How Technology Advancements in Smart Metering Can Enable Broader Socio-economic Changes

Prosenjit Dutta | Sep 13, 2011

With the deployment of Smart Metering, Utilities now have an opportunity to explore the broader benefits that Smart Metering can result in. Of course, many utilities are currently in the process of leveraging their Smart metering investments to employ energy savings programs such as Demand Response, Critical Peak Pricing just to name a few. However, one important aspect that should be considered by Utilities and regulators alike are the socio-economic changes that can be brought in by leveraging the Smart Metering Infrastructure.

Let's be a little more specific. One of the offshoots of Smart Metering is Home Area Network and automation. The obvious purpose of implementing HAN would be to educate customers about their usage patterns and enable them to make informed decisions to save energy and their electric bill, while indirectly contributing to help reduce peak demand and thereby reducing the need of new generation plants and reduction of greenhouse emissions. However, HAN can be leveraged to achieve a lot more than this fundamental goal.

In talking to one of our utility customers, we came across a very interesting topic. Electricity can be used for a variety of purposes. A common person might be using electricity to keep the basic lights and fans on. At the same time, someone might be enjoying living with all sorts of modern gadgets and using electricity to have 'great fun'. This sounds simple but the differentiation is remarkable, and, needs to be thought thru very carefully. Why would someone pay almost the same rate to make basic amenities of life available while many others would be utilizing the same resource for enjoying the feats of modern science and technological advancements?

It is time that regulators and utilities alike thought over on how to address this 'discrimination' and HAN would turn out to be the obvious tool to address this. Using a HAN enabled Smart metering infrastructure, Utilities should be able to measure the energy consumed by each major device within a household and track the consumption. This should provide a means to charge different tariffs for different devices. For example, a KwH consumed by a light bulb can be charged at 3 cents, whereas the same consumed by a Playstation ® can be charged at 20 cents. The thought is essentially to take time of day based tariffs to the next level, where the tariff is no longer a function of only the time of the day, but, also of the devices that actually run on the electricity. This is what "Type of use Billing - TyOU!" will be all about!

Imagine the consequences of being a pioneer to conduct a HAN Pilot with this objective. A utility can bring in a dramatic socio-economic change by reducing the burden on low income or mid income families, whereas recover the balance from the ones who can afford to live a lavish lifestyle.

Opponents may argue that basic tiered rate structure already addresses this challenge, which is definitely true to a certain extent. However, the suggestion that is being made here is to utilize modern technology advancements to further address this cause.

From a technology implementation standpoint, the backbone to this process, once adopted, has to be a combo of a HAN server, Smart metering system and an intelligent decision making system. The schematic system has been depicted in the following figure:


The core systems as shown in this diagram are obvious components of the Smart Metering/HAN infrastructure. The communication network has not been shown. The new layer to be introduced will be the 'Data Integration' layer, which will essentially act as the central intelligent processor for the information and data gathered and processed. The billing and CIS systems will need to be updated to compute bills and reflect information on the bill in accordance with the new processes and rules. Information as relevant can also be presented to the customer thru' a web portal or thru' awareness sessions.

Of course, there will be challenges to this proposed infrastructure that needs to be planned properly and implemented; these would include cost of implementation, ownership and security considerations, authenticity of the data being generated from the HAN etc.

It would be interesting to see the changes in customer behavior that can be brought in by adopting the outlined approach. While obviously, introduction of this kind of a process might face initial resistance from different consumer interest groups, the change will definitely benefit the society at large in the long run, and encourage reduction of demand and consumption in general.


With technology advancements in HAN, Utilities can implement processes and systems to help Low income groups substantially, and, also encourage savings by the ones who probably end up spending 'too much' on energy consumption. Smart Metering and HAN are already being deployed to achieve substantial benefits to engage consumers, increase their awareness about Energy consumption and helping them make informed decisions about the electricity usage. Adoption of the '"Type of use Billing - TyOU!" process will be a big step in achieving newer benefits from a HAN Infrastructure.

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Technology is certainly capable of implementing TyOU, it would be far from any rocket science, I can say as a long-time electronics product designer. However in my humble opinion TyOU billing would never be socially accepted by the public at large because electricity uses by a customer is considered their own private business.

The LAST thing most customers want is (another) "big brother" monitoring their lifestyle habits in their own homes. And you'll find that most utility companies are loathe to become involved with anything beyond their billing meters, and will fiercely resist TyOU for residential customers unless of course governments forced them to implement it.

Consider also the tremendous cost of implementing a TyOU system. The HAN would somehow have to identify most types of loads used by a customer. This would place a huge cost burden on manufacturers of everything from appliances to light bulbs to equip all their products with ID technology that the a HAN could recognize. Otherwise consumers could easily lie about what loads are plugged into any given circuit in their homes to get a lower TyOU rate applied to any given circuit.

