Transcript Slide 1

Latest Developments in Dynamic Pricing
and Advanced Metering Adoption
Restructuring Roundtable #99
February 9, 2007
Stephen S. George, Ph.D.
Principal Consultant
Freeman, Sullivan & Co.
There is so much going on, it’s hard to know
where to start
 Pricing experiments continue to show that customers can and will
respond to dynamic prices
 Combining enabling technology with price signals significantly
increases demand response
 Getting customers to try time-varying rates remains a challenge
 Information feedback is showing promise
 Unfortunately, it’s still true that if you ask two people what AMI is,
you’ll get three answers
 Open standards (at least half open) are the newest “in” thing
 EPAct continues to generate a lot of heat for DR and AMI (but how
much light remains to be seen)
 PPL takes the plunge into the world of MDM
 California continues to build DR infrastructure
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As the results of each new pricing pilot become
available, a common story is developing
Percent Reduction In
Peak-Period Energy Use
14
13.1
11
12
11.9
10
8
6
4
2
0
CA SPP
Price Ratio:
4.1:1
AmerenUE
4:1
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Anaheim Peak Time
Rebate
4.6:1
More experimental results are on the way?
 Analysis from PSE&G’s pricing pilot should be available within the
next few weeks
 Xcel Energy’s pricing pilot is complete and a regulatory filing is due
in April
 The regulatory log-jam that stalled the Pepco (SMPPI) pricing pilot
finally broke earlier this month
– Will examine CPP and Peak Time Rebates side-by-side
– Results are a year away
 Similar results are being seen across a wide spectrum of pricing
concepts
– CPP, RTP and PTR (rebates)
There is 30 year’s of research indicating that mass-market
customers can and will respond to time-varying price signals—is it
time to stop doing experiments and just get on with it?
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Combining price signals with control technology
significantly increases demand response
 California’s Statewide Pricing Pilot showed
– That peak-period impacts on critical days roughly doubled for residential
customers when PCTs were used
– For C&I customers with demands less than 20 kW, there was no
reduction on critical days without PCTs but a 13% reduction with PCTs
– For C&I customers with demands between 20 and 200 kW, there was a
5% reduction without PCTs and a 10% reduction with PCTs
 In the Ameren pilot, reductions doubled with PCTs for
residential consumers
 The Gulf Power program is the “poster child” for enabling
technology combined with dynamic pricing
– But Gulf Power’s population characteristics differ significantly from
consumers in most other parts of the country
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The real challenge is getting customers to try
time-varying prices
 Market research and experience indicate that customers are
reluctant to sign up for CPP tariffs due to risk aversion
– Customers like time-varying rates once they try them, but when
considering whether or not to sign up, customers focus more on downside risk than upside potential
 There is no political will to place customers on default dynamic rates
– Massachusetts’ examination of this is encouraging and CA keeps talking
about it
– SDG&E’s proposal for a carrot-only peak time rebate offering addresses
the downside risk and may prove popular
– UC Energy Institute has proposed a new Incentive Preserving Rebate
tariff that addresses psychological barriers to acceptance
 PG&E’s AMI application proposed an aggressive marketing
campaign to attract 30% of it’s target population for CPP rates
 CA’s aggressive approach with enabling technology could help
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Information feedback is gaining attention
 Hydro One’s experiment was the first statistically
rigorous study of the impact of real-time information
feedback on energy use
– More about energy conservation than demand response
– Roughly 400 customers monitored over 2.5 years
– Provided with usage, dollar and CO2 emissions per hour, total to date
and predicted
– 6.5% average reduction across all households
– Reductions were lowest for households with electric space heating
(1.2%) and highest for households with electric water heating but no
electric space heating (16.7%)
 Salt River Project has conducted a similar pilot
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What is advanced metering infrastructure?
 Advanced metering is a metering system that records
customer consumption [and possibly other parameters]
hourly or more frequently and that provides for daily or
more frequent transmittal of measurements over a
communication network to a central collection point.
(FERC, Assessment of Demand Response & Advanced Metering, August 2006)
 Most people would agree that this definition identifies the
minimum functionality of AMI—interval data daily
 Others (DRAM, CPUC) include much greater
functionality, including two-way communication, remote
connect/disconnect, information provision to consumers,
and interface with end-use control devices
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What advanced metering is not!
 Mobile AMR ≠ AMI
– And a movement to legislate accelerated depreciation for “AMI” that
includes mobile AMR for monthly collection of TOU data will hinder
demand response penetration
– Indeed, any investment in mobile AMR will hinder DR penetration for
years to come
 Fixed-network AMR ≠ AMI
– While defining AMI correctly, FERC’s survey counted every fixednetwork AMR system as AMI
– Substantial investments and/or additional outsourcing payments would
be required to obtain interval data on a large number of customers from
many legacy fixed network AMR systems
– PPL’s system is the ONLY one that currently gathers hourly data on all
customers (once installed, PG&E’s system will do so, as will Edison’s
and SDG&E’s if approved)
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Open standards are all the buzz
 OpenAMI, Grid Wise, Intelligrid, SCE’s functional
specification, etc.
