Smart Meters for a Hot Summer Day

Life and vacation have gotten in the way of blogging recently. Nevertheless, the ideas keep turning, so long as Bacon has a keyboard nearby.

While catching up on my reading, I came across a post at Knowledge Problem on “smart meters,” which might soon be making a widespread appearance in Pennsylvania, if Gov. Ed Rendell has his way:

A key element of his plan would require all the state’s utilities to install computerized “smart meters” in every customer’s home or business, so that all electricity users will be able to see the real cost of power at peak-demand periods.

Some customers could volunteer for so-called “demand-side management” programs, which might allow their utility to power-down their air conditioners when temperatures soar while they are at work.

Others might choose “time of day” pricing and manage their consumption as cell phone users manage their minutes. Even in the summer, power demand dips low enough overnight that electricity often costs just a few cents per kilowatt-hour.

A PJM staff study found that demand-side management saved electricity users $650 million during the first week of August 2006, when demand soared. On Aug. 2 alone, it said, voluntary cutbacks in usage saved $230 million.

The cost? PJM said payments to customers who curtailed usage, which are pegged to the hourly clearing price for buying spot power, totaled $5 million for the week.

“The key is that small reductions in peak demand produce large reductions in peak price for all customers,” Hanger said. “Every customer benefits, whether they are shifting demand or not, because the whole market price falls.”

Cost transparency is a good thing, particularly when it gives consumers more control over the purchases (in this case, electricity).

Will we see smart meters in Virginia any time soon? I won’t hold my breath.

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4 responses to “Smart Meters for a Hot Summer Day”

  1. Larry Gross Avatar
    Larry Gross

    Congestion pricing for electricity! what a novel concept.


  2. Ray Hyde Avatar
    Ray Hyde

    “saved electricity users $650 million during the first week of August “

    Well, yes, but they didn’t get to use the electricity either. Presumably that had some value, too, so the real cost of this “savings” was a lot more than the $5 million in payments made.

    The same thing is going to be true of congestion pricing fo highways, too. The costs to those who are excluded will not be considered.

  3. Larry Gross Avatar
    Larry Gross

    Hey Ray –

    tell me if I’m wrong here… but are you saying that if I buy a car that gets 25mpg to replace one that got 15 mpg that I’m getting gypped out of 10 mpg… ???


    Saving money by using less electricity is a bad deal?

  4. Ray Hyde Avatar
    Ray Hyde

    What? I never said that.

    Major demand management comes when certain customers are cut off: they get no usage during certain periods, and they shut down. Gettin no usage is a lot different from getting essentially the same benefit more efficiently, as with compact fluorescents. With a shut down you have saved electricity, but that is different from saying you saved $650 million. You haven’t saved all of that money because there is a cost to being without electricity.

    Even if you curtail operations, it may cost you more in business than it saved you in electricity.

    There is also a cost with buying compact fluorescents, but at least you have light.

    In a congestion pricing context it would be equivalent to banning trucks during certain hours so you could “save” more spaces for cars. It’s a savings to the motorists, but it isn’t without costs.

    Otherwise, why not shut electricity down entirely: we could save billions.

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