Moreover consider what might happen if electrical energy storage becomes practical for residential consumers to implement e.g. like the batteries in future electric vehicles. What would stop a consumer from storing energy from their grid supply in a battery, and then later, unknown to their utility company, using that stored energy to run their most expensive loads under a TyOU system. Indeed this is one of the visions for future electric car batteries under the simple TOU systems being rolled out to realize load shifting to off-peak hours and lower energy costs.

I have a better idea; why not let consumers buy and implement their own HANs and metering technologies within their homes that logs all their private energy uses. The hardware and software to collect this data is already available in some home automation technologies (e.g.’s Insteon technology is one of them). Then, for a suitable fee or credit on their utility bills, consumers would choose whether to SELL their private consumption data to the utility company to get TyOU rates applied IF they want it. Alternatively, they might potentially even sell their private data to governments who are interested in providing such consumers tax credits to conduct more green lifestyle habits.

Further to my first comments above, I believe the stigma of another "big brother" monitoring your private lifestyle is a much bigger political force than most realize that would oppose any sort of TyOU billing. Even lower income customers that could benefit from TyOU would oppose it because they are the MOST LIKELY segment of the general population that would prefer to practice conservation and energy efficiency upgrades to lower their electricity bills long before letting anyone outside their homes monitor their lifestyles in order to do so.

If TyOU billing was implemented and FORCED onto some consumers, it would accelerate the emerging trend of customers investing in their own private on-site generation for the purpose of getting off the grid completely. This would be another factor in the demise of our utility industry down the road as another commenter on this website, Malcolm, has recently been predicting due to the growing alternative energy industries.

I agree with Bob. I also agree that smart metering could produce "Broad Socio-Economic Changes" but not in a good way. But in the "big brother" way that Bob indicates. All you need to do is broadcast a real-time price. Then the market can decide for itself, and demand will respond to cost changes.

But no, it's always about top-down control with the utilities now. Frankly, it kind of creeps me out. So now I have to "register" my fundamental vs. frivolous electronic devices with the utility now? Yikes! The PATRIOT Act comes to the grid.

BTW, it would be way easy to cheat a TyOU system. All you'd need to do is plug your frivolous foot massager (or XBox or whatever) past the monitoring device used by your stove/lights.

I agree that the complexity of implementing any sort of reliable "device type identification" system in a home, and THEN trying to measure reasonably what amount of metered total is going to any particular category or type of device, makes the concept of TyOU metering impractically costly.

It should perhaps be noted however that that top marginal load is a LOT more valuable in regions where there are chronic generation shortages and a concept that money alone shouldn't determine who gets access.

Regarding public reaction concerns, I think this is probably overstated. After all, would not people 150 years ago have had the same reaction to the concept of charging fees for tying your horse to a hitching post on the street, or for riding along a specific trail? Yet parking meters and toll roads are broadly accepted now.

What a great concept, but why stop there? Certain appliances have essential and non essential purposes. All refrigerators need optical detectors and complex software to determine the ratio of beer to food items so the appropriate charges could be calculated for the energy it uses. Society would need to do some background work. First society would need to determine whether the essential items are the beer or the food.

To extent further, if the frigs owner was a drunk we could give her/him a discount on frig power since the beer is the medically necessary to stop the DTs. Besides, the money is likely needed to buy more beer since work performance likely suffers as a result of the addiction. Really isn’t it unfair to ask anyone to work with a hangover so shouldn’t society do the right thing and supply the beer and the power free.

For heaven’s sake think of the children. Their parents are drunks and now we are going to make their video games expensive to play. Give the kids a break, I say free video game power for all.

Or maybe I am just being ridiculous.

In my fridge, my beer to food ratio is approximately infinite.

This is an interesting concept and might see the light of the day in emerging economies like India and China and Latin American countries where there is an imperative to fill the gaps between haves and havenots. This might not be acceptable in advanced countries like the US and Western Europe where this will be construed as an invasion of privacy and passing on the control of personal lives to the utility company.

However one point to be noted is that, even today we do have a tiered metering systems in countries like India where in the heavy users of energy have to pay a highet per unit rate than the medium and low users of energy. This concept takes one step forward and talks about the way in which we can charge the users depending upon the end usage of energy.

It remains to be seen what additional benefits and energy savings this concept provides to the utility companies over and above the existing tiered metering systems which charge a per unit rate based on the number of units consumed and where more the units consumed the more the per unit rate.

We will need to do a cost benefit analysis in terms of the benefits provided by this model as well as the investments that are needed to be made to implement the HAN and the devices in the HAN to make them compatible with the device based energy pricing model.

Hello Deepak,

We have that in the U.S. too, and I have no problem with that. I think Len hinted that a single (high) price at peaks may be hard on those that just use a small amount of power at all times. You could adjust a real-time pricing system to account for that higher price due to the added (expensive) capacity that is turned on. So if you are using 8 KW on a hot Summer day (a peaking day), then maybe the first 2 KW are charged at nominal rates, but a premium is paid for the remainder.

