Programmable communicating thermostats: who will control them and what are the implications for utility rates?

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Many utilities can potentially reap large savings with new programmable communicating thermostat (PCT) programs – but ignoring such opportunities exposes customer relationships to third party providers whose initiatives may result in increased utility customer rates, a new study from the Smart Grid Research Consortium (SGRC) advises.

According to the study results, big changes have taken place recently in PCT technologies and programs. Compared to several years ago:

  • PCT costs have dropped dramatically with PCTs that provide basic control functionality available for less than $100
  • PCT functionality has increased including capabilities such as HVAC maintenance diagnostics and voice recognition
  • Control strategies have become more sophisticated and can provide individual dwelling unit strategies, address “bounce-back” impacts and address other program issues
  • Many PCTs do not require an AMI infrastructure.

Thus, nearly all utilities can develop PCT programs that provide utility and customer value and many utilities and their customers can potentially reap large savings with these technologies.

“If you haven’t kept up with recent PCT technology and program developments, you are in for some surprises,” said Dr. Jerry Jackson, SGRC leader and research director and the study’s author. “We have seen a shift in PCT business cases over the last three to four years among our clients with some programs going from being unattractive to providing paybacks in five years or less with big utility and customer bill savings. Even utilities that lack AMI or communications bandwidth can potentially benefit with cellular and internet-based systems.”

However, the PCT advances also define a huge mass market potential for third party PCT program providers as evidenced by the growing number of companies in this space, the study reports. Utilities then face a risk that independent third party relationships with utility customers will increase customer rates, if the participating customer bill savings are greater than the utility avoided power costs. In this case, participating customers will see bill reductions and third party providers will share in savings while overall rates will increase to cover revenue shortfalls.

On the other hand, third-party providers of PCT services working with utilities can potentially provide more value for participating customers and the utility than can be provided by the utility’s own program – and still make a profit. The costs and benefits of in-house versus utility/third party partnerships depend on a variety of factors, including utility customer rate structures, avoided power costs characteristics, utility customer characteristics, and weather among others.

The Smart Grid Research Consortium is an independent research and consulting firm based in Orlando, Florida.