Smart meters are key to unlocking the potential of the smart grid

Technician Installing a Smart Meter (Photo by PG&E)

By Michael McCullough, Edelman

In late March, PG&E announced that it would allow customers to opt-out of smart meters. While this is a logical response to customer feedback showing a preference for the choice to opt-out, it may result in some unintended challenges that will hinder the potential for a smarter electrical grid infrastructure.

Energy in the U.S. has always been relatively affordable and accessible. But the cost is going to rise with or without the smart grid and smart meters. The International Energy Agency (IEA) notesthat worldwide energy consumption will increase 115-150 percent by 2050. The smart grid promises to change the energy delivery structure in advance of escalating energy costs and demand. It puts consumers in control, helps energy producers manage and plan for demand, creates efficiencies in the distribution and transmission of power, and empowers renewable energy sources.

PG&E’s “opt-out” customers, and likeminded households in other markets, will challenge the potential of the smart grid. Here’s how.

Macro challenges.

A full-scale smart meter deployment has economic and performance benefits that can only be maximized with 100 percent participation. Individual energy usage information, collected as a whole and then shared, represents the advantage.

When consumers opt-out the value of trend information is diluted. It is less powerful for those that could benefit from having it. The Electric Power Research Institute (EPRI) reported that the cost of a fully integrated smart power grid could total from $338 billion to $476 billion. The ROI on that investment over the next 20 years – between $1.3 trillion and $2 trillion. This ROI projection will be negatively impacted should a significant percentage of customers opt-out of smart meters.

Since the business case and economics of smart meters are based on a saturation model that includes uniformity of coverage, rate designs and time of use programs, such offerings have their foundation in uniform services. Customers’ option to opt-out from large-scale projects will make the business case analysis of the project even more difficult for the utility.

The information taken from smart meters will also have a significant impact on the environment. Over the next decade, a smart grid could reduce U.S. peak demand enough to avoid the need for 1,300 new power plants. The ability to effectively manage energy demand is one biggest draws for utilities. The collection of meter data enables new and better business processes that cut across departments and organizational boundaries. Not having this information will prohibit improved outage management, load forecasting, market settlements and distribution sizing.

Micro challenges.

Energy consumers without smart meters won’t have access to the sophisticated usage information that will help them become better energy managers. They won’t have the insights needed to gain more control over their energy usage habits. And they won’t be offered suggestions for conservative methods to increase monthly savings.

Tests on smart meters by multiple entities under various conditions prove that smart meters are more accurate than traditional ones in many ways. Utilities envision creating new applications that will improve customer service. Those opting out of smart meters will not be able to utilize these future products and services.

For example, are you considering an electric car? Consumers with smart meters who charge electric cars in their garages have the option of selecting unique pricing plans to fit their budgets. Georgia Power offers customers a “Nights and Weekends – Fuel” plan,  basically a “double down” on the Time of Use (TOU) program that Nights and Weekends already is. While individuals are still debating about what constitutes the best package, at least they have a choice.

Customers without a smart meter might be left in the dark during power outages. Homes with smart meters provide the utility with the information necessary to quickly ID the cause and location of power outages – enabling faster repair response. Utilities rely on “pings” from smart meters to confirm whether or not the outage is indeed in the grid or just localized to that home.

Utilities and energy providers will continue to incent customers to participate in the smart meter evolution and avoid the challenges listed above. To date, the industry has done a good job explaining how consumers could cut bills by 10 percent or more by deploying “smart” technologies already available. CenterPoint Energy recently reported that 95 percent of participants in a pilot project would use smart meters after it ended.

The next step is for energy leaders to address consumer’s security concerns in the same spirit. They need to demonstrate that the same effort to achieve energy efficiency and monetary savings is being applied to securing data. They would be wise to highlight how they are going above and beyond standard compliance.

Security lies at the heart of the issue with consumers. Utilities need to earn customer trust. According to research conducted by Accenture, 73 percent of consumers would consider buying electricity and energy-efficiency solutions from companies other than traditional energy providers.  Advocates say differentiated and tailored products and services will earn that trust.

Utilities view smart grid as an infrastructure move, not a technology play. Edelman’s 2011 Trust Barometer study tells us that technology is the most trusted industry. Hence, utilities need to engage stakeholders in meaningful ways and demonstrate their technological prowess. Presented the right way, customers will be receptive to the technology.