February 17, 2011 – A study led by economists at The Brattle Group and prepared for the Edison Foundation’s Institute for Electric Efficiency (IEE) finds that the net benefits of smart meters could range from $96 to $287 million over a 20-year time period for a U.S. utility with one million residential customers. Key findings from the study were presented today during a breakfast session hosted by IEE that was held in conjunction with the National Association of Regulatory Utility Commissioners (NARUC) Winter Committee Meetings in Washington, DC.
The study, led by Brattle principal Ahmad Faruqui, estimates the costs and benefits of smart meters between 2011 and 2030 using four prototypical utilities (South, Central, East, and West). Each utility has a million customers and features different generation resources, load forecasts, capacity costs, and smart meter costs. The study estimates the operational benefits that each utility would accrue as it replaces its existing metering infrastructure with smart meters, which allow for two-way communication between the consumer and the utility. In one case, the operational benefits virtually covered the installation investment.
However, in all cases, additional benefits would accrue as customers participate in specific smart meter-enabled program offerings, including household energy use information delivered to customers in real time via in-home devices and web portals; dynamic pricing with and without technology options such as programmable thermostats with display information; direct load control with measurement and verification; and electric vehicles with a time-varying rate.
The study concludes that in each of the four utilities, the benefits of smart meters exceed the costs. The net benefits range from $96 million for a utility in the East to $287 million for a utility in the South. The range of benefits is due to the variation in smart meter costs, operational benefits of meter replacement, and the mix of customer-side programs across utilities.
Commenting on the study, Dr. Faruqui noted, “We all know that smart meters provide operational benefits by eliminating or avoiding the cost of reading meters. However, what we have demonstrated is that they also open a gateway to benefits on the customer side of the meter. Even without dynamic pricing, smart meters allow utilities to offer customers a variety of programs that would lower their energy costs and reduce greenhouse gas emissions. With dynamic pricing, these benefits rise considerably.”
The results of the study were presented today by Dr. Faruqui and Dr. Lisa Wood, Executive Director of IEE. The session was moderated by Mr. David Owens, Executive Vice President of Business Operations at the Edison Electric Institute. A draft of the study, “The Benefits of Smart Meters,” was distributed at the briefing and is available for download below.