Demand for electricity is highest on hot days in the summer, mainly because people, and businesses turn on their air conditioners. Increased demand is pretty easy to predict using a weather forecast.
When you turn on your AC, some generator, somewhere has to work a tiny bit harder — it happens almost instantly and automatically. All of this is entirely invisible to you.
But, in the aggregate, when lots of people turn on their AC and this happens at scale, three things can occur:
- The generator (power plant) revs a little higher and produces more power, unless it’s at it’s capacity, then
- The power plant operator ramps up one of the “operating reserve” plants, unless they have already put all the spares online, in which case
- There’s a brown-out, or black-out
But actually there’s another option: consumers of power could just use less. But how do we know to use less — it’s invisible.
And, would we do anything is we know we were getting to the edge of capacity? What’s interesting is that some customers agree to unplug voluntarily. This link is to a story in the New York Times. It doesn’t surprise me that (some) people are willing to adjust their behavior without monetary incentives. What I found remarkable is how primitive the system for communicating the need is:
On the afternoon before an anticipated surge in demand, e-mails, faxes and phone calls go out alerting those who had already agreed that it is time for them to unplug.
So what if there were a way to automatically inform people of peak events? What if people that turned off appliances did get some economic benefit?
Some utilities have tiered rates based on time or day — the mechanism for tracking usage at a given time is there, at least in some places. In such a system, you pay a higher rate for power used during the day (peak) than for power used at night (off-peak). California has lead the pack on this — remember the rolling blackouts in 2002?
But There’s Efficiency Here, Too
But this turns out to be about more than just keeping the lights on. It’s about efficiency.
The electrical system needs to be highly redundant, plants are built to be able to generate more power than they usually need. The amount of power used during peak periods, whether daily or seasonally is significantly different than in off-peak periods. And more plants are built than are needed. The ones that are idle for all but peak periods are, naturally the older, or less efficient plants. Many factors make delivering all the power demanded during peak time a great deal more costly. Yet with flat rates, we just pay the average cost.
According to this article in Popular Mechanics:
Reserve plants are much more expensive to operate, resulting in large disparities in generation costs throughout the day and year. According to a 2004 report by the U.S. Government Accountability Office, it can cost up to 10 times more to generate electricity during a summer afternoon compared to at night, and the top 100 highest priced hours account for 10 to 20 percent of electricity costs for the 8766 hours in each year.
My College Economics Thesis Lives — Who Knew?
I have written a lot about electricity monitoring, both here, and on Energy Circle.
But it also happens that in college, I wrote my Economics thesis on the general subject of managing use of a shared resource through pricing feedback. In 1984, my shared resource was the computer terminals (a keyboard and screen) on a time-share computer owned by the university which we all used to write our term papers — and a few of us also used for computer programming. At the end of the semester when papers were due, you would have to wait until 3 in the morning until there was a computer terminal available to type on. As I type this blog post on my personal computer, that sure does sound quaint :-).
So my thesis idea was: increase the price (yes, we paid for “computer time” by the hour!) during peak times, and decrease for off-peak times.
The key to making this work was that users had to be aware of pricing so they could schedule accordingly. That would be pretty easy for a computer system, presumably.
And now, 25 years later, a few customers of our electrical system have time-of-day rates, but not rates that are based on anything near real-time demand — it’s night and day rates, all year long. For more “real time” information, according to the NY Times, we use faxes. Not a lot of progress with our electrical grid in the last 25 years — talk about being quaint!
An Electricity Rate Monitor
So back to the electricity monitor. I have a few in my house. They tell me how much electricity I am using. Right now, we’re at 760W. Many have argued that knowing how much you are spending or using at the moment, which current monitors can do is fine, but what do you do with this information? It’s a fair question.
On the other hand, as the NY Times article demonstrates, even primitive methods of letting people know about peak demand periods are effective at reducing consumption. And in the Times article, the utility is not even changing rates, the people turning off lights are just being good citizens.
Imagine a system where the price of electricity you paid was adjusted to reflect the true cost of generating it, at the moment. If you knew you were paying ten times more for electricity on a hot August day than your usual rate, you might take some actions — perhaps wash dishes later, or dry clothing later, or turn down or off the air conditioner, or turn off the lights.
All you need to know is that rates are a higher than normal. Or lower. (And perhaps a lot higher and a lot lower).
(And perhaps if you had solar PV panels on your roof producing electricity at peak hours — you might feel happy knowing you were not only helping the problem, but also paying for your solar panels a lot faster. Eh? What about that?)
If we all had some simple visibility to rates, and rates were adjusted, not just on the super hot days, but on regular days, I would bet that we would all easily adapt our electrical usage in a rather startling way. Sure, you might still use the AC, but you might think a little harder about it.
Getting rates is easy — you have Internet in your house (you’re reading this, right?), so it’s almost trivial to get a device that can tell you what the current rate is … if your utility simply published it. To be sure, not everyone would need to have this — it’s just one plan option. Save money — buy your electricity at market prices!
And, keep in mind that with flat rates, which is what most consumers have now, we all pay those costs one way or the other. We have no visibility to the costs driving our bills, so we just pay the average of the total costs.
Allowing prices to fluctuate according to real costs would lower costs for the whole system, all other things being the same.
A slightly harder part of this is for the electric utility to know how much power you use, and when. Dumb meters only know the “how much” part. Smarter meters are needed to get the “when” part … but they do not need to be true “Smart Meters” to get simple tiered rate — many municipalities have meters that have a built-in clock so they can track how much electricity was used at a given time. But, to get the amount of power used at any given time, eventually you need a real smart-meter. Less than 10% of the US has smart meters now. But once you’ve got that, the rest is relatively easy.
A big idea here is: if you could tell people you were going to give them a way to reduce their electricity bills, this would be a good incentive to embrace smart meters.
By adjusting prices based on demand, and giving people access to pricing information through some in-house feedback, there’s a potentially dramatic change we could make to reduce our consumption smartly.