By Ed Gray
There are a few troublesome issues facing the electric utility industry today: Demand is growing, the cost of building generation is sky high, and carbon concerns are weighing heavily on people’s minds. When the National Association of Regulatory Utility Commissioners (NARUC), a trade group for US policymakers, had the consultants at Capgemini survey members earlier this year, 93% of respondents said they anticipate some kind of national carbon legislation in the near future. Not surprisingly, anything that can defer investment in new generation is now getting US regulators’ attention.
Smart meters deliver hourly consumption data that support retail rate structures such as critical peak pricing (CPP). Since CPP prompts consumers to reduce peak demand, the rates can postpone the need for new electric generation. Yes, there is still deliberation over the cost of the new technology, but the cost of inaction is higher yet, and regulators are beginning to see that. Smart metering addresses many of the problems plaguing electric utilities today.
In that NARUC survey mentioned above, new generation and new transmission capacity were tied as top priorities for the United States. The US Energy Information Administration projects that the nation’s electricity consumption will grow from 3,814 billion kWh in 2006 to 4,972 billion kWh by 2030.
Hundreds of gigawatts of generation capacity will need to be built, and that will be expensive, according to a report issued last February by two information delivery companies: Cambridge Energy Research Associates and IHS, Inc. Their investigation shows that the cost of new power plant construction in North America is more than 130% higher now than in 2000. A plant that cost $1 billion in 2000 would cost $2.31 billion today.
On the transmission front, US Department of Energy figures indicate that construction of transmission facilities has decreased some 30% since 1990, while demand has risen about 25%. Studies show that recent increases in transmission investments have to be tempered with the reality of dramatically increased materials costs. Rising construction costs are where many investment dollars are going. They are not necessarily going to more line miles of transmission.
In distribution systems, industry sources say that approximately 40% of US distribution transformers are at or beyond design life.
To make the most of capacity already in place, 40% of the NARUC survey respondents considered the smart grid fundamental. Nearly 70% support dynamic rates that reflect time-based wholesale cost fluctuations.
Smart meter s to the rescue
Today’s regulator concerns have a common solution: smart metering. It serves as the foundation for both smart grid initiatives and demand responsive rates that would cut peak load and defer generation investment.
At a recent NARUC meeting, presenters cited several studies examining how much peak load reduction a demand response programme such as CPP might deliver. Most studies found the reductions to be 10% or more. Reductions were twice as high with the addition of technologies such as programmable communicating thermostats that automatically respond to price signals sent by the utility.
What smart metering offers is a way out of the morass of rising demand, an overtaxed grid system, increasing construction costs and environmental pressures.
Already, such issues have been behind smart metering initiatives across the globe. These include the European Parliament’s April 2006 energy directive urging adoption of metering that gives consumers “information on actual time of use”; the formation of the European Smart Metering Alliance, which is funded partially by the EU’s Intelligent Energy programme; and Victoria, Australia’s 2004 mandatory rollout of frequent interval meters for small businesses and residential customers by 2013.
Likewise, US regulators know what is ahead of them, and they know how smart meters can meet those challenges. More importantly, they are beginning to recognise that adding advanced metering now will be less costly than delaying a smart meter deployment.