Posted on March 9, 2010 at 10:18 am
When customers complain about high gasoline costs regulators never blame the gas pumps, so why are regulators questioning the accuracy of smart meters in Bakersfield, California and in Dallas, Texas? Because they are answering the wrong question. We know these meters are accurate; they’ve been through years of testing before deployment. In fact, I’ll buy anyone who reads my blog a three-star lunch if they can show me an inaccurate smart meter installed by a utility.
The other wrong question is to ask why the bills have gone up. The reason is that, without a controlled experiment, it is impossible to determine the answer. There are too many variables: rates change, temperatures change, household occupants change, household appliances change (how about that new big screen television?), and even billing periods change (ranging from 27 to 33 days for a monthly bill).
Here’s the right question: are bills for customers with smart meters any different from bills for customers without smart meters? The simple way to find out is by selecting a statistically valid random sample of customers with smart meters and customers without smart meters, then comparing the two groups. Because I know the meters are accurate, I know what the result of this test will be: both groups will show the same changes, because the changes are from all those other factors, not from the meter. People’s gasoline bills go up because they drive more or pump prices go up, not because the pumps are changed.
But, you say, what about the information feedback from smart meters that will lower consumption? Good point, but that information is not being delivered yet. We’ll see those savings, but not immediately.
Stay tuned for more on getting smart meter benefits to consumers.
Posted on February 22, 2010 at 9:31 am
Maybe.
On 60 Minutes last night, Bloombox described a fantastic new fuel cell powered generator that could be installed potentially in every home. If their claims are true and they achieve their price and performance targets, then Bloombox will result in a vast expansion of distributed generation. This substantially increases the need for and value of smart grid data management and transaction management software to monitor, manage, and control the grid. This is because utility planners will have much more difficulty in planning and operating the grid.
However, this is just as likely not to occur. The reason is basic economics. Even if Bloombox can achieve their price target of $3,000, that price is still higher than the cost for a utility to provide the same power plant using today’s technology (assuming a 3 kW Bloombox, the cost is $1,000 per kW; this is more than a Combined Cycle Combustion Turbine natural gas-fired power plant). If the Bloombox actually converts natural gas to electricity more efficiently than existing technology, there will still be scale economies by having larger units constructed and operated by utilities.
Finally, reliability is much higher for electricity from the grid. If I have a Bloombox in my basement and it fails, I am both out of power and faced with the need to get it fixed. My life is simply much easier, less expensive, and more reliable by taking power from the grid.
But they do have a great vision.
Posted on February 19, 2010 at 10:09 am
At last week’s session of the Association for Energy Service Professionals’ (AESP) 20th annual national conference, I sat by Paul Bonavia, Chairman and CEO of Tucson Electric Power – who looked somewhat uncomfortable as Ralph Cavanagh spoke to the audience of Arizona’s new energy efficiency goal: a 22% reduction by 2020. So I asked my long-time colleague, who is Energy Director of the Natural Resources Defense Council and a real efficiency policy thought leader, how do policymakers get electric and gas utilities excited about selling less of their product?
Ralph argued the case for decoupling of utility revenues and profits. For 100 years, utilities have earned more by selling more. Decoupling is a new regulatory mechanism that allows utilities to earn the same or higher profits when they succeed in reducing energy sales, plus a profit bonus for exceeding conservation targets. I pointed out that this formula is fine for a year or two, but how does a utility grow? How does Paul Bonavia turn a 22% reduction in kWh sales into a success in 2020 when Wall Street is demanding ever-increasing earnings?
The issue is crucial, because the single biggest benefit of the Smart Grid and smart meters is energy conservation. Conservation, based on the studies, will deliver 10% lower bills and carbon emissions from education, feedback, and behavior – and another 10%, for a total of 20% savings, from smart thermostats and smart appliances over the next decade (providing those markets take off).
Ralph’s answer to my query was that decoupling must be accompanied by a somewhat complex profit adjustment mechanism, so utilities continue to benefit and can grow earnings over the years. While the complexity is a challenge, the good news is that 10 states have solved the problem for electricity and 18 for gas.
I have to admit I wasn’t fully convinced of the solution. But I am convinced that the energy efficiency industry is committed to the hard work needed to come up with a better one. Hard work that I’ll continue to work with Ralph and others on.
Posted on February 19, 2010 at 10:04 am
The Edison Foundation reports that 38 states are pursuing deployment of smart meters. As shown in the map below, 22 states are pursuing deployment for over 50% of consumers, with 16 for under 50%. “Pursuing” includes smart meter deployments, planned deployments, and proposals by investor-owned utilities and some publicly-owned utilities. The total number of meters represented is 60 million by 2019, representing 47% of U.S. households.
