Intelligent end-use devices make a transactive smart grid valuable (Part 3 of 5)

Lynne Kiesling

Digital communication capabilities in the network, including in end-use devices, provides increasingly feature-rich, mobile, and customizable ways to create consumer awareness about electricity consumption, electricity expenditure, and the environmental impact of that consumption. It also provides ways to change electricity consumption, either manually or automatically, in the home or remotely. In yesterday’s post about a transactive smart grid I invoked our imaginations of a potential vibrant future electricity industry:

… imagine what that kind of transactive capability would be like with respect to your energy use. Online home energy management, remote access, the ability to automate your electricity consumption decisions, the array of new products and services that could make use of this transactive functionality.

For example, a home can have a home area network (HAN) that connects its appliances, its heating and cooling, its water heater, its laundry, its entertainment (stereo, TV, DVR, game console), and its lighting into one communication network, accessible either through a computer screen in the home or a web-based portal that can be accessed via a computer or a web-enabled mobile device. Through this communication interface, the customer’s electricity retailer can communicate real-time information about the quantity of electricity consumed, the price the consumer is paying, and even the type of generation resources being used to generate the power being consumed. The retailer can also communicate price signals to the customer, and the customer can program the different devices in the HAN to change their settings in response to price changes – if the price increases from 9 cents to 12 cents, reduce the temperature in the water heater by 5 degrees, and increase the thermostat air conditioner setting by 5 degrees. Moreover, the consumer can have remote web access to the HAN, and can change settings, monitor energy consumption, and analyze data on the home’s electricity consumption.

Say, for example, you are on the train to work, and you get a SMS notification that due to unexpected weather, there will be a higher-than-normal electricity price in the 9:00-10:00 hour. You may have already programmed your devices to respond to price signals, but what if the price is high enough that you want to change your settings? You can log in to your HAN from your mobile device, or from your computer at work, and change the device settings in the home through the web portal.

Such functionality requires intelligent end-use devices, which are increasingly feasible and cost-effective as the costs of information technology fall. Intelligent devices are things like your thermostat, water heater, television, and so on that have digital communication capability. Intelligent devices can have their settings changed remotely, and can be programmed to respond autonomously to data, including price signals.

Furthermore, if the home has distributed generation installed, such as solar photovoltaic rooftop panels, the customer can program the network to reduce electricity use once the home’s consumption reaches the generation capacity of the solar resource, thereby reducing the use of energy overall and reducing the use of fossil-fuel-generated power, if the marginal generation resource at that time is coal or natural gas (of course, with retail choice, the customer could choose a 100% renewable energy contract if s/he desires, which would alleviate the green/grey mix consideration). These digital communication technologies enable new value creation, reduction in environmental impact, and decentralized coordination in the electricity industry precisely because they make more of the network, and more of the participants in the network, transactive.

The technologies to make that vibrant future a reality already exist. The research that I’ve discussed here before in the GridWise Olympic Peninsula project used price-responsive, transactive water heaters and thermostats in conjunction with dynamic pricing and consumer choice among retail contracts. Other intelligent end-use devices and home network energy portal systems that are already in the market include (in no particular order):

  • Tendril: Tendril’s suite of in-home display options and web portal are a great example of the kinds of intelligent devices and applications that I think will transform the electric power industry. See this Greentech Media article for an overview of what Tendril is doing.
  • GridPoint: GridPoint is an industry leader and another great example of the types of products and services that can create value for consumers via the use of two-way communication capabilities.
  • Greenbox: Emphasis on transparent in-home display of energy consumption information. See this Ars Technica article for a nice discussion of Greenbox’s product.
  • Positive Energy: Uses a “combination of cutting edge technology, analytic direct marketing, behavioral science and world-class design” to inform consumers about their energy use. See also this CNet article.
  • EnergyHub: I’ve written about them before, and there’s still not a lot of information about their product and its commercialization.
  • Ecobee: A programmable thermostat geared toward transparent display of energy consumption information, focused on heating and cooling. Ecobee uses your existing home wireless network for its communication capability. See this Engadget article for more.
  • Current Cost (UK): a market leader in in-home energy information and management in the UK
  • WattzOn: An energy use tracking web site, not a device. You enter information about the various devices you have in the home, and it recommends behavioral changes. While interesting, I do not think of this as an application that takes advantage of two-way communication capabilities in the electric power network, so it falls outside my definition of smart grid, but is interesting. See this Lifehacker post for more.
  • Google Power Meter: the much-touted recent entry into the home energy management market.

