Hot Questions on Demand Response, Smart Grid

Phil Carson | Jun 02, 2010


A GridWise Alliance webcast yesterday focused on demand response under the aegis of the alliance's commercial/industrial subgroup, and I knew I had to listen.

What better way to understand the concerns of commercial/industrial electricity customers who for decades have taken advantage of real-time pricing and demand management techniques to control one of their biggest costs?

Seda Atam, manager for national customer markets for the Edison Electric Institute (EEI), described EEI's work with commercial customers with national footprints and the high value of demand side management in that context. Then Michael Cornicelli, executive vice president for BOMA/Chicago (Building Owners and Managers Association), described the concerns of his members, who manage 125 million square feet of space - 80 percent of Chicago's central business district. (Electricity is second only to property taxes as their highest expense.)

But the most revealing of the presenters was John Anderson, president and CEO of ELCON, the Electricity Consumers Resource Council, which represents large industrial manufacturers. Anderson's constituents have been participating in dynamic pricing and demand side management for decades.

"The facilities of our members represent hundreds if not thousands of megawatts at each site," Anderson said, underscoring their scale.

"We've never heard a U.S. president talk so explicitly and fervently about an electricity issue the way President Obama talks about the smart grid," Anderson observed. "We have some very basic questions."

Here I render his questions nearly verbatim in the breathless manner he delivered them - not unlike a patient shown the couch and asked to describe his anxieties. Why the realism? It lends authenticity to the concerns. After all, Anderson represents the largest electricity consumers in the country. (Note: when Anderson uses the word "consumers," he typically means customers such as his members.)

"For instance, what is a smart grid?" Anderson asked rhetorically. "Does it involve transmission, distribution, or both? Will it bring mandatory requirements to consumers? Or will participation be voluntary? Can participants opt out? Will it be Internet or wireless based? Will hardware and software from different vendors talk to each other? What are the cyber security implications? What will the smart grid cost? Will it produce long-lived assets or will consumers be faced with stranded costs? Why have no qualified consumer groups supported the idea? Is real-time pricing what customers want? Will customers be prohibited from hedging against price volatility by seeking fixed-price contracts in the smart grid era? Will cyber security concerns drive tremendous costs, spread across all customers? Finally, do we really need the smart grid to bring about peak load control goals? For 40, 50 years, utilities have been installing radio-controlled switches on hot water heaters, swimming pool filters, air conditioning compressors and things like that. Utilities actually, directly dispatch these load-control appliances. It's a proven concept, a very, very inexpensive way to reduce peak load and verifiable. Customers have been pleased with the results. Finally, there are real problems being raised. California is ahead of the rest of the United States on many issues, and certainly they are with smart meters, ordering them for all customers. They started installing a couple years ago and immediately they started getting complaints. As one of them said: 'For the utility to come into your home at any time of day or night and know what appliances you're using is corporate intrusion on your life.' PG&E for a long time denied there were problems, but just last month they recognized that there is significant customer discontent, discontent that may have merit. A senior vice president said 'I just don't think we did a good job of seeing the world through the lens of the consumer.' I think the idea of a smart grid may be a terrific idea, it probably is, but that message has not resonated with many consumers, at least to date. To be successful, I think consumers must be convinced of net benefits, benefits that they want, not something that someone else says they want. I urge advocates of the smart grid to directly address consumer concerns, or else I think you might find you'll get some backlash."

"We certainly have an open mind," Anderson concluded. "And we're looking forward to learning more about it."

These are the largest, most sophisticated electricity customers in society and their leader rattled off myriad concerns without drawing a breath. All smart grid proponents - including yours truly - should take note and attempt to answer these concerns. Then take a deep breath.

Phil Carson
Intelligent Utility Daily




Related Topics


NIST Smart Grid Standards

You all should check out the massive effort underway by FERC, NIST and 26 or 27 different stakeholder groups (including consumer input) to produce Smart Grid Interoperability Standards.  THere are hundreds of people contributing to this organized effort and it is on a very fast track.

This is a completely transparent effort, anyone can join and it wil achieve many goals including consistency in the use of technology, cyber security, demand response, etc.  If you have ideas, join the SGIP (Smart Grid Interoperability Panel) and start contributing rather than speculating and, I dare say, displaying the pessimism that I see in some of the comments above.


Peter Friedland

Thank you

Thanks Peter,

We've been reporting on the SGIP; see these links to two columns:

I got the sense that John Anderson is well aware of the SGIP, too -- his tsunami of questions may represent the misgivings of his constituents rather than reflect his own knowledge of the widespread efforts.

