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N-14 Avoid Power Shortages

Demand Side Actions

N-14 Avoid Power  Shortages

Suppose you were filling your car with gas, and the pump behind you suddenly changed the price from $4 a gallon to $400 a gallon. You’d get an unpleasant surprise when you put the nozzle back on the hook and saw how much you owed.

Electric prices can go up 100-fold during an unexpected shortage, as they did in Texas in 2021. Price spikes of this magnitude are fairly common in the electric market (although usually much shorter-lived than they were in Texas), because heat waves, cold snaps and unexpected outages aren’t predictable. The Texas situation was unusual both because it was prolonged, and because the high prices were passed on to some consumers.

In most utility markets, consumers are rarely aware of extreme electric pricing events as they happen. However, consumers ultimately pay for them via higher long-term rates. Retail electric customers aren’t watching the electric meter every second. We have no way of knowing that prices have gone up, and, mostly, have no practical way to react even if we did know.

However, the technology to make electric markets more like other markets – to enable consumers to react to high prices, and thus in turn to ultimately minimize dramatic price increases – can be developed, using existing, proven technologies and business methods.

A thermostat with a display screen, connected to the electric meter, could provide a live two-way communication path between utilities and electric customers. Such a device would enable customers, utilities and utility regulators to work together to program in one-off, and automated, customer responses to price increases. It would, for the first time, enable consumers and producers to react to sudden price changes, making electricity more like every other product.

The envisioned thermostat would have all of the features of state-of-the-art smart thermostats, along with a highly-visible, easily-read display. It would be a communications hub for utility messages to the customer, and for customer replies. It could be integrated with other systems, like meters and smart circuit breakers, to allow the utility to request, and the customer to approve, voluntary demand reduction actions such as turning off specific appliances, or temporarily re-setting thermostats.

Given a large enough number of participating customers, this could significantly reduce both the magnitude and duration of price spikes. Southeastern utilities, which often experience high wholesale rates during summer heat waves, have decades of experience in using simpler voluntary demand reduction systems to control wholesale prices. Utilities like Florida Power & Light pay customers to allow the utility to turn off their air conditioners and swimming pool heaters for just a few hours a year. Almost half of FPL’s residential customers participate in this voluntary program.

The envisioned device would offer other benefits, such as: enabling customers to see how much they owe at any time, instead of just once a month; paying on the customer’s schedule by pressing a button; and notifying utilities of outages by pressing a button. Utilities would be able to provide outage repair estimates and notify customers of immediate opportunities to save money, e.g., by taking advantage of demand reduction incentives or rates that vary with the time of day. Furthermore, several studies have shown that customers who understand how their energy is used, permanently reduce their energy use by 2 – 14%. This device would facilitate such learning.

Copyright 2022 [or 2023], La Conner Weekly News. Reprinted with permission

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