These companies are already working on a range of devices and software applications to increase the information and transparency of electricity use to the home consumer. At this point, though, none of them pass my transactive test — they do not explicitly enable devices or applications in the home to be responsive to electricity price signals. But they can, and I think they will.

What’s really required to enable this vibrant transactive network of intelligent devices is regulatory reform. More on that Friday.

Tomorrow: smart grid and renewables interconnection

Other posts in this series:

Retail electric power market shakeout in Texas, II

Michael Giberson

Following up on a Monday post, in the news another report of a Texas electric power retailer seeking to acquire generation as a natural hedge.  From Platts:

Direct Energy said Wednesday that it plans to acquire and/or develop new generating capacity in the US to support its electricity retailing business.

Direct, a subsidiary of UK-based energy giant Centrica, owns gas-fired plants totaling about 1,300 MW in Texas, where it serves about 800,000 retail electric customers, Phil Tonge, president of Direct’s North American mass market business, said in an interview…

“One thing we’ve found–and it’s not specific to Texas–is that there are obvious advantages to owning generation” to back up retail load that Direct serves, Tonge said, noting that access to generation “takes some of the volatility out.” …

Tonge said that it some instances it can make sense for a retailer like Direct to own generation equal to as much as 40% to 50% of its peak needs. Direct said that in Texas it can currently meet 27% of its peak demand from its three gas plants and five wind PPAs.

Cheryl Morgan summarized my post as asking “whether vertical integration might have been a better option for Texas,” but I wouldn’t say it quite that way.  “Vertical integration” in the electric power industry is typically conceived as bundling retail, local distribution, transmission, and generation.  As I recall Sally Hunt’s point (in her book, Making Competition Work in Electricity, and I too don’t have the book handy so I’m relying on memory), she argued that it make sense to unbundle the wires from the non-wires portions of the business, but it wasn’t inherently desirable from a policy standpoint to unbundle retailing from generation.

Once unbundled from the wires business, the retailers’ decision to own or contract for power supplies seems to be just another “make or buy” decision that any business must consider.  Some gasoline retailers are vertically integrated with refiners and crude oil production companies, others are content to buy on the wholesale market.

Morgan worries about the loss of transparency that comes when retailers acquire generation (rather than buying power through long-term contracts and short-term markets).  So long as consumers can switch retailers and have a reasonable choice of alternatives, we don’t need to worry about the loss of transparency.  Consumer switching can discipline inefficient power supply arrangements, whether through contract or ownership of generation.

Which brings us to Morgan’s second point, that the shakeout will eventually result in relatively few large retailers.  If you think that customer choices will dwindle to a few large companies, then transparency may become an issue.

But I’m not ready to lump the California and Texas retail experiences together.  The approach taken in the two states differed and the differences have seemed to matter.

RELATED: an exchange of views in the February 2009 issue of Energy Policy between Christophe Defeuilley and Stephen Littlechild. (Subscription may be required, check with your local library if you don’t have direct access).

  • Defeuilley says experiences with retail electric power “have proven less than stellar” and wants to blame the disappointing results on an inadequate view of competition arising from the Austrian School of economics, which Defeuilley says served as foundation for the reforms.
  • Littlechild disputes both the claim that retail power competition has been disappointing and the claim that lackluster retail competition is somehow connected to Austrian School views on competition. Littlechild adds that the behavioral economics ideas that Defeuilley cites are more consistent with Austrian ideas than with the concept of compeition offered by traditional neo-classical economics.
  • Finally, Defeuilley elaborates on why he characterizes retail competition as falling below expectations and on the limits he sees in the Austrian School conception of competition and why it matters to the case of retail electric power.