While encouraging, these data put the U.S. behind many other countries, who have committed to 100% deployment by 2020. These include China, Italy, Sweden, Ireland, Spain, and the U.K. U.S. policymakers should take note for competitiveness and other reasons.
More details are at http://www.edisonfoundation.net/iee/issueBriefs/IEE_SmartMeterRollouts_update.pdf.
Posted on February 18, 2010 at 9:45 am
Last week, the Texas market became the second one to go live with a smart meter data exchange. Two years ago, Ontario, Canada, implemented its centralized MDM/R (Meter Data Management/Repository) to serve all 93 utilities in the province with MDM services and act as a centralized data exchange.
In its “soft launch,” the Texas portal began accepting 15-minute interval data from all 710,000 smart meters already installed by the four large investor-owned Texas distribution utilities, which include CenterPoint Energy, Oncor, AEP-Texas, and Texas-New Mexico Power (TNMP). Data are collected and updated daily. Most of the meters online are from CenterPoint and Oncor (recall that in December, CenterPoint became the first utility in the world to begin providing residential interval data for wholesale market settlement).
When additional features of the portal go live shortly, retailers will be able to use the portal’s API (application programming interface) to extract data for their customers and present it on the retailer’s website. Consumers will also have the ability to designate one or more authorized recipients to receive their metering data, potentially including retailers who would like to make special offers based on the actual data.
For consumers in Texas, the promise of smart meters is steadily becoming a reality.
Posted on February 17, 2010 at 9:25 am
An oft-asked question about the Department of Energy’s Smart Grid Investment Grants is whether the IRS will consider them as taxable income to utilities. Having to pay tax on the grants, at a typical corporate income tax rate of 35%, would have a significant negative effect on the business case for smart meter and smart grid projects funded by the grants. Thankfully, the IRS says the grants are not gross income.
The IRS addressed the issue in a private letter ruling made public by the Maine Public Utility Commission in Docket No. 2007-215 Phase II for Central Maine Power. The letter ruling, issued by Paul Handleman, Office of Associate Chief Counsel for Passthroughs and Special Industries, analyzes in detail the applicable tax laws and several tax court rulings relevant to the issue. It found as follows: “(1) The payments from Government to the taxpayer pursuant to the Program for the Plant are a nonshareholder contribution to the capital of Taxpayer under section 118(a) excluded from Taxpayer’s gross income under Section 61; and (2) The basis of the Plant’s capital assets acquired by Taxpayer with the money from the Program that is contributed by Government shall be reduced in accordance with the provisions of section 362(c) and the regulations thereunder.”
In plain English, this means the grants do not increase taxable income, they are “excluded from Taxpayer’s gross income”. Instead, the money provided for smart meter and smart grid equipment and installation is credited directly to the utility’s capital accounts. This means the utility cannot depreciate the assets, which would result in tax savings on plant actually paid for by the government. (Of course this ruling applies only to investor-owned utilities; municipal utilities and cooperatives do not pay income taxes.)
This tax issue illustrates yet again the central role of regulators and policymakers in society realizing the benefits for smart meters and smart grids.
The good news is that the tax issue should not be a problem for utilities receiving smart grid grants.
Disclaimer: this is a great precedent for other smart grid grant recipients. However, because I am not a lawyer, I cannot comment on its legal applicability to other utilities. I also understand that private letter rulings, according to the IRS, technically apply only to the recipient of the ruling. Having said that, there is no reason the logic and analysis above would not apply to other smart grid grant recipients. In acting on this issue, each utility should follow the advice of its own counsel.
Posted on February 4, 2010 at 4:54 pm
This week, PG&E quietly reported to the California PUC its substantial progress on rolling out smart meters. As of last month, PG&E’s total installations had exceeded 4.6 million meters, half electric and half gas. PG&E remains on schedule to complete its rollout to almost 10 million meters by the end of next year. The figure below shows PG&E’s substantial progress.
As a pioneer, PG&E has taken some arrows in the back, and some customers in Bakersfield and elsewhere have complained about not seeing the benefits of smart meters. When PG&E started its smart meter journey, few others were even discussing smart meter rollouts. Today, some PG&E smart meter recipients have already taken advantage of critical peak pricing, but most are still awaiting new pricing choices, including Peak Time Rebates, and more detailed information, including hourly and daily energy usage information.
We applaud PG&E for its accomplishments to date. And we look forward with anticipation to PG&E rolling out the smart meter benefits now that PG&E is making such good progress on the meters themselves.
Posted on February 2, 2010 at 9:43 am
Last week at the Smart Grid Summit UK conference, I asked my fellow speaker, Charles Hendry, what he thought of the current UK smart meter policy. Mr. Hendry is a Minister of Parliament and the “shadow” Energy Minister of the Conservative Party. In the UK, the party not in power appoints its own shadow cabinet ministers to provide a counterpoint to the actual ministers and to prepare for their own administrations, should they get elected (the UK will be holding elections in May 2010).
