Smart Grid - Without HAN, There Will Be No Demand Response?
The Utilities will have to show shareholders and consumers that the benefits outweigh the costs to gain approval for new investments. The modern grid can not exist without an effective integrated communications infrastructure, and also can not exist if there is the commitment of all its stakeholders -- Government, Utilities and Consumers.
Several communication technologies are presented daily in the market, but that instead of helping just bringing more uncertainties, and consumers know that the string always breaks toward the weaker, and weaker side is always the consumer.
The Utilities can recognize a good project for AMR and AMI and its integration with the area of IT, but using and sharing it with consumers, they have no idea. The HAN area must be taken now as a priority, because without its implementation, I do not see how we will develop Demand Response. Renewable Energy is also closely linked to the development of HAN and Demand Response.
"Area coverage, capacity and cost are three requirements, but are treated as one, because many solutions require the participation of three. Wireless solutions can meet these two requirements, but the costs of the third. For utilities that require both coverage large footprint, and capacity -- with broadband and real-time applications, cost becomes the tradeoff, that is, Can cost rise dramatically to satisfy the coverage and capacity required".
One of the differences between residential environments and commercial/industrial environments is the level of sophistication and customer participation that can be assumed in configuring premises networks to achieve interoperability of Smart Grid communications. Many homes have one or more data networks linking computers or consumer electronics devices. However, this does not reflect all consumers. Moreover, even in homes that have data networks, consumers may not have the expertise suitable rooms for configuring a home network or may not want to spend time or money setting up a machine as a clothes dryer to communicate through your home network.
It should be possible for consumers to get some kind of benefit of energy savings without the need they have a local area network or expertise in setting data networks.
In the end, what we can all do for the development and deployment of all segments of the Smart Grid is useful and can reach all the intended goals.
Comments
Consider what happens with CATV or telephone companies and consumers. These industries have a long history of successfully marketing basic services plus optional services and optional in-home equipment to use them. They are characterized typically as having strong sales and marketing to "sell" consumers on buying the optional stuff. They also have consumer telephone and on-line technical support to help educate consumers on how to use their optional stuff, plus they have armies of field technicians that will do house calls on demand for setting up any in-home equipment for any consumers that need it, or house calls to fix problems when they arise.
Now picture electric utility companies doing the same. They offer a basic service of providing energy to homes as usual, and then sell optional stuff like HAN equipment and communications with their smart grid to enable consumer demand responses. They also offer consumers the technical support and help and education on how to use them, plus, most importantly, educate consumers about why and how the consumer can benefit financially by buying into them. They could even offer consumers incentives like discounted energy rates when they first buy into it, just like CATV and telcos often do when you agree to buy into a new optional service or new provider.
If the utility companies were clever, they could even potentially make extra money beyond their energy billing doing this sort of thing, just like the CATV and telephone companies routinely do getting extra money from those customers that sign up to optional services. This would effectively mean an end to uniform billing rates for all their customers.
Too bad utility companies have little interest in doing this sort of thing. Most generally want nothing to do consumers' lives beyond selling energy and simply using their service meters to bill everyone as usual. Maybe this situation has something to do with regulators (or governments) not permitting them to change beyond business as usual. Among other things under current regulatory regimes, most utility companies must bill all their customers the same way with uniform rates.
You're probably right to some extent about the willingness to utilities to reconsider their business models. However they also have to deal with regulators, who try to keep prices low. Moreover, there's a mindset among utilities, regulators and the public that any useful expenditures are entitled to cost recovery.
Fred Banks is probably going to object, but if "we", meaning society, want utilities to transform themselves, the first step has to be a significant departure from the existing regulatory model. Expecting utilities to think and behave like competitive businesses doesn't work when they're still regulated like monopolies.
I agree completely with your comments here. Indeed a big obstacle is that regulators try to keep prices low, since any increases in regulated rates tends to cause economic ripples throughout the economy i.e. higher costs for everyone.
My analogy to CATV and telephone companies though suggests that if uniform rates for all customers were abandoned, any increases in service charges would affect ONLY those consumers who opt to sign up for optional services or equipment. And if the consumers who do so are educated on how to minimize their energy bills using demand response technology, accompanied by Time-Of-Use or real-time pricing, then overall those consumers would, potentially, pay less over time for energy than if they did nothing. So in essence the idea would lower overall energy costs for the public as a whole.
It's good also in that only those consumers that can afford to invest are the ones most likely to first make the initial up-front investments in HANs, smart appliances, and optional services from utilities.
Furthermore, just think of the potential marketing competition it would open up for domestic businesses selling demand-response-equipped appliances. Home Depots and appliance retailers alike might even be willing to pay utility companies advertising fees for pushing their latest hi-tech demand-response-equipped appliances directly to utility customers with mailers or on-line ads. Utility companies in this scenario have it made because they have a direct communication marketing pipeline to every customer through their billing systems. It would be an advertising company's dream to have widespread public coverage simply by tapping into the utility's customer list. In fact, those lists probably have research data associated with them too about customers' profiles that could be sold to retailers. e.g. retailer might be willing to pay an advertising premium to access ONLY those customers addresses who have signed up for HAN equipment and demand responses.