As per my understanding Tiered billing rates were typically to solve this problem. Almost every household will be using the basic energy for essential services like lighting and cooking.
But if a person has spent a lot in buying energy efficient bulbs (like LED) then does he get an additional discount for the same or he is charged more for other hi-tech ammenities like Playstation.
There has to be very careful judgement of different scenarios while trying to come up with these Smart Rates.
My take on this peak demand is that if we have sufficient and advanced electric energy storage systems, then the whole idea of "Demand Side management" and "Peak Load management" would die down.

This idea is near-insane. If a user decides to forgo the comfort of a fan and decides to switch on the PS3, you would penalize them? And is computer considered "essential" or "non-essential"? Maybe the 3rd bulb is non-essential. Or if there are only 2 people in the house, the 3rd fan is now non-essential.

While the idea of helping low income customers is commendable, "encourage savings by the ones who probably end up spending 'too much' on energy consumption" is misguided. If everyone stops buying electricity beyond essential services, the utility companies probably would be forced to fold their operations or line-up for bail-outs. Not to mention that the complexity of such a system would be incredible and an implementation of this concept would possibly open utility companies to damaging lawsuits.

HAN itself is far from being a ubiquitous technology. It is hard to see every home equipped with HAN that understands a common protocol in the next 10 years. HAN technology can and will do a lot of things. TyOU should definitely not be one of those. I shiver to think of a world where the gas station charges me more because I drive a new BMW or Target charges me more because I wore a suit to the store. Or maybe my utility company decided to charge me extra because I used "their energy" to read and post my thoughts on a "non-essential" piece of information.

Instead of a program that tries to out-think everything while seeking social justice, wouldn’t it be much simpler and more effective to charge by RATE of use (kw) as a multiplier upon the actual energy used (kw-hr) in any given day AND the time of use in order to encourage peak shaving? Seems that having only 3 variables in the program would be far less complex, not to mention less intrusive on privacy.

As it stands we are not charged according to the kilowatts of power we demand (how quickly we use electricity), just how much energy units in kw-hours are consumed by the end of a billing period. If rate of use was factored in, the big users of games, home entertainment centers, industrial sized kitchens, walk-in freezers, large over-used A/C, plug-in electric vehicles, large power tools, etc., etc., etc., would automatically pay more and the low-end users would be unaffected.

With time-of-use also factored in that would give further incentive to use power at off-peak times.

We already have the technology to monitor all three factors outside the house or apartment at the meter.


Monitoring a customer's real-time power demand is already being done by many utility companies for large industrial and business customers. During heavy peak demand periods, some utilities will offer these customers financial incentives to curb their power demand to ease the strain on the grid. This is generally not being done however for residential customers, but as you correctly point out, smart meters are capable of reporting any customer's instantaneous power demand on software commanded request.

In aggregate all residential customers make up a very large portion of overall demand on the grid at any given time, and so utilities tend to be uninterested in any single residence's power demand profile, unless of course it is unusually very high. The latter might suggest they are running some sort of illegal business in their house like a pot grow-operation or something.

To monitor every customer's power demand profile including residential, either in real-time or to record its history for billing purposes is certainly not rocket science with today's smart meters and computer systems. The problem for utilities would be that in practice the volume of data to store and analyze for billing purposes would become astronomical, especially say if they took a power measurement from every customer over very short interval sample periods like minutes or less. This would probably render it not very cost effective for any utility company to bear the cost of implementing it on a large scale.

Of course under Len's IMEUC market system proposals where the customers own the smart meters, anything is possible when the customer chooses to pay for implementing any given system. In this scenario customers could implement their own power demand profiling software that could later be used for billing purposes.

I don't want to sound overly negative but the authors have missed a number of critical issues related to the potential for success of their solution.

One of the key issues that the authors have failed to recognize is the energy education levels of customers. Typically, customers are not very knowledgeable about key facets of their energy use or specifically which appliances and end-uses have the most impact on their bills. Discussions of kilowatts or kilowatt-hours typically lead to glazed eyes and disinterest.

They also aren't in general overly interested either. Or that interest is fitful at best. This suggests that their willingness to participate in complicated or always changing rate/pricing structures is rather limited. Thus their need for overly complicated technology to generate overly complicated pricing structures is minimal. There are a number of examples in recent smart meter roll outs where the customer has been forgotten in the "gee whiz" of the technology, the "we got it approved" in the regulatory process, and the "can do' attitude of software vendors. When this has happened there is typically a consumer backlash as has happened at some of our largest and best utilities.

