility get the most out of the new meters.
I would love to hear your questions or comments on the deployment of smart meters and potential new tariff designs. I just wish it happened sooner.
Notes and references
1. To be fair, this may not be viewed as a benefit by residents living with these older meters! But that’s a plus for the rest of us. CPAU spokeswoman Catherine Evert said the public service “does not anticipate this will be a widespread problem.”
2. The utility will allow residents to opt out of smart meters, and these withdrawals will continue to incur meter reading costs.
3. Municipal literature indicates that meter reader injuries are not uncommon.
4. The city estimated in 2018 the measurable annual financial benefits as follows:
And the estimate of the measurable annual financial costs (mainly additional staff) is as follows:
5. The utility provides documentation for customers on smart meters here. The results of the previous pilot study can be viewed here (2017). Relevant reports can be found here (approval of the 2018 plan) and here (funding approval 2021).
6. This presentation by Strategen Consulting reviews some smart meter pilots across the country. Each region has different constraints and objectives, but there are still lessons to be learned. Rocky Mountain Institute Examines Time-Based Fare Designs here. The Brattle group has a brief overview, although not everyone agrees with the author.
7. Gennady Sheyner wrote about smart meters a few months ago when the Utilities Advisory Board approved their funding. His article has more information on the deployment.
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