And of course there would be other economic spin-offs of creating much more technology in my electronics industry. It would be a mass market boom opportunity akin what the PC market opened up, and a welcome boost to America's Silicon Valley too.
Probably the only way to get regulators “out of the way” and permit the changes is to get their governing politicians to change their mandates. Easier said than done I'm afraid.
Here in Ontario our local utility companies are distribution only, while our generators are separate companies. Our electricity bills are split detailing energy charges and, among others, distribution-only delivery charges, with the former simply a pass through to the Ontario grid operator for compensating Ontario's generator companies, and the latter pays our local distribution-only utility company according to some formula function of the total energy used in the billing period. Changes to either of their rates are subject to Ontario regulatory approvals, and I'm sure the situation is similar in other parts of North America even if a utility company is both a generator and the local distributor.
In my proposal above the rates for delivery charges could still be strictly regulated to an upper limit but allow utilities the flexibility to offer time-limited discounts for anyone signing up to any optional smart-grid stuff. They could make their extra money by charging small monthly fees for the optional services, such as providing communications with their smart grid (or providing communications with generators under an IMEUC system), plus money from advertising fees and / or profit sharing of sales of optional in-home equipment. Customers who don't sign up to any optional stuff would still pay the usual regulated energy rates and the regulated upper limit for delivery charges.
Over time the local distribution utility companies might even be able to make extra money from commercializing residential renewable source micro-generators. They could help individual customers with buying a rooftop solar PV or solar thermal, or geothermal system. They might even make money with clever marketing by e.g. offering consumers discounts like described above, and / or possibly free electrician help to hook-up to their local grid in return for the getting a piece of the action i.e. a share in the profits whenever the consumer’s micro-generator sells power back to the grid.
All of these ideas would require a revolutionary shift in a utility company’s business model, and much more involvement commercially with their customers’ lives than simply selling energy. So as much as I hate to admit it, it is probably pie-in-the-sky dreaming on my part.
- Bob
And don't expect much different from the technology geeks. My son's fiance is a self described "code monkey" for a software start up. At home she uses an Apple mini and laptop. She just wants it to work without thought when out of the office. My son is pretty much the same way, and it appears their contemporaries in Silicon Valley seek balance in life by adopting similar attitudes. A 10% or 20% reduction in even a California energy bill is not worth their time to bother about.
Green energy is about to make managing energy in California much more difficult and complex. The ISO is recognizing that it needs to develop massive ramping capabilities to accommodate green resources. It may turn out that building enough ramping resources will result in lots of spare capacity to meet the AC peak. How many consumers are dumb enough to walk into exposure to such massive complexity and uncertainty by paying real time rates? Consumers will be wise enough to KISS.
Herschel
That 5% or 3% savings will grow more important to average consumers over time. Consider how you might react if your monthly electricity bill was double or triple what it is today, comparable to say your mortgage payment. In that scenario you just might go out of your way to shave a few percent off it, just like people routinely do now in shopping for mortgages and food.
Save your pennies Dean, we're going to need them.
What do you think that distribution transformer on your block is going to do when say 1 out of 2 or 3 of all your neighbors eventually gets a plug-in car and are wanting to recharge on a hot summer afternoon as soon as they return home from work at 5:00pm, with their central air conditioners all running full blast at the same time. You can bet there will be unpleasant demand responses in that transformer, and others alike.
You're probably right though, most of the public are reactive, not proactive. Many will wait until they can no longer bear the price of gasoline before buying electric cars, and most will wait until electricity bills have soared before doing anything about HANs. The question is how fast will these trends unfold, and I'll bet it happens in our lifetimes, perhaps within 5 to 10 years.
I hate to admit it but I hope I am wrong about all of this, since we have had it extremely good growing up with cheap plentiful electrical energy on demand. But this luxury is already changing as record levels of renewable source generation rolls out across North America, especially where you live in California.
Now, here is a sneaky idea. We have plenty of natural gas for the next few decades. Buy a natural gas fueled car instead of an electric. Its cheaper and its fuel is cheaper. Its more efficient than using the gas to make electricity at about 50% efficiency (at best), losing more energy in electric T&D ( which is much less efficient than gas T&D), and losing another 25% charging & discharging a battery. Greater efficiency means better environmental performance. And auto companies already do produce some natural gas cars. Its existing technology. Just do it.
There is definitely a "complete failure by the industry" in the making, don't kid yourself into believing otherwise.
They also know most consumers are not likely to ditch their existing appliances before their end-of-service-life simply to buy and use the latest models with HAN and DR technology built into them.
The quickest and best way to get HAN and DR technologies deployed in the field with large numbers of residential customers is to have manufacturers develop products that can retrofit, where possible, existing appliance products. This would also be far less costly to the consumer than having to replace their appliances. Adding a HAN would then be as easy as buying and setting up a wireless network in the home akin to a wireless computer network.
Utilities also need to bite the bullet and provide the necessary HAN communications from their smart meters or from their smart grid systems into any customer’s home on request. If this is not made available to all customers on request, most customers are likely consider buying into the in-home products or HANs as a waste of time and a waste of their money.