Pricing complexity is also a problem. Other industries have moved away from overly complicated pricing programs, like cellular companies, who are primarily pricing through large block, sometimes only one block, mechanisms (unlimited minutes). As a general rule, today's residential customers don't have time for complicated pricing structures.

Finally, in today's political environment, it wouldn't be long before the proposed rate structures would be painted as a "tax the rich" scheme which would likely be dead on arrival at most state utility commissions.

I would like to thank everyone who read through the article and provided their views and valued comments and sparked this debate.
Many of the new concepts that can be considered as theory today would have the potential to become reality in the future. For example, a few decades back nobody would have anticipated utilities would remotely control devices at the customer's home (such as the AC). Cost is definitely a concern today, but, as technologies become cheaper to adopt, many of the offshoots of HAN can be implemented much easily and on a larger scale. On the customer education front, I would like to add the following excerpt from a blog that I had authored in the past: "With the advent of Home Area Networks, Utilities will now be able to monitor consumption patterns of consumers. While this opens up substantial avenues for the Utility companies to analyze the data collected and utilize the same for meaningful purposes, the possibilities of consumer repercussions are very high...
As a consumer, it is a little scary to think of the fact that whenever one turns on his/her dishwasher, someone in the Utility Company might know it within seconds. One would definitely be worried that the data collected by means of advancements in advanced metering would reveal individual lifestyle patterns. Concerns over privacy of such information being made available have put a halt to major advanced metering initiatives in multiple geographies. So, what is that a Utility company should do?
Utilities should engage more in educating consumers about the values they can derive out of sharing basic consumption details and usage patterns. Utilities should be able to demonstrate that access to such data will eventually enable the utility to provide meaningful analysis to the consumer in return that helps him/her in achieving reasonable savings. Utilities should go for focused marketing campaigns, advertisements, commercials etc. to socialize the concept and attract more masses to participate. Only an inclusive approach will help achieve the holistic goal of achieving savings by the Utility and consumers alike. The question that arises is - are Utilities doing enough to promote consumer awareness and exploit the current opportunities made available by the technology advancements? If not, we all are losing out on 'an opportunity of a lifetime'!"

Mr Dutta: I strongly disagree that "utilities should have access to detailed information from the retail customer's HAN". Instead, utilities should be forced to implement a genuine market system on the retail level, and let the customers respond as they wish to this market.

Mr. Dutta,

I agree with Len. In a very broad sense (far beyond the energy industry) I've noticed that all this consumer information sharing does little to actually help the consumer; 99% of its value is all to the producer. And yes, it is spooky and scary. Someone will probably amend the PATRIOT act to allow the gov't to access these data streams. I'm sure China is doing it already....

And the sad thing is; it's really all unnecessary. At the end of the day (actually, in the middle of a hot summer day) it's all about TOTAL demand at various points of time. That's what sends costs higher. Broadcast a @%#$& real-time price! The consumer will respond. IMEUC is better thought out than any top-down system, especially HAN.

Proponents of home automation have been singing the praises of the electric meter as being the key to home automation for decades now. And what they don't realize it that the meter is the tail on the dog...and it ain't going to make the dog wag. Unless of course the meter somehow becomes the master controller - then its a different story, but I don't think that will happen. Second the meter will not provide you with what appliance is running right now that's using the most electricity...nor will it break it down over time. Third its almost always assumed that the meter is needed to give the current real time price...and that's just plain false. The consumer (and the utility) would be better served to have the price signal (aka demand response)come over the internet. Even better, have the price schedule come over the internet. The debate should be on the deployment of public infrastructure to provide wifi "like" access to every home and business so that home automation apps and utility meter reading apps, public safety apps, etc can share.

At most the meter should provide the total kwhr usage at the moment as a free or low cost service to the consumers home automation system.

As far as demand response

Mr Morgan - "Third its almost always assumed that the meter is needed to give the current real time price...and that's just plain false." -- the meter may not be required in order to implement the communication from the market to the customer, but since a one-way communication link of very high reliability is required in any case to read the meter, why not simply make that link bi-directional? Implementation such as those incapable of doing the bidirectional communication in a timely manner must simply be declared errors. Sorry if the systems you recommended fit in that category.

Millions across India and in other parts of the world do not have electricity.Tariffs are being designed to ask the large energy users to cut their usage.This is not so onlyfor electrivcity- there is a thinkung which is about big cars - thwey nee to pay higher rate of Road tax becuse they use more of public space.Equitable Distribution of Wealth is the theme of all socoeties.So keeping tack on Appliance usage will hardly deter those that use them.People who are habitual users of air- conditioning will run them and then get cold and take medicine.For them it is staus symbol. I have seen people running acs while temprature outside is perfectly normal.So there is more to appliance usage then simply economics.Tell that to a woman who spends USD 100 for a haircut in New Delhi.For them money does not mean a thing becuse they earn loads of money by hook or crook and believe in brandishing it .So it is required to change the attitude.