Sunday, July 31, 2011

Post # 77 - California PUC Adopts New Smart Meter Privacy Rules

In late 2009. the California Public Utilities Commission (CPUC) ruled that the big three investor-owned utilities in California -- Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric -- would have to provide their customers with real-time residential usage data through smart meters by the end of 2011. Last spring, following extensive stakeholder debate, the CPUC released proposed smart meter privacy rules.

Now, in a decision issued last week, the CPUC issued final smart meter privacy rules. Among other things, the rules require the three utilities to:

1. Provide customers with detailed energy usage, bill-to-date, month-end bill forecast, and projected month-end energy price on their websites – updated daily. Moreover, the information must be available with hourly or 15-minute granularity -- matching the time granularity programmed into a smart meter.

2. Provide "tier alerts" via some form of rapid communication (email, tweets, etc.) when customers move from one price tier to the next.

3. Provide a website calculator to help consumers determine if they would save money by switching to a time-of-use rate

4. Allow consumers to authorize third parties to receive their backhauled smart meter data directly from the utility.

5. Set up a program to roll out home area networking devices to be directly connected with smart meters.

The CPUC said that data on energy consumption generated by smart meters and transmitted by the smart grid will prove critical to future conservation and grid management efforts. The CPUC asserts that enabling consumers and companies to assess and act on this information is key to advancing many of California's energy policies, such as promoting conservation, reducing demand in response to grid events and price signals, reducing summer peak demands, and efficiently incorporating renewable energy and electric vehicles into grid operations.

PG&E, SCE and SDG&E will now have six months to implement the requirements. In the meantime, the CPUC will be exploring whether the new rules should also apply to electric service providers (non-utility entities that offer electric service to customers within the service territory of an electric utility) and community choice aggregators (programs within the the service area of investor-owned utilities that allow cities and counties to buy and/or generate electricity for their residents and businesses).

Thursday, July 28, 2011

Post # 76 - New Electric Industry Study Highlights Benefits of Smart Meters to Consumers--And Need for Consumer Education to Achieve Those Benefits

A new white paper by the Institute for Electric Efficiency (IEE), an organization representing about 70% of the U.S. electric industry—including investor-owned utilities, public power utilities, electric cooperatives, and foreign utilities—finds that for a wide variety of utilities under a range of assumptions, the customer and utility benefits of investing in digital ‘smart’ meters, or advanced smart metering technologies and associated energy management technologies will outweigh the costs.

Co-authored The Brattle Group, an economic, financial and regulatory consulting firm, the paper—The Costs and Benefits of Smart Meters for Residential Customers—quantifies three categories of benefits from smart meters: operational, customer, and societal.

In deriving its cost assumptions, IEE relied on smart meter business cases and equipment manufacturers’ prices, as well as projections and other sources. IEE then used a framework involving different types of utilities and customers to compare smart meter benefits and costs. The framework identified four kinds of utilities defined by real-world factors that influence the overall business case for smart meters, including current generation mix, renewable energy portfolio, regulatory environment, energy prices, and emphasis on efficiency and conservation.

In looking at utility customers, the IEE white paper factored in both how likely they were to be engaged in a utility’s energy programs, and how actively they would manage their energy use. Assuming a service area of one million households, IEE found that the total cost for a utility to invest in smart meters and associated home energy management technologies will vary from a low of $198 million to a high of $272 million.

In looking at benefits, the IEE study found that the smart meter investment will produce operational savings (resulting from avoided metering costs, automated outage detection, and remote connections) of between $77 million and $208 million, and customer-driven savings (resulting from energy pricing programs, in-home enabling technologies, and energy information) of between $100 million and $150 million. The net benefits from investing in smart meters ranged from between $21 million and $64 million for the four types of utilities.

With specific reference to consumer benefits, the IEE study calculates five benefits:

1. Avoided generation capacity costs: This is calculated as the change in peak demand times the avoided cost of generation capacity, and then scaled due to system line losses (assumed to be eight percent) and reserve margin (assumed to be 15 percent). The avoided cost of generation is $50 per kW-year and is based on Brattle’s experiences in this field.

2. Avoided transmission and distribution capacity costs: This is calculated as the change in peak demand times the avoided cost of transmission and distribution, and then scaled due to system line losses and reserve margin. The avoided transmission and distribution capacity cost is assumed to be $10 per kW-year and is based on Brattle’s previous experience.

3. Avoided energy costs: This is calculated as the change in energy in each time period (offpeak, peak, and critical peak) times the cost of energy in the respective time period, and then scaled due to system line losses. The avoided energy costs vary by region and are based on reviews of energy market data as well as Brattle’s prior experience.

4. Avoided carbon dioxide costs: This is calculated as the change in energy use in each time period (off-peak, peak, and critical peak) times the carbon dioxide emissions rate in the respective time period times the value of each ton of carbon dioxide emissions. The emissions rate for each utility differs based on the assumed fuel mix. Furthermore, the value of carbon dioxide emissions is the same for each utility but changes over time with a value of zero until 2016. The value of carbon dioxide emissions is $15 per metric ton in 2017 and increases linearly until 2030 when it reaches a price of $60 per metric ton. (This assumes no national carbon legislation will be in place until after the 2016 Presidential election).