Regards, Phil Carson

Fear is healthy

I hear a good deal of fear expressed here, and given the arguments, that fear is not inappropriate.

I'd point out, however, that the theory that smart meters only serve TOU pricing and that TOU pricing is just a ruse to pay for higher renewable energy rates is a bit narrow. The most expensive power is generated at peak hours, mostly by natural gas-fired generation.

Metering use according to costs makes a lot of sense and is prevalent in other utility settings beyond electricity.

What utilities have not done, in part, is explain how smart meters serve their operational efficiencies (utility side) and why and how consumers might benefit from TOU pricing (consumer side). I do like the repeated suggestions, from many quarters, that utilities introducing TOU pricing should offer an opt-out, basic flat rate, while providing more active consumers with info on how to benefit from dynamic rates.

Completely avoiding the conversation with consumers, who are taxpayers and voters, or not metering them, doesn't seem like options to me. But I'd say that at this point, meters without engagement and dynamic pricing only exacerbates fear and mistrust -- the worst possible outcome in an effort to modernize the grid.

Regards, Phil Carson


TOU pricing - carrot or stick, or both


TOU pricing need not be punitive for the consumer.  Incenting consumers to move a portion of their usage away from the peak can be accomplished with a combination of savings opportunities and higher price risks.  I agree that utilities need to dialogue with consumers before deciding how best to roll out TOU rates in a way that doesn't create a zero-sum scenario.  Also, TOU pricing need not be static, with set parameters that are at best changed for summer/winter loads.  Some customers may prefer a predictable, static rate structure, but others may want to have more dynamic rates, if there is a mechanism that can adequately inform them in advance of changing energy supply & demand constraints on the utility and more aggressive savings incentives for modifying their energy usage accordingly.  Here is where automated HAN technologies may really benefit the consumer.  Imagine a prolonged heat wave coupled with an unscheduled outage at a major generating facility, where a utility can offer a more aggressive dynamic TOU rate for the next week.  It wouldn't work for everyone, but I am sure some consumers would be willing and able to take advantage of the opportunity.  As Phil stated so well, segmenting the consumer population and offering these programs effectively can only improve the brand of the utility if there is engagement with consumers, a strength of retailers, but not so much for utilities.

C. M. Nobles

microcontroller abuse

Inclusion of microcontrollers in a device is an invitation for abuse.

Firm- or software can be progammed for a company's financial advantage.

If an appliance contains a microcontroller, then we always buy the extended warranty for the reason a microcontroller can be programmed to make the appliance fail once the factory warranty has expired and the extended warrant NOT purchased.

Law enforcement industry would like to be able to disable a vehicle computer remotely.

Swiss Radio International tell of  manipulation of Iranian and Libyan ciphering machines.


"To be successful, I think consumers must be convinced of net benefits, benefits that they want, not something that someone else says they want. I urge advocates of the smart grid to directly address consumer concerns, or else I think you might find you'll get some backlash."

Exactly right...kinda. In my view, the problem is that there are no meaningful benefits to the typical residential consumer. I sense that utilities already understand this. Fact is, they may have known this prior to any smart meter installation. So why press ahead? To answer that, you have to look at the bigger picture: accommodating high priced, low reliability renewable resources as part of an overall green agenda.

To recap, you can "do" all sorts of energy efficiency, including demand response, WITHOUT smart meters. I know...I've designed and installed numerous cost-effective industrial-scale systems (including DR). What you can NOT do absent Smart Metering is TOU or real-time pricing. Without real-time pricing, passing on high renewable source costs is significantly more difficult. Beyond that,  in the wider Smart Grid initiative, you also find the need for more sophisticated dispatching....again to accommodate high-cost, low-reliability renewable sources PLUS a variety of storage schemes that are on the horizon.

Frankly, I long for a cogent plan that forthrightly addresses the BIG picture including the elements mentioned above. So far, all I'm seeing is a convergence of special interests. On the one end, you have the Church of All Things Green. On the other hand, you have equipment manufacturers that all all too interested in selling their greenware. Between you have engineering firms, utilities and contractors that don't want to kill the golden goose either.

I fear to the marrow of my bones the result of a conflict-interest driven haphazard redo of our "grid" costs that cannot possibly be justified on any economic basis. Meanwhile, the DOE continues to pass out public money for "demonstration projects" if full-scale commitments haven't already been made toward "commercialization".

I see a monstrous, ugly, insanely expensive patchwork dog on the horizon.