Mr. Hendry said he would like to see the Government speed up the smart meter rollout as much as possible. He gave three reasons that acceleration completion by three years to 2017 would make a lot of sense. First, the UK has a goal of eliminating “fuel poverty” by November 2016, so that all UK citizens are able to pay their electric and gas bills. He feels smart meters would help people better understand and manage their energy use and, accordingly, help achieve this goal.
Second, the UK is forecasting power generation shortages in 2017 based on the current installed base, expected retirements, and forecasted load growth. Demand response is the most cost-effective way to avoid power shortages.
Third, the UK will be bringing on its first new nuclear plant, and will have much more wind power by then. Smart meters allow for pricing options that let consumers save by reducing the peak – taking maximum advantage of low- or no-emission baseload energy such as nuclear – and using smart appliances that turn on only when certain sources, such as wind power are available. This works for electric vehicles too.
I mentioned to the Shadow Minister that we have experience in other countries and states – e.g. Ontario (Canada), Texas, California, and Victoria (Australia) – that are completing their rollouts in about four years, so 2017 is readily achievable in the UK with the right political consensus. Mr. Hendry said the experience of others would be important in ensuring the UK gets it right. He asked for eMeter’s participation in the stakeholder process.
I assured him we were there to help.
Posted on January 26, 2010 at 9:49 am
It seems Germany likes the idea of smart meters as much as the United States and other countries around the world.
Accenture yesterday published results of a German nationwide household survey. Eight of ten consumers would like a smart meter, believing they can reduce power consumption by around 10 percent by using the smart meter information. Approximately 85 percent of the survey participants said they would like an in-home digital display that can show, for example, if any energy “vampires” are still using energy when switched off. Even more, 86 percent, felt the meters would be advantageous in signaling power outages and help speed restoration. And 80 percent were interested in automated control of washing machines or dishwashers, so that they would operate only during times of day when power prices were lower.
Accenture conducted the survey with the market research firm Forsa in December 2009, reaching a representative sample of 1,002 private householders from age 18 to 69.
Und auf Deutsch:
Acht von zehn Haushalten in Deutschland wünschen sich von ihrem Energieversorger den Einbau eines intelligenten Stromzählers. Die Verbraucher gehen im Durchschnitt davon aus, ihre Stromrechnung mit Hilfe eines so genannten Smart Meter um rund zehn Prozent senken zu können. Nach den Ansprüchen an die praktischen Anwendungsmöglichkeiten von intelligenten Stromzähler gefragt äußerten 85 Prozent der Befragten Interesse an einer Digitalanzeige in ihrem Haushalt, die beispielsweise signalisiert, ob noch versehentlich Elektrogeräte eingeschaltet sind. Dass dank der Informationen von Smart Metern der Strom bei einem Stromausfall schnell über eine andere Leitung wieder hergestellt werden kann, sehen 86 Prozent als vorteilhaft an. Funktionen zum automatischen Ein- und Ausschalten von Waschmaschine oder Geschirrspüler, sobald der Strompreis zu bestimmten Tageszeiten günstiger wird, finden 80 Prozent der Befragten interessant.
Für die Studie hat Accenture in Zusammenarbeit mit dem Marktforschungsinstitut Forsa im Dezember 2009 eine repräsentative Auswahl von 1002 privaten Stromentscheidern im Alter zwischen 18 bis 69 Jahren nach ihrer Einstellung zu “intelligenter Energie” befragt.
Posted on January 21, 2010 at 1:06 pm
Yesterday, in the first of two important industry steps, George Arnold of the U.S. National Institute of Standards and Technology (NIST), part of the Department of Commerce, announced the publication of Smart Grid Interoperability Standards. These standards will help smooth the way for utilities and regulators to move forward with smart meter and smart grid plans.
NIST formally adopted 25 different standards that apply to different parts of the Smart Grid. Some are data protocols, others communication protocols, and others cyber security standards. They will make it easier to integrate disparate systems, share data, and achieve the benefits of Smart Grid.
The second step will be in seeing which of the various standards the industry implements in a big way. I.e., if what we need is a standard, what good is it to provide a menu of 25 different ones from which to choose? Part of the answer is that the 25 standards address different areas. The key answer, though, and the key standard, is the Home Area Network standard.
The HAN standard is the open interface between the utility Smart Grid and the world. Utilities can build interfaces within their space, but the only way for smart devices and smart appliances in homes and businesses to take off is for an open interface that can be utilized by any manufacturer in the world. That interface has to be both open and adopted by the market. NIST’s list does include standards that fit this need. One of them, ZigBee/HomePlug is also being adopted by the market and will be in at least 16 million electric meters in California and Texas within four years, with more in other states and countries.
NIST’s announcement is a welcome leap forward on the Smart Grid highway.
