How Smart is Ontario's Smart Metering Plan?
Posted by Stoneleigh on October 27, 2006 - 12:25pm in The Oil Drum: Canada
How are smart meters being introduced?In support of the Ontario Government's smart meter initiative, six of the province's major urban electricity utilities are working cooperatively under the brand name powerWISE® to implement delivery of smart meters to consumers on a province-wide basis. They are each undertaking smart meter pilot projects that involve installing the meters in customer's homes in order to test the various technologies that will be required to deliver smart meter services.
The intention of the smart metering policy is to use time-of-day pricing to reduce peak demand by encouraging load shifting, as meeting peak demand during peak season frequently involves reliance on expensive electricity imports. Reducing peak demand could remove the need for new peaking plant and its associated transmission capacity, as well as dampening price volatility in the energy markets. It remains to be seen, however, how much load-shifting can be achieved under the policy as currently conceived.
Consumers were told they would be paying monthly for the new meters, but that the meters would help them to save money in the long-term as their consumption shifted to off-peak hours. However, opinions vary as to the scope for such savings. Given that the meters are likely to cost $400-$500, it is by no means clear that any savings will accrue to consumers.
Smart meters will be required to:
· Measure and indicate consumption during prescribed periods
· Be adaptable to seasonal, time-of-use and critical peak pricing
· Be capable of remote reading
· Provide feedback on consumption no less than daily
· Provide bi-directional communication unless impractical
Being adaptable remotely allows the utility to alter the hours designating peak, intermediate and off-peak price bands in order to accommodate a different usage pattern on weekends and also seasonal variations in peak demand. As meters can also be read remotely, there will no longer be a need for a utility employee to visit in order to read the meter, and there will be no more estimated bills.
Critical peak pricing is a controversial element, which may or not be included in the final meter design. Essentially, a critical call is an override signal sent out by the utility instructing the meter to surcharge all consumption during time when demand is predicted to approach maximum available supply.
Critical-peak prices incorporate a dynamic component into the tariff by signaling relatively high peak-period prices to consumers only on a small number of days when market conditions are particularly dire. These days are not known until the day before they occur, at which time consumers are notified that the next day is a critical day when electricity will be more expensive than normal. Analysis of data from the first summer of the California experiment indicates that these "rifle shot" price signals can be both popular and very effective at reducing peak demand, thus dampening wholesale prices and helping to avoid the need to construct relatively inefficient peaking generators.
This feature is controversial, because it is not clear what the magnitude of the surcharge would be or how much lead-time Ontario consumers would receive that a surcharge would be in effect. In the event of a short-notice warning, given that potential power emergencies are not perfectly predictable, it is unclear how effective communication of the critical call would be in reaching a sufficient number of consumers to affect demand. Consumers could remain unaware that a critical call had been issued until the power shortage was already over, or may simply not be in a position to alter their demand immediately.
Its value as a price signal able to head off a power emergency would be limited under a delayed billing system with no access to immediate feedback. Unless critical calls were particularly frequent or the surcharge were set at a punitive rate, it is unlikely that even consumers who took no action at all would notice the effect on an amalgamated bill arriving two months later. Critical calls are therefore unlikely to differ materially from the current system of power warnings, which would suggest that the cost of enabling this capability is not justified.
Consumption feedback would be available on the internet or by telephone by 8am the following day, allowing consumers to check their consumption pattern and its effects after the fact. The present plan is for 13 months of data to be available to utility customers. It is unclear, however, how many customers - long encouraged to be passive consumers - would be willing or able to take advantage of this feature. Providing some feedback, albeit still delayed, is better than providing none, but in order to be truly effective, feedback needs to be readily available to all consumers in real-time.
Preliminary Cost Estimates
The Ontario Energy Board (OEB) has directed all Ontario electricity distributors to collect 30 cents per month from each residential consumer in 2006 to fund initial start up costs. Preliminary estimates indicate that the incremental monthly cost for a typical residential customer may be between $3 and $4 per month once full implementation is complete. The OEB expects it to cost more than $1 billion to install the meters across the province. Hydro One alone has over a million meters to install province-wide.
