Why Don’t We Do It With Demand?
(Title inspired by the Beatles. Blog inspired this song sent by an anonymous reader.)
Customers can help avoid blackouts if they are given better information and prices.
Even if you don’t live in California, you probably heard about the rotating power outages we had on August 14 and 15 due to insufficient electricity supplies. While the outages were less than 1000 MW when demand was over 40,000 MW, and lasted for 1-3 hours, any gap in reliable electricity is a problem. But these blackouts were just as important for what they say about California’s electricity planning process as for the direct hardship they imposed. One thing they highlight is how little progress we’ve made towards incorporating demand responsiveness in the transformation of our electricity system away from fossil fuels.
The outages show what can go wrong if we don’t pay sufficient attention to the new constraints from changes in the grid: increasing peak electricity usage due to climate change, more solar and wind generation, closing gas-fired plants and nuclear plants, and, in the future, widespread electrification of vehicles and homes. Some critics are saying the blackouts demonstrate that California can’t pull off a renewables-dominant grid, but that’s the wrong lesson.
Given what a simplistic, rule-of-thumb based approach California has taken to assuring there is sufficient capacity on the grid (known as “resource adequacy”), it’s actually surprising that we haven’t had any system-wide energy shortfalls in the last 19 years. During that time, we’ve ramped up to getting about one-third of the grid’s energy from renewables while also accommodating widespread adoption of customer-side solar and beginning to grow electric vehicle charging. But to keep that momentum going, we need to redesign the way we do resource adequacy planning. We must take a much more granular and empirically-verified approach to planning for supply/demand balance every hour of the year.
There are many ways to make the system balance with high levels of renewables. We could build a lot of storage, including batteries and/or pumped hydro storage. We could keep gas-fired plants online for very occasional use. We could build nuclear plants, like in South Carolina and Georgia. We could do a little of each of these – OK, not the nukes, