Many utilities across the U.S. and Canada have been deploying Advanced Metering Infrastructure (AMI) or "Smart Meters" over the last several years. The 2009 American Recovery and Reinvestment Act (ARRA), also known as the "stimulus" included funding for many Smart Meter projects via the Department of Energy. As a consumer, your ability to capitalize on a deployment of AMI by your utility depends on a variety of factors. In this blog post, we'll review some of these factors and discuss various AMI deployments.
Pennsylvania Power & Light (PPL) is a progressive utility in northeastern PA that led the way in AMI deployments in the U.S. In approximately 2002, PPL commenced the installation of hourly interval meters for all of its residential and small commercial customers. This hourly interval data is helpful for PPL (e.g., outage tracking, etc.), but it can also be used by competitive energy suppliers who can offer prices that reflect a customer's usage pattern. This is great for customers who use more energy on nights and weekends, but its bad for customers with poor load profiles whose true cost to serve would otherwise be socialized by flat rates. PPL's data also enables demand response and other innovative energy technologies to thrive in their service territory. PPL's communication technology is unique in that their meters send data back to PPL over PPL's powerlines.
The Electric Reliability Council of Texas (ERCOT) is currently on the leading edge of AMI integration into retail energy markets. In ERCOT, every consumer is forced to choose a Retail Energy Supplier (REP) and each REP must settle the hourly usage of their customers in the ERCOT market. The ERCOT market's maximum spot price is $9,000/MWh and a few hours of those prices are enough to blow up many REPs. As a result, the REPs have a significant incentive to help their customers conserve energy during high priced hours. The result is that small-scale demand response has become a retail energy product in ERCOT via bundling packages offered by REPs. For the REPs, this is a necessary risk management tool (DR as a physical hedge in their supply portfolio) and for the customer there are savings opportunities if they can shift usage away from peak periods with severe price spikes. Reliant (an NRG subsidiary) has partnered with Nest Labs to offer discounted supply in exchange for the ability to control the customer's thermostat. Champion Energy Services has recently begun to offer bundled DR options in its supply product offerings. Just Energy is one of the biggest residential DR companies in ERCOT, although there is little public evidence of it. Through their partnership with Ecobee, they've bundled energy supply with Ecobee thermostats and use them to manage residential air conditioning load during high priced intervals. The bundling of supply and DR in ERCOT is a great example of how smart meter data can unleash a wave of innovation that helps balance supply and demand and make an ERCOT capacity market totally unnecessary......., but I digress.
In other parts of North America, the AMI picture is more mixed. Ontario made the installation of AMI a major policy objective and the majority of Ontario consumers now have "Smart Meters" and are subject to Time of Use (TOU) rates. The Ontario Energy Board has made peak demand reduction a cornerstone of its energy policy and AMI coupled with customer education around TOU rates has been a critical part of its strategy. Due to massive design flaws in the Ontario deregulated power market (we'll cover that in a future post), Ontario consumers get the majority of the TOU price signal through the distribution component of their bill. So far, it appears that the strategy is working as Navigant consulting recently released a study confirming a link between TOU rates, shifts in consumer energy consumption patterns, and a reduction in peak demands.
The experiences of residential consumers in the Central Maine Power (CMP) service area in Maine are more typical of AMI deployments. CMP deployed Smart Meters after it was awarded a grant from the DOE as part of the "stimulus". The Smart Meters have been very helpful to CMP in that they have reduced the need for meter readers and associated vehicles/travel expenses and have also given CMP much better situational awareness regarding outages. CMP consumers have yet to reap the full benefits of this AMI deployment. While consumers can see their usage through the Energy Manager application, competitive energy suppliers and energy service providers can't obtain this information in a timely fashion for use in ISO-NE settlements (as they do in ERCOT). CMP needs to perform an overhaul of its Meter Data Management System (MDMS) before the AMI data is available fast enough for all participants in the retail energy value chain. Maine Public Utility Commission Docket 2013-00168 proceedings have indicated that the expense associated with a new MDMS and associated billing systems have far exceeded CMP's original projections. While the AMI roll out has reduced certain expenses, it has necessitated a significant capital expenditure requirement in order for the AMI and associated data to be fully utilized. At CMP, AMI and Smart Meters have been a journey with a destination to be reached sometime in the future.
In Massachusetts, the MA Dept. of Public Utilities just issued Order 12-76-A which lays out a framework for AMI investment and deployment among Massachusetts utilities. To date, NStar, NGrid, Unitil, and WMECO have engaged in "Smart Meter/Grid" pilots, but the technology has not been deployed on a significant scale. While many residential electric meters in MA may look smart, they are mostly one way meters that chirp reading data to meter readers who collect the data via drive-bys in specially outfitted vehicles with equipment that can collect the data. Order 12-76-A requires the utilities to develop 10-year Grid Modernization Plans (GMPs) and a Comprehensive Advanced Metering Plan (CAMP) to be submitted as part of the public record. For a state with lots of technology, MA is taking its time in the development of AMI policy.
Although there are many pros and cons to AMI deployment, Smart Meters are seeing increasing resistance from people who are worried about the radiation associated with communications by these meters. In Massachusetts, there is a group called Halt Smart Meters - Massachusetts who have organized a vocal opposition even to pilots of the technology. While it may be easy to dismiss Smart Meter critics as modern day Luddites and scientific studies (such as the one conducted for Vermont Dept. of Public Service) indicate that the radiation emitted by Smart Meters is safe, there are people who claim to have electrosensitivity. Electrosensitivity is poorly understood and while many knowledgeable people assert that the symptoms are psychosomatic, its hard to say with 100% certainty that what people with claimed electrosensitivity are feeling isn't real. Opt-out fees, and even the ability to opt out itself, have been a major source of controversy in Smart Meter deployments and will likely continue to be until the issues around electrosensitivity are resolved (which could be decades). Other issues involve data security as hackers could use this data for criminal purposes (e.g., best time to break into your house) and data security is a constant and evolving challenge.
Regardless of the issues, this author thinks Smart Meters are cool and if your firm needs help understanding AMI as it relates to retail energy markets/tariffs, give us a call.