The Ontario Energy Ministry says the meters now cost $400 a unit, but it estimates the cost will be closer to $100 when more companies start producing them. We have examined the cost-effectiveness of smart meters combined with innovative pricing for several U.S. utilities, as well as for Victoria, Australia (where the government is contemplating a policy like Ontario's), and Singapore. Based on this work, it is likely the metering costs will exceed the benefits if the cost is anywhere near $400. Done correctly, however, the cost per customer based on a mass deployment of smart meters could be closer to $150. At that price, it is much more likely benefits will exceed costs.
The Proposed Rates
The electricity rates proposed under the smart metering initiative (which are subject to change before the program is implemented) are not as variable as one might have expected for a program intended to achieve a significant amount of load-shifting. Given that these rates cover only the commodity charge - distribution rates and other fixed charges remain constant - the difference per kWh delivered is not particularly large.
Ontario Energy Board Time-of-Use Period and Pricing
(in cents/kWh, not yet mandatory)Weekends & Holiday .......... Off-peak ....... 3.5
Summer Weekdays (May 1 - Oct. 31)
7:00 a.m. - 11:00 a.m. .......... Mid-peak ....... 7.5
11:00 a.m. - 5:00 p.m. .......... On-peak ....... 10.5
5:00 p.m. - 10:00 p.m. .......... Mid-peak ....... 7.5
10:00 p.m. - 7:00 a.m. .......... Off-peak ....... 3.5Winter Weekdays (Nov. 1 - Apr. 30)
7:00 a.m. - 11:00 a.m. .......... On-peak ....... 10.5
11:00 a.m. - 5:00 p.m. .......... Mid-peak ....... 7.5
5:00 p.m. - 8:00 p.m. .......... On-peak ....... 10.5
8:00 p.m. - 10:00 p.m. .......... Mid-peak ....... 7.5
10:00 p.m. - 7:00 a.m. .......... Off-peak ....... 3.5
The Impact of Price Incentives
There is already a growing number of consumers in Ontario who are shifting their load for altruistic reasons, particularly at times when the Independent Electricity System Operator (IESO) declares a power warning. They run their dishwashers after 10pm, turn down their air conditioners, do laundry on weekends, put their water heater on a timer or make other minor modifications at perhaps a small cost in terms of convenience. So far, due to the willingness of the public to conserve at times of peak demand when asked to do so, it has been possible to avoid declaring a power emergency when the system has been under severe strain. The IESO is concerned, however, that if power warnings should become more common - or even routine - in the future, a form of warning-fatigue may set in and the public response may diminish.
Smart metering in conjunction with time-of-day pricing is meant to bolster the altruistic impulse to conserve power when supply is tight, theoretically to a degree great enough to extend load-shifting behaviour to daily peak demand periods. Unfortunately for the policy makers, prices are not the prime motivation for those who load-shift now, and the difference between the proposed on and off peak rates is probably far too small to motivate many additional consumers to do the same.
On the other hand, if punitive peak rates sufficient to provide a genuine financial incentive to load-shift were mandated, it would have a highly disproportionate effect on those unable to alter their demand profile. Farmers, for instance, would be heavily impacted, as would the poorest consumers - generally those with the least flexible demand. As far as these consumers are concerned, price increases, whether based on time-of-day pricing or not, are a blunt instrument.
The poor often lack the information, resources and control over their own circumstances to change their demand, much of which is for non-discretionary uses such as heating. Half of Ontario homes which are electrically heated are occupied by those in the bottom income quintile, while very few in the upper half of the income scale heat electrically. If those electrically heated homes were also badly insulated, as the homes of poorer individuals often are, then the impact on the many at the bottom of the pyramid could be crushing.
It appears that the need to keep the impact manageable for those unable to load-shift will require maintaining a price differential which is too low to deliver much load-shifting by other consumers, and also too low to result in any savings for most consumers once the monthly charge for the meter has been taken into account. Spending a billion dollars up front, followed by an estimated $50 million per year in operating costs, in order to achieve a relatively small shift from coal-fired peaking plant to baseload nuclear and an estimated 5% overall reduction in residential consumption is probably not the best use of those funds.
