“Smart Grid” Lessons from Around the World

“Smart grid” initiatives can take many forms, from improving existing generation, transmission and distribution systems with new technology and software to rolling out smart meters and consumer devices. Although the media often focuses its attention on smart meters and appliances, many electric cooperatives and other utilities have been working for years to improve the communications backbone of their systems and provide greater integration of system components. Such improvements are necessary to set the stage for introducing smart grid technology that directly affects consumers, such as smart meters.

Many utilities in the United States are now introducing smart meters and related technology, but what impact will this actually have on consumers and their relationship with their utility? The degree of impact depends in part on the “smart meter” functions that the utility actually turns on. Some functions improve the distribution system without directly impacting consumer behavior, such as improvements in outage detection and data reliability. However, if the utility intends (or is required by regulators) to use smart meters to move to different consumer pricing structures, the result could be a dramatic change in how consumers perceive their utility and use electricity. Success will require more than simply installing new equipment; it calls for careful planning and systematic consumer education programs.

Much can be learned from smart grid programs already in progress around the world. In other countries, regulators and utilities have focused on using smart meters (and the accompanying usage data) as a way to introduce pricing changes that will change consumer behavior and yield certain benefits, such as efficiency and environmental benefits. For example, if pricing based on time of use causes consumers to use less electricity during peak times, the decrease in peak demand would result in more efficient use of generation. Projects in other countries are already yielding important lessons as to how consumers are affected by and react to such programs.

Such projects also expose potential roadblocks that must be considered by utilities in the United States in rolling out their programs. For example, projects in other countries have shown that:

  • Consumers are not likely to respond well to pricing changes without extensive outreach and education by utilities on program benefits
  • Utilities must be prepared to explain and justify all elements of new programs, including how consumer data will be used and the tangible (and intangible) benefits received from such programs
  • Relatively large price differentials may be required for consumers to change their usage patterns, and changing usage may take more time than expected
  • Not all consumers may have the resources to take advantage of programs and shift their usage to achieve lower rates

More information on this topic can be found in “Far and Near,” the cover story in Energy Today. The story is based on an interview with AHC attorney Roland Hall.

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