5. Avoided gasoline costs: This is calculated as the change in gallons of gasoline consumed times the price of gasoline (assumed to be $3 per gallon [2011 dollars], a conservative approximation for the national average gas price). This benefit, of course, is only applicable to the customers with electric vehicles. But the authors assert that “the strategy with the potential to achieve the greatest financial impact is to focus on accelerating [electric vehicle] adoption. The benefits of [electric vehicles]. . . are disproportionately high, indicating that even modest increases in [electric vehicle] adoption will have a large impact on benefits.

The study concludes that “the customer-driven benefits could be much greater with more investment in and focus on customer education and engagement.” The IEE document states:

Over the 20 year horizon in this study, most customers migrate from passive engagement in energy management to much more active strategies. This holds true for all utilities types. Hence, a potential area for further study is how to accelerate this process so that a broad array of customers are ready, willing, and able to engage in energy management soon after smart meters are deployed.

In this regard, as in similar studies by other groups (see here, here and here), IEE recognizes the importance of consumer education to achieve consumer buy-in: “Given the high satisfaction ratings of dynamic pricing pilot participants where education is a key component, we believe the combination of program choice based on personal preferences (thereby avoiding opt-in, opt-out arguments) with comprehensive consumer education could yield tremendous financial and societal benefits.”

Tuesday, July 26, 2011

Post # 75 - FERC Holds Off on Smart Grid Rulemaking

In an action with some long-term significance for overall smart grid development, the Federal Energy Regulatory Commission (FERC) last week decided to suspend a rulemaking proceeding on the first group of proposed smart grid technical standards developed by the Commerce Department’s National Institute of Standards and Technology (NIST). FERC took this action based on what it saw as a lack of consensus among electric utilities, telecommunications companies, and equipment manufacturers. FERC thus sends the matter back to NIST), which is the lead federal agency for developing technical standards for the smart grid.

As I have previously discussed, the Energy Independence and Security Act of 2007 (EISA) directs NIST to coordinate the development of a framework to achieve interoperability of smart grid devices and systems, including protocols and model standards for information management. In turn, EISA directs FERC to conduct a rulemaking that would apply to the electricity industry and other stakeholders if it is satisfied that the NIST product has led to “sufficient consensus” on smart grid interoperability standards for the electricity grid.

In August 2009, NIST launched a plan to expedite the development of smart grid interoperability standards. NIST led smart grid stakeholders in a participatory public process to identify applicable standards, as well as priorities for additional standardization activities. In January 2010, NIST released its Framework and Roadmap for Smart Grid Interoperability Standards, Release 1.0, identifying a number of standards that are applicable to the ongoing development of the smart grid. NIST also oversaw the establishment of the Smart Grid Interoperability Panel (SGIP), a public-private partnership providing an ongoing process to support the evolution of the NIST interoperability framework process.

On October 6, 2010, NIST notified FERC that it had identified five “families” of standards as ready for FERC's consideration. FERC then opened a public docket for a possible rulemaking proceeding -- noting, however, that it had not yet made any determination regarding whether there is “sufficient consensus” for the standards. FERC then held a series of technical conferences in late 2010 and early 2011 and soliciting written comments from stakeholders.

FERC now believes that “there is insufficient consensus for the five families of standards under consideration.” In an order issued on July 19, 2011, FERC notes that the commenters were “nearly unanimous” that the agency should not adopt the NIST proposals at this time, citing concerns with cyber security efficiencies and potential unintended consequences from premature adoption of individual standards. FERC thus concludes that “the best vehicle for developing smart grid interoperability standards is the NIST interoperability framework process, including the work of the SGIP and its committees and working groups."

Saturday, July 23, 2011

Post # 74 - Smart Meter Developments in the E.U.

Many European states are investing in smart metering in the drive to meet EU's energy targets to be achieved by 2020. Earlier this month, the European Commission released an Energy Efficiency Directive aiming to achieve the 2020 target of a 20 percent energy saving, with smart metering and billing set to play a key role. The Directive, which presents the legislative framework for putting into place binding measures on energy efficiency, expects that major energy savings for consumers will result from easy and free-of-charge access to data on real-time and historical energy consumption through more accurate individual metering and billing, hopefully to empower consumers to better manage their energy consumption. The Directive is driving member states for 80 percent smart meter penetration by that date.

However, according to Frost & Sullivan, a "a global growth consulting company," region-wise disparity exists due to the different regulatory challenges faced by each country, thus having a direct impact on implementation. The firm's study forecasts 26% growth in Europe, with the UK holding the highest growth potential amongst all the European countries. The British Government has in fact announced plans to install 53 million electricity and gas smart meters in homes and businesses by 2019, while the French energy regulator CRE (Commission de r√©gulation de l'√©nergie) has set out guidelines with an objective for mandatory implementation requiring all electricity consumers to have smart meters by 2016. Meanwhile, Sweden attained 100% smart meter penetration in 2010 while Italy’s deployment is almost complete with 33.5 million smart meters installed till 2010. On the other hand, no mandatory roll out has been planned in Germany.

Frost & Sullivan predicts that the three hotspots in Europe will be France, UK and Spain, countries that the consulting firm expects to witness high level of growth in smart meter installations in the next 2-3 years. In particular, ‘’[w]ith the UK Government publishing its plans for a mass rollout in 2014, the UK smart metering market holds the highest growth potential amongst all the European countries. According to our research, the UK is expected to witness a 109% growth in smart electricity meter unit shipments from 2010 to 2017.’’