Can the Utility and Consumer Collaborate To Solve the Peak Problem?

For years, experts have warned that our current grid network will not be able to withstand the demand of our expanding digital culture and growing renewable technology. According to the U.S. Department of Energy (DOE), since 1982, peak demand for electricity has exceeded transmission growth by almost 25 percent each year.

To prevent grid failure, industry professionals have been developing the Smart Grid. According to the Energy Independence and Security Act of 2007, Smart Grid is the optimization of our current grid system so that it securely monitors the operation of its interconnected elements. These elements include real-time load monitoring of everything from solar and wind power plants to microwaves. This two-way communication allows both the utility and consumer to monitor supply and demand.

Currently, a major grid issue is peak hours — the timeframe where electricity demand is greatest. For example, according to a National Institute of Standards and Technology (NIST) study, peak hours during the summer months are between 12 noon and 8:00 p.m. — one kWh of energy during this timeframe costs approximately 90% more than energy between midnight and 8:00 a.m. In order to solve this problem, researchers have developed numerous potential solutions that involve utility pricing, consumer behavior, and renewables.

Flat vs Time-of-Use Rates

The current utility pricing model is a flat rate, where the consumer is unaware of when or how much energy is used at specific times. And according to a 2008 Department of Energy (DOE) report on the Smart Grid, the utility does not know precise peak times either, which becomes expensive, “grid operators and utilities must bring generation assets called peaker plants online to ensure reliability and meet peak demand. Sometimes older and always difficult to site, peakers are expensive to operate — requiring fuel bought on the more volatile ‘spot’ market.” 

In order to decrease expense and strain on the grid, many experts suggest a time-of-use (TOU) rate system be implemented with the smart grid. The smart grid will allow both the consumer and utility to monitor energy usage in real time. The utility can then charge different rates for on- and off-peak hours, while consumers can monitor at what time of day rates are either up or down and decide when and how to use their electricity.

These smart grid enhancements will help to decrease load while increasing utilization and the DOE report estimates that this will send, “50% to 300% more electricity through existing energy corridors. The more efficient their systems, the less utilities need to spend.” A 2011 cost and benefit report by the Electric Power and Research Institute (EPRI) states that utilities will be able to provide consumers with more reliable energy, particularly during emergencies, all while improving cost management through enhanced efficiency and data.

Let the Consumer Decide

The smart grid allows consumers to have more control over their own utility usage, and a recent E Source study indicates that consumers are hungry for information. Michael Peacock, E Source Smart Grid Program Director, noted that 42% of consumers would be willing to pay at least $5 more per month for smart meter data. If the utility allows for TOU pricing, customers have the power to decide what rate they will pay. According the EPRI report, “The Smart Grid motivates and includes customers, who are an integral part of the electric power system. They have choices, incentives, and disincentives to modify their purchasing patterns and behavior. These choices help drive new technologies and markets.”

Photo courtesy Pecan Street Project, Inc.Researchers at the Pecan Street Project in Austin, Texas have set out to investigate this consumer behavior. The Mueller community facet of the project involves a smart grid community where researchers are trying to determine the best methods for smart grid integration. Colin Rowan, part of the project’s communication team, said the project is looking for the best route to impact consumer behavior. “We need to figure out a way to ensure that the various pricing scenarios that we test are valid economic tests. If certain things save people money or certain things cost extra money, we want to make sure those are real genuine triggers to their behavior,” he said.

Researchers are collaborating with Austin Energy, and will be measuring this behavior with different price scenarios beginning in 2012. These prices may include time of use, flat, and a “cell phone” method that charges consumers for a bundle of energy, and then charges for additional “minutes” of use.

The collaborative effort between utility and consumer ultimately benefits all parties. According to the EPRI report, smart grid benefits that lower costs for utilities allow the utility to lower prices for consumers. These decreased costs and prices enhance the value of electricity for the consumer because it gives them more control, which allows for increased economic activity that benefits society as a whole.

Renewables and Storage

Renewables are set to play a huge role in smart grid integration, and are an enormous benefit for peak shaving. “It’s wind at night, it’s solar during the day. Not because it is going to charge your car, but it will do some peak shaving. It’s those types of aspects that will make us have a more robust and efficient solution that allows us to go to utilities and say ‘this is how you prepare for incoming increase on demand on a low-budget level,’” said Colin Read, VP Corporate Development of Ecotality, during a recorded interview with the Networked Grid 2011.

Colin Rowan of the Pecan Street Project agrees that renewables will help to significantly shave peak costs. Researchers at the project are even encouraging utilities to try a different approach when integrating solar. In Austin, the utility buys back solar, so it is in the customer’s benefit to install south facing panels. But peak times are between 4:00 and 7:00 pm in the summer months, which is about the time when south facing solar becomes less efficient. Therefore, researchers are encouraging the utility to invest in west facing solar and install them on homes. “It would benefit the utility more than it would benefit the individual homeowner who is trying to figure out how to recoup their solar investment as quickly as possible,” Rowan said. 

Some research even points to electric vehicles (EVs) as potential peak shaving devices. When consumers plug in their cars, the vehicle battery can serve as short-term energy storage, supplying utilities with short bursts of electricity when and if necessary. Denmark has become a leader in this vehicle-to-grid (V2G) technology due to its advanced grid ability to handle renewables — the country has more than twice the amount of renewables on the grid than any other nation and a goal to be fossil fuel free by 2050. In September 2011, a pilot project consisting of 30 EVs will be placed into effect, with hopes to add more quickly. According to a press release about the project, EV owners who enroll in the program will be allowed to sell power back to the grid through their EV batteries and earn up to about $10,000 over the lifespan of the car in compensation. Researchers hope this aspect will serve as an incentive to encourage consumers to purchase EVs and sign up for the V2G program.

Photo courtesy MITTo further EV potential, MIT professors and students recently developed a battery architecture breakthrough. They claim that they have made a more efficient structural design by separating its functions, energy storage and discharge, into two distinct structures. According to an MIT press release, the benefits are numerous and include, “reducing the size and the cost of a complete battery system to about half the current levels.” This would allow, in EV applications, “the possibility of ‘refueling’ and, for energy storage applications, allowing for large scale, clean energy storage at what is said to be low costs,” the press release said.

Another exciting storage development is from Ice Energy, the makers of Ice Bear, a battery made of ice that integrates with air conditioning systems. At night, the ice charging system freezes 450 of gallons of water in a tank, which is then used during the day to cool the hot air from the building in the conditioning unit. The hot air is filtered to the Ice Bear and slowly melts the ice for about six hours while cool air is filtered back to the building via a pump system. If additional cooling is necessary after this timeframe, the air conditioning unit restarts. The Ice Bear also includes sensors that keep track of daily energy usage. According to the website, “utilities can aggregate an entire fleet of Ice Bears through a two-way Smart Grid solution to permanently shift hundreds of MW of power. It consumes 95% less energy during the peak of the day.” 

These breakthroughs could lead to a consumer and utility collaboration that would allow greater use of renewables on the Smart Grid.

An Inevitable Fate

In order to satisfy our ever-growing energy needs, grid infrastructure must be built — smart or not. We will need to invest about $1.5 trillion by 2030 in order to keep up with demand, say estimates. “The Smart Grid holds the potential to be the most affordable alternative to ‘building out’ by building less, and saving more energy. It will clearly require investments that are not typical for utilities. But the overall benefits of such efforts will outweigh the costs,” the 2007 DOE report said.

For the utility to gain optimal benefits from investing in the Smart Grid, it will need to collaborate with consumers. And for consumers to benefit from the Smart Grid, they will need to collaborate with the utility – especially during peak demand.

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