The “Smart Grid” is coming to New England, and with it will come opportunities for property owners and managers to move beyond traditional conservation methods, better manage their electricity consumption to achieve savings and even get paid for not using power.
The U.S. Department of Energy’s Smart Grid program is aimed at developing a network of transmission lines, equipment, controls and new technologies to respond immediately to our 21st Century demand for electricity.
While it may seem a confusing mix of complex electric grid operations and complicated technology, the Smart Grid will actually make the power system more interactive and accessible. Not only will the system become smarter and more efficient, but consumers will become smarter as well, with new tools to actively manage their electricity use and achieve potentially large savings.
Think of the Smart Grid as a new branch of the information superhighway with real-time data moving back and forth among power grid operators, electric utilities, demand-response providers and consumers. With new market-based incentives, consumers will be able to benefit from adjusting their behavior in response to changes in wholesale electricity prices, or a call to reduce their consumption at times when the power system may have trouble meeting demand, or their own desire to act on environmental concerns.
There are several opportunities presented by the Smart Grid. One is available through demand-response providers – companies that help businesses manage peak-time energy use and curb power consumption – working with ISO New England, which is responsible for overseeing the day-to-day reliable operation of New England’s power generation and transmission system.
Financial Incentives
Since 2001, demand-side resources in New England have been compensated to reduce electricity consumption during hot summer days or during unforeseen power system events that result in higher-than-usual wholesale prices. For the electricity they don’t use – or “negawatts,” the flip side of megawatts – participating companies can see a new revenue stream. Property owners that sign on with demand-response providers can receive monthly payments based on the amount of electricity they promise not to use when called upon by the ISO to take action.
In response to signals sent by the ISO, commercial building owners with on-site generators may be able to temporarily disconnect from the power grid and run on their own power (consistent with state emission regulations). Or, property owners or managers can dim the lights in common areas, or even get paid for long-term efficiency measures, such as installing new energy-efficient lighting. Large commercial office buildings and shopping malls would be obvious candidates to provide this service, and demand-response companies will also aggregate smaller commercial properties together into larger pools.
ISO New England, as the grid operator for the six-state region, has a clear incentive to incorporate demand-response resources into operations – the reductions in energy use at times when demand threatens to exceed supply can significantly enhance power system reliability. For property owners and managers, the benefits come in two forms: from the savings earned by using less electricity, and from the monthly payments received for the commitment not to use a certain amount of electricity when signaled by the ISO. And ISO New England is working on a new initiative that will provide a third way to benefit, allowing demand-side resources to participate in the daily wholesale electricity markets and get paid for the electricity not used.
Regional Benefits
Taking full advantage of these opportunities will require some upfront expenditure on technology such as advanced meters. These meters can be set to automatically alter the use of heating and air conditioning, office/plant equipment, lighting and other devices in response to signals from the ISO. Information from the consumer’s property is then fed back to utilities and grid operators, who are keeping track of demand on the entire regional system.
The Smart Grid also sets the table for possible changes in the way electricity at the retail level is priced. Right now, whether you use electricity at 3 a.m. in December or 3 p.m. in July, the retail price is the same. Wholesale prices – paid by utilities to power producers – fluctuate hourly in response to demand. In the future, retail electricity prices could be based on the time of day and demand on the power system. This type of “dynamic” pricing moves with demand, enabling consumers to adjust their consumption in response to real-time signals – and financial incentives – that demand and/or prices are spiking.
These initiatives benefit the participants, and the region as a whole, because they help “shave the peak.” There are only a few hours a year when demand is extremely high, but the region must have the expensive generating capacity available to meet those peaks. With energy efficiency and demand response, those peaks will be lower, which can lessen the need to build costly infrastructure.