A Smarter Alternative
A smarter metering alternative already exists and has been operating in one Ontario town since 1989. That will be the topic for Part II.
The problem is they have added all these extra features to make the units "smart". If instead they designed it as a "black-box recording device" that still had to be visited by a person to download the data it would be a trivial expense.
How much money are the utilities going to save by not having someone come to read the meter? The remote communication feature is probably the main cost factor driving the $400 price tag and is purely a cost saving feature for the utility. It has nothing to do with peak shaving.
In terms of hitting the poor and farmers particularly hard, they can always buy into a plan that gives them a fixed price. The smart meter gives them the option to have a variable price it doesn't make it a requirement. In Ontario there are already multiple providers of electricity that will give you the option of price certainty.
If consumers are going to be hit with higher rates at crisis times, they need to have access to that information in real time. Preferably, their appliances should be able to access and act on that data without human intervention. I see no features in this meter to allow this.
Ideally, you'd want a low-bandwidth channel over the electrical line itself. How about X10? A naïve installation could plug existing sheddable loads into appliance modules set to a well-known house/station code, and the meter would send the commands to turn those loads on and off at the appropriate times. In an intelligent installation, the meter might merely broadcast the information received from the utility and some other controller, perhaps even a home computer, would schedule and coordinate power use among smart appliances.
On Peak: 9.7
Mid Peak: 7.1
Off Peak: 3.4
http://www.oeb.gov.on.ca/html/en/consumers/infocentre/fsheets-elec/fs_timeofuse.htm
Everyone needs to create and learn news way of using energy. Information is infinite, fossil fuels aren't.
I remember the Y2k idiocy and the utilities were the first industry to claim compliance, why? there were no computers in the system. The guy running the grid at PGE in CA told me in '97 they would have problems if the, "Phone system went out." - hah!
The system needs more information to evolve. Consumers, farmers, everyone are going to be paying more for energy, so we have to figure out how to use it better. If you have an egalitarian/democratic ethic, we have to figure out how to do that most equitably, but consumer groups stick to their failed policies of promoting low cost as their only justification. If you care about consumers or farmers think about changing the system, and the first step to that is more information, period. I'm all open to debate on the best way to do that, but I'm not starting from utility bullshit.
CD Howe Institute - Preventing Electrical Shocks
The utilities' costs vary with demand, and if you don't pass that variability on to the individual customers, but rather have a fixed per-KWH rate, then in effect the customers that are careful not to use much during peak times are subsidizing those who leave their air conditioners on on summer afternoons or choose to heat with resistive electric heat during cold snaps. Making the variable costs fair and transparent thus seems like a good idea to me.
The issue of how will low-income people cope is a separate one. (The same arguments arise when talking about gasoline taxes.) As energy prices increase in the future, they will be hit hard in any case. If TPTB cared about the poor then they should invest more money in programs that help them insulate and convert away from electric heat. Landlords should be required to make rental housing satisfy certain energy efficiency standards, with money being made available to the landlords in loans to help them finance the needed changes. Even if those loan payments are then passed on to the renters in higher rents, the renters will still save money in the long run due to lower utility bills.
Looking forward to Part II
I agree that the problem of the less well off is, or should be, a separate issue. Electricity billing and social welfare have been intertwined for a long time, which has led to price signals becoming muted and confused. I was merely pointing out that, within the confines of the current system, political action represents a balance between conflicting factors. It would be political suicide to raise peak rates high enough to provide a real financial incentive to load-shift, hence the balancing act that will please no one.
The solution IMO is to sharpen price signals through real-time feedback and billing innovations which eliminate the effects of amalgamation and delay. There are already tried and tested systems in place which do this, and they work because they are smart in a human sense, rather than only being smart in a technological sense. In combination with time-of-use pricing, these methods could be used to turn a blunt instrument into a precision instrument. Both the problems of the need for social considerations and the need for load-shifting can be addressed in such a way that they do not poltically confound one another. For details, see Part II.
