Prepare the Grid Now For Consumer-Bought Smart Technologies

Utilities should expand their demand response programs now in preparation for major consumer adoption of communicating thermostats.
Published: Fri 07 Mar 2014

Big change is on the horizon for the demand response market. A major driver for this change is consumer adoption of communicating thermostats and other “smart home” technologies.

These devices are becoming widely available at major retailers and consumers are flocking to buy them as products promise to help them use power more efficiently, thus saving them more money.

According to IMS Research, shipments of communicating thermostats that consumers can remotely control are projected to quadruple by 2017.

This growth is actually good news for utilities as customer-owned communicating thermostats represent a potential new demand response resource that utilities can utilize to regulate peak demand.

However, today almost all mass-market demand response programs rely on utility-owned devices. While the use of customer-supplied thermostats may not reach critical mass for a number of years, utilities can still prepare for the “bring-your-own-device” (BYOD) concept by deploying the right smart grid technology today.

What the Customer-Owned Device offers

Customer ownership reduces the utility share of demand response program costs. This can significantly enhance overall program cost-effectiveness.

Customer-owned communicating thermostats give utilities the ability to expand demand response programs to more residential and small-commercial customers. This means that the utility is not forced to directly pay for or have to install the device.

However, while utility-supplied devices add expense, they are a proven commodity when it comes to reducing demand at critical times. There is still doubt as to how effective customer thermostats are and whether they will respond in the same reliable manner.

In addition, some customers will continue to opt for the utility-supplied device because they are either not technically savvy enough to install and maintain the equipment themselves or because they are unable to afford a costly retail thermostat.

Either way, utilities should take the opportunity now to upgrade existing programs to smart grid technology, while starting to integrate customer-owned devices into their demand response portfolio.

Reaching Customer-Owned Demand Response Devices

Many of the new off-the-shelf thermostats communicate mainly via the customer’s home broadband connection. Customers typically use their Smartphone or PC to interact with a web-based service to remotely control their thermostat.

Utilities can also utilize this web-based service to transmit demand response commands to the thermostat. However, the integration of each thermostat vendor’s proprietary interfaces can prove to be complex and costly.

A better option is to connect the customer-owned thermostats through a smart meter and a standards-based interface to the utility smart grid network. Using smart meters as the gateway into the home makes it easy for utilities to reliably deliver demand response signals to either customer- or utility-owned thermostats.

The smart grid approach ensures that utilities maintain a strong relationship with their customers, mitigating the risk of disintermediation by the thermostat manufacturer or another third party, until a time when manufacturer business models or regulatory structures become clearer.

Revamping Incentives for Customers

This future promise of customer-owned communicating thermostats will mean that utilities can leverage an alternative channel to manage demand at peak times, reduce demand response program costs, and improve cost-effectiveness. But how do you get utility customers on board to use the device that they themselves will have purchased?

One solution is to motivate customers to participate in a demand response program via rebates on approved thermostats or rewards based on actual load reductions. Smart meters can provide the consumption data that operators need to track responses to demand response events and to properly align customer incentives and payments with the exact number of KW saved.

A utility may want to seek approval for new dynamic rates designed specifically to appeal to demand response customers who participate using their own thermostat or other devices.

Turning Customer Devices into a Predictable Resource

Regardless of who owns the devices, utilities need a demand response management system (DRMS) that will maximize the response to demand response events, decrease cost and complexity, increase program effectiveness, and provide tools for optimization of demand response assets across various programs.

A full-featured demand response management system solution will help the utility to meet demand response goals-these include:

  • Broad customer participation

  • Predictability of load shed

  • Achieving target load shed at any given time

  • Highly accurate, consistent, and fast measurement and verification (M&V) based on near-real-time monitoring and reporting

An effective demand response system will help utilities integrate customer-owned thermostats by learning each device’s individual load shed characteristics and customer behavior. This will make it possible to shed load in a predictable manner and better manage demand reduction targets.

Why Bother With Consumerization Initiatives?

Utility customers want to have more control over their energy consumption. As a result, many opt for off-the-shelf technology to attain this goal.

It will be in the utility’s best interest to offer utility customers choice and flexibility in managing energy resources as this will encourage customers to participate in demand response programs.

In the interim, utilities should focus on developing standard utility-owned methods. By establishing a smart grid for demand response, utilities can manage peak capacity, avoid the need to build new generating facilities, and improve customer satisfaction.

By doing this, utilities will enhance their customer relationship value and customers will reap the cost benefits by actively managing their own energy consumption.

By investing in the right smart grid technology now, utilities will be able to expand their current demand response programs to easily integrate consumer devices such as communicating thermostats.

Possible Disruption

We asked Matthew Smith, Senior Director of Utility Solutions, Silver Spring Networks, if utilities will react fast enough to this trend and whether it will cause a major disruption to the utility if technology prices plummet.

He responded by explaining that nearly all mass-market demand response programs rely on utility-owned device and that while the increasing availability of direct-to-consumer residential energy management devices is encouraging, it will probably not reach critical mass for a number of years. In the meantime, it will be crucial for utilities and manufacturers of residential energy management devices to work out technology approaches and business models from the interconnection of consumer products within the critical infrastructure operated by utilities

The current utility approach needs to be enhanced to support any long-term consumer deployed device-driven developments, says Mr Smith. “ We believe that utilities that invest in a network platform approach for smart grid will be able to augment their existing demand side programs by enabling interconnects between consumer devices such as communicating thermostats, and the smart grid network,. This is regardless of whether they were provided by the utility or purchased by their customers directly.”

He concludes: “The key thing that needs to be proven is the amount of load shed these consumer deployed devices can reliably deliver over time. This will allow utilities to develop and deploy new rate plans and programs that will compensate customers for the amount of load reduction they can provide.”

Further reading:

Silver Spring Networks-How Utilities Can Capitalize on the Consumerization of Demand Response [pdf]