EPRI on customers: what we know, what we don't

Institute focuses on behavior studies to ID gaps

Phil Carson | Dec 10, 2012

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A few weeks back, the Electric Power Research Institute (EPRI) issued "Understanding Electric Utility Customers—Summary Report: What We Know and What We Need to Know."

One simple statement and the rest of this column is digression: there's a lot we don't know about how customers use electricity, what affects their behavior and how to scale up programs that will attract widespread participation. And utilities haven't exactly knocked themselves out trying to find out what we don't know.

The abstract clarifies that the report focused on "how customers use and value electricity," but the EPRI study is a literature review of actual customer behavior in pilots and programs that assessed behavior in relation to pricing, (energy use) feedback and control technologies. And it's technical in nature. If you're not conversant with energy economics, behavioral studies and their lingo, statistics and concepts such as "own price elasticity" or "elasticity of substitution" or "readiness scoring," it's going to require sweat equity to read it and "get it." 

If you have such a background, or the time to wade through the report, your efforts will be rewarded. 

If, however, this column's headline led you to believe the EPRI report might be about attitudes and perceptions, I can at least steer you to some of my past ravings on those topics in "Customers will listen, if utilities talk: But will utilities listen if customers talk?," "The Customer: `Waiting for Godot?'" and "Do Regulated Monopolies Still Have to Compete?"  

The EPRI report is, in fact, based on practicalities, even though the science and quantitative and qualitative assessment of that science is the purview of specialists. Because one of the essential drivers of the need to understand actual customer behavior is that that understanding could lead to improved energy efficiency measures by utilities. 

An EPRI team looked at field trials of the past decade among residential, commercial and industrial end-use customers as they worked with pricing, energy use feedback and control technologies. 

The report notes that most participants in such programs are volunteers, thus it's important to understand who those participants are; why they volunteer appears to remain an unknown. (Though, off the top of my head, the quest to save money or achieve environmental benefits must loom large.) The EPRI study attempted to discern how volunteer participants behave in such programs and whether their behaviors persist over time. The EPRI team also wanted to discern the hurdles to scaling such programs, should they prove effective for the utility and its participants. 

For the purposes of this column, I'll merely quote a few of the authors' concluding remarks to offer a little flavor of the report and establish a level of urgency, which is revealed in the last  paragraph of the report (and of this column). 

"The readiness scorecards suggest that there is much to do to verify the impacts of behavioral programs. This outlook is apparently widely held, if not often expressed, by entities that provide customers with electric service.

"Electricity providers have not embraced behavioral approaches, despite research first launched nearly 40 years ago to quantify the potential impacts and associated benefits. The recent resurgence of pilots, many implemented explicitly to resolve uncertainties about price effects (in many cases to help justify AMI investments), has elevated public dialogue about the need for and benefits of pricing electricity to reflect the marginal, not average, cost of supply.. 

"While there is near universal concurrence that we should be pricing electricity differently, there is a shortfall of definitive and committed action to make that come about."

The conclusion continued, in part: 

"As is the case with new pricing structures, an ever-increasing body of field research has done little to spur utilities to embrace feedback as a means for meeting energy efficiency goals, engaging customers, or both ...

"If utilities are uncertain about, and therefore skeptical of, the impacts of pricing structure, feedback, and control technology, it is not surprising that customers do not seem to be highly inclined to participate in such offerings, or to respond to mandatory interventions when they are enrolled. It seems that customers do not want what utilities do not want to offer ...

"This impasse is likely to persist until we devise and adopt insightful and verifiable behavioral models and credibly quantify their characteristics through field research. If utilities continue to go it alone, responding to local and limited interests, it may be a decade or more before we realize resolution and have available actionable interventions. Rigorously designed research implemented in a cooperative and collaborative way could bring about resolution much sooner, in time to influence forthcoming decisions about investments to meet future electricity demand."

Phil Carson 
Intelligent Utility Daily
pcarson@energycentral.com 
303-228-4757

 

 

 

 

 

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Thanks

Thank you for linking the EPRI report but even in the reports introduction it has some silliness obviously based on heuristics.  From the report:

 

 Reducing supply costs and environmental emissions, and improving reliability and energy sustainability.

To the extent that customers are willing and able to respond to dynamic prices that better reflect marginal costs, it can reduce the need for capacity, save energy and reduce green house gas (GHG) emissions.  It can also improve system reliability and energy sustainability by reducing consumption of

non-renewable resources.”

 

It could be reasonably assumed to reduce the need for Peak capacity and I would add and argue the most significant benefit is to reduce the impacts of scarcity pricing.  “Save energy”  maybe, but incenting the change of loads profile would incent devices like ice storage air conditioners (ISACs) which would cause a net increase in energy consumption be it at lower total cost but likely increase GHG by shifting loads toward off peak base load coal.  How by any stretch is it going to reduce non-renewable resources? “Energy sustainability,” renewables like solar are peak products themselves and load profile shaping could be a disincentive to its expansion.  “Reliability” sure reducing peak loads increases reserve margins and should improve reliability as would simply adding Peaking capacity.  

The next two advantages “Increasing value to customers” and “Improving customer relationships” Really?  Is that fact or more wishful thinking?  Sounds like a sales pitch.

 

 As for this article, what is the marginal price? “need for and benefits of pricing electricity to reflect the marginal, not average, cost of supply..  The term “marginal price” is used as if it is defined and predictable.  It could be, if it simply meant the price of the next block or last block of power generated based on reasonably sound planning or even the capacity plus fuel cost.  By the previous discussions and in practice it includes scarcity pricing which is the driver and reason for price caps.  PJM’s use of the term LMP have given the term credibility as marginal pricing when it actually includes scarcity pricing.  The more appropriate term would be “Locational Price” with abundant capacity and transmission and the absence of other incentives it may approximate the marginal price but with inadequacy of either of these elements, the scarcity price will be the driver.  

 It remains unfair to subject retail customers to dynamic pricing and putting them at risk for real time price spikes since they have little, if any, control of many of the factors that create these excursions.  

I keep thinking if I say this enough someone will hear it.  All  the customers controls is their own demand (Capacity Usage) and the most cleanest most direct method, and as far as I can tell simplest method, is to charge them for the capacity they are using rather than any the complex indirect energy price systems that fruitful minds have came up with to make this tie. 

 

 I realize the demand siders, have this vision of reduced Peak demand as the markets salvation Personally, I have no desire to attempt to modify behavior and think it is bold to assume we have the right to do so, what I am advocate is more basic it is for each consumer to pay for the energy and capacity they use.

 

If they decide to modify behaviors so be it, this approach opens the door to alternatives like ISACs or solar PV that do not require complex control schemes or real time behavior changes or even real time input to get the desired flatter load profiles.  Enough.

 

Jerry Watson 757 8945132

 

show me the data

We hear you, but until your theory is supported by evidence, it will be ignored. You know what they say, opinions are like... well, you know.

It's been shown over and over with real people and real data that customers like and respond as expected to dynamic pricing, saving energy and money in the process. Show us the data (not theory) that your plan works, and someone will pay attention.

p.s. - "Bold" to think we have the right to encourage behavior modification for the good of society? Are you an anarchist? 

Sacramento?

The main finding of the EPRI report seems to be that we know very little despite many, many studies. Having reviewed the report just now, I was curious about why they removed the Sacramento study from the summary (despite placing it on the map and including it in the list of studies reviewed) - since it DID begin to answer many or most of the questions they say "need further research." The Sacramento study provides demographics and preferences of those who participated (Participation), and also separates the effect of the real-time information, both premise-level and appliance-level, from the rate and control technologies (Performance). With the second year analysis underway, there will be better information about Persistence - although I would argue that even 2 years may not be long enough to capture changes in appliance and envelope upgrades.