Potential benefits to society through smart metering initiatives


Palo Alto, CA, U.S.A. — (METERING.COM) — February 9, 2009 – The benefits of smart metering generally extend beyond the consumers that undertake behavioral changes and accrue to all consumers and to society as a whole, according to a new study from the Electric Power Research Institute (EPRI).

Termed societal benefits, these are benefits that accrue primarily as a result of actions undertaken by consumers. However, because they accrue to consumers, rather than showing up as cost savings on the utility ledger, identifying and monetizing these benefits in a business case can be a challenging task.

The study “Characterizing and quantifying the societal benefits attributable to smart metering investments,” was aimed at reviewing how utilities have estimated societal benefits in regulatory filings and develops a framework that describes how societal benefits can be characterized and quantified systematically and thoroughly.

The study says the installation of smart metering technology by itself does not produce societal benefits. Rather, smart metering serves an enabling role when combined with other initiatives, such as the implementation of demand response programs, the revision of outage restoration practices, and the adoption of devices that communicate consumption and price/event information to consumers. Additional benefits are attributable to the energy and demand changes that result from change in consumption behavior, including lower environmental impacts and improvements in employment and wages in the local economy.

Quantifying societal benefits requires sorting these streams of benefits in a way that characterizes them by the source so that proper value transformation function can be applied. If this is accomplished, then benefits arising from different sources may be monetized and accumulated to provide an overall measurement of benefits.

The study identifies six potential sources of societal benefits that may accrue from smart metering:

  • Demand response programs that provide consumers with inducements to modify their electricity consumption through price or other incentives, thus providing them with an opportunity to reduce their electricity costs
  • Feedback made available to consumers about electricity consumption in an actionable and timely fashion that may result in reduced electricity consumption and bill savings
  • New products and services that can create opportunities to use electricity more efficiently and effectively
  • Service quality enhancements that may reduce the duration of outages
  • Reduction of externalities, which are potentially adverse impacts of electricity usage on the environment or society that are not explicitly reflected in electricity prices but whose reduction benefits all consumers
  • Macroeconomic benefits may arise from changes in the expenditure patterns of utilities and consumers that can enhance regional employment and raise wages.

The value transformation function associated with each benefit stream converts the physical changes in the level of electric service or the nature of economic activity into monetary terms, the study says. The nature of that function and the parameters used are critical elements of the valuation process and require a chain of linked assumptions. Moreover, these assumptions are subject to considerable subjectivity in the process of parameterization and measurement and further widen the range of values that characterizes the final monetized level of benefits.

This ambiguity and uncertainty are part of the landscape. As more experience is gained in characterizing behavior, the range of attributed benefits will narrow. For now, the analyst is left with determining how to convey to decision makers the inherent uncertainty.

The study was undertaken in collaboration with four Ohio utilities – American Electric Power, Dayton Power and Light, Duke Energy and FirstEnergy.