The last party at the helm declared themselves free marketeers and set up a pool pricing system for electricity. Pool prices rose quickly (to about 8 cents/kWh), whereupon the government promptly slapped a cap on rates at a level so low that consumption was being actively subsidized - and this after only a four months trial period for floating prices (when it had been obvious prices would rise as supply was tight).
The present administration raised the rate cap (because the subsidy was costing the province a fortune) and introduced a tiered payment system. They declared that the bad old days of Ontario Hydro (which had accumulated some $40 billion in debt) were over, then promptly set up an even more centralized bureaucracy. If its Standard Offer Contract is anything to go by, it seems to be determined to micromanage everything in such as way as to impose completely unnecessary cost burdens on those trying to introduce alternative generation, particularly at small-scale. The metering program also imposes unnecessary costs, largely due to the political requirement for two-way communcation and critical call capability.
We already have a form of demand management. We have time stepped cost for our electricity.
Cheap (5.4p/KWh) from midnight-5am, 1pm-4pm, 8pm-10p
Expensive (9.5p/KWh) from 5am-1pm, 4pm-8pm, 10pm-midnight
Basically its expensive to encourage conservation at peak times and then cheap off peak to encourage consumption.
We don't have gas or oil heating, so we heat using electricity.
Needless to say the hot water heating + space heating are largely run off peak.
Oh, and the meter was free to us.
I don't see the public relations value of forcing people to pay $500 for a "smart" meter. Ours is a dumb meter and we get along just fine.
besides won't $500 pay for 6 months worth of electricity for many folk?
Andy
I don't know about Canada; I live in the U.S, in GA, in a fairly small house for the area (1200 sq. ft.). Our annual electric bill runs about $600, but we heat with nat. gas and pellet fuel, and the hot water tank and stove/oven run on nat. gas; the annual amount we spend for nat. gas plus pellet fuel has been about $950 the last two years. In other words, our total household fuel bill is closer to $1500 annually than to $1000.
I have friends whose furnaces and water tanks are also natural gas appliances and who routinely spend considerably more than $100 per month on electric alone (they live in bigger houses and are less fanatical than I am about turning things off). If we all had "all-electric" homes, we would spend WAY more than $500 in 6 months. Of course, that might be incentive to find ways to cut back!
-Amy W.
Have you looked into air source heat pumps?
http://www.energystar.gov/index.cfm?c=airsrc_heat.pr_as_heat_pumps
given your bills are small it is probably not worth the capital expenditure unless you are due a revamp already.
"Smart Meters" are a baby step in the right direction of intelligent devices that can adjust demand in real-time to substantially reduce energy peak demand.
Imagine a "smart electric panel" that knew the temperature in your freezer and coudl stage the compressor motors in sync with other fridges, freezers and pool pumps. This could easily reduce electric generation demand by 10-15%.
When there are rolling black-outs to dampen excessive demand whole neighborhoods are cut off. Imagine if the "smart panel" could distinguish between critical and non-critical loads (say a dialysis machine vs a hot tub).
Imagine, with distributed generation resources in a given geography, small-generators (owners of PV, standby power equipment, etc) could be compensated for their emergency ready power that would be distributed to customers paying a premium to light up certain circuits in their smart panels.
The opportunity to build intelligence at the edge via smart devices is just now emerging as a significant way to reduce capital and operating expenses, increase competition, reliability and security.
Having lived in the UK for many years, especially as a poor student, I still find it amazing here in Canada that the hot water tank is "on" all day and all night, despite only needing it mornings and evenings. Unheard of over there!
In the UK they have these horrible instant electric showers that dribble on you as you stand in a freezing bathroom (due to dodgy insulation mostly), but at least you only use 5KW of electricity for 5-10 minutes, depending on how long you can put up with it :-)
Cheers,
Gary M.
It shows just how inefficient the water heater is!
When in doubt, insulate everything. Then do it again with a different material.
This is a problem that needs to be solved with legislation.
Akerlof, George 'The Market for Lemons'
http://nobelprize.org/nobel_prizes/economics/laureates/2001/public.html
which summarised this problem brilliantly.
In the Akerlof case, we are buying and selling used cars. You have a good used car, but I know most used cars are of low quality. So I make you an offer which is too low for you to accept.
We wind up not doing a deal. Because you have information I don't have, I can't/won't take the risk. Conversely, you can't make me any more sure than I already am.
Breakdowns in negotiations (see Palestine v. Israel) happen all the time because of this. In tightly knit communities, trust can overcome them.
In your case, the problem is not imperfect information, per se, but the structure of the problem is similar. Ideally the landlord would insulate the pipes, and all future tenants would pay him some of the gain in higher rent.
But whilst its easy to show that a bigger flat rents for more, it's a lot harder to ensure that given 2 identical flats, the one with the lower utility bill rents for less.
Incidentally, this is a pretty easy thing to so since they make regular 30amp, 220volt wall swtiches and most heaters are 30amp.
:-)
Here's the tariff schedule for summer in cents per kW (numbers rounded):
Summer peak usage(noon to 6PM)
baseline - 0.294
101-130% of Baseline - 0.294
131-200% - 0.384
201-300% - 0.467
Summer off peak usage (all other times including weekends)
baseline - 0.087
101-140% - 0.087
131-200% - 0.177
201-300% - 0.26
In the summer, our major power usage is for irrigation of our garden and orchard. During weekdays, all water is heated on the PV system (which also has a solar preheating system). We "average" between 26-29kW per day - on weekends I may use 200-400kW irrigating.
Given the complexity of the tariff schedule which is less complex than the proposed Ontario one, I see the whole thing as a can of worms there.
BTW, Pacific Gas and Electric (PG&E) has kept reducing the baseline amounts as the years have passed. It isn't as good a deal as it once was.
I'm drip watering a half acre garden with a 12 volt boat pump in a pond. Power comes from PV panel on top a shed with a lead-acid battery and voltage regulator inside the shed. Works great. The house is grid tied PV. Whenever they get those big cheap megabatteries and much cheaper PV we should all tell the power company to get lost.
http://www.monbiot.com/archives/2006/10/06/small-is-useless/
Also, I disagree with his conclusion. He cites many great examples of exceedingly poorly designed systems and then concludes that all micro systems won't work. This does not follow.
In fact, if Monbiot were correct, off-grid living would be impossible. This is simply not the case. Many off-gridders would explain to you that they live quite comfortably off of the grid.
I agree however that pumped storage might not be quite affordable on the small scale, but it should be considered.
One question though. I always assumed "smart meters" are capable of running backwards, i.e. that they belong to distributed generation infrastructure. But that's not an item in the feature list in your article. Is distributed generation even a topic in Canada?
One of my primary complaints with the way the current government has managed the electricity system is its almost complete lack of joined-up thinking. My own view is that they have no desire to encourage distributed generation at all, especially at small-scale. It is quite clear to me that Standard Offer Contracts (SOCs) are not viable for micro-generation, and quite possibly not for small generation either. Net metering is possible, but involves paying for expensive metering equipment that will only have to be replaced long before the end of its life. The list of unneccessary barriers to entry, especially for SOCs, is long indeed. If I were trying to devise a policy framework intended to supress small-scale distributed generation (without sacrificing the 'green vote'), I would be hard-pressed to do better than what the present government has come up with.
When I bought my farm, it used 130kWh/day in the winter (due to electric heating in the house and poor insulation). Six years later I can run it on about 10 kWh/day, which means translates into a bill of about $100 every two months. I wasn't thinking in terms of pay-back periods when I put in my system - I was thinking about being as self-sufficient as possible. I am extremely concerned about the state of the grid and don't want to have to rely on it.
e.g. I want my water heating to turn on when it's cheap, off otherwise. I should be able to program th meter to do this, and other stuff. If I have to buy extra modules for my switchboard, that's a ... turn-off.
Power companies need to provide internet-based feedback and control to consumers to make this stuff work. Transparency is important, the consumer should have all the info the power company gets.
Pricing rules need to be simple and transparent. If it gets too complicated it'll be too much trouble for most people.