– There are many organizations touting the benefits of open
communication protocols between an AMI system and end-use devices
– Eventually, this could allow consumers to purchase compatible control
and display devices at Home Depot for example and foster competition
among suppliers
 SCE is requiring AMI suppliers to have Zigbee
compatible meter communication capability
 Itron and DCSI (and perhaps others) are going to market
with offerings that meet this requirement
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EPAct is generating a lot of heat (but how
much light?)
States with EPAct Proceedings
Underway
Other Relevant
Proceedings
EPAct Proceedings
Completed
Alabama
New Jersey
Arkansas
Kentucky
Arizona
New Mexico
California
Montana
Arkansas
New York
Connecticut
Virginia
Colorado
Ohio
District of Columbia
West Virginia
Delaware
Rhode Island
Oregon
Georgia
South Carolina
Pennsylvania
Iowa
South Dakota
North Carolina
Idaho
Tennessee
Texas
Illinois
Texas
Oregon
Indiana
Utah
Munis and Coops
Louisiana
Vermont
Maryland
Washington State
Missouri
Wyoming
New Hampshire
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PPL takes the next step
 PPL is the only utility that currently collects hourly data
on all of its customers
– But until recently, that data was being discarded
– PPL’s AMI system was estimated to be essentially breakeven based
solely on operational savings—DR was not directly considered
 PPL recently completed initial installation of Nexus’ MDM
– Energy Vision—enterprise-facing software that manages usage data in
order to improve business processes such as billing, forecasting,
settlement, revenue protection and distribution planning
– Energy Prism—a customer-facing application that provides customers
with more useful information on bills or through web-based interfaces.
 PPL has high hopes that the self-service aspects of a
web portal will lower costs, improve customer service
and foster better consumer decisions
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Web portals can provide valuable information
Links to
additional
content and
tools
Peak
energy is
expensiveUse it
Wisely
Save money
by using less
peak energy,
especially on
Critical Peak
days
How do I
spend my
energy
dollars during
Peak
Periods?
Take action,
especially
on Critical
Peak days
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A load shift calculator can help customers
decide what actions to take to shift load
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CA is developing the most DR friendly
infrastructure in North America
 The CPUC approved PG&E’s AMI application in June 2006
– PVRR of $2.2b to replace 5+ million electric meters (PLC by DCSI) and
4+ million gas meters (RF by Hexagram)
– Deployment will be complete by the end of 2010
 SDG&E’s AMI application is being reviewed and a decision is
expected this quarter
– Settlement discussions currently underway with interveners
 SCE’s RFP is currently on the street
 The CEC has proposed to modify building standards so that all
new construction and all HVAC retrofits will have PCTs
– PCTs will have one-way radio or paging capability (with no override) to be
used for reliability and a port through which Zigbee or other protocols can
be incorporated for use by utilities for economic dispatch
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At PG&E, operational savings covered 90% of
costs; demand response easily covered the gap
$460
2500
$2,227
$200
$2.026
Millions of Dollars
2000
1500
1000
500
0
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Gap
Demand
Response
At SDG&E, operational savings only covered
60% of costs. An aggressive DR strategy
covered the gap
Millions of Dollars
1000
$360
$741
$300
750
Gap
$441
500
250
0
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Demand
Response
Key Conclusions
 Customers can and will respond to time-varying prices
– Responsiveness seems to be similar across alternative rate concepts
(CPP, RTP, PTR) and across utilities (after adjusting for population
characteristics)
 Getting customers to try time-varying rates can be difficult
– But once they do, they often embrace these options
– Risk aversion is a significant barrier that carrot-only approaches and
enabling technology can help address
 Enabling technology such as programmable
communicating thermostats can significantly increase
demand response
– And may be essential for small C&I customers
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Key conclusions (continued)
 AMI functionality continues to evolve rapidly
– Open standards for beyond-the meter control and information
technology will help drive down costs and increase penetration
 MDM functionality is also evolving
– In-home displays, web portals and enhanced bill presentment can
improve customer decisions
 Demand response is rapidly becoming “the” hot topic at
both the state and federal level and a key driver of
interest in AMI
 The combination of pricing, enabling technology and
enhanced information, built on an AMI platform, can
produce substantial demand response
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For more information, contact
Dr. Stephen S. George
Principal Consultant
Freeman, Sullivan & Co.
415 777-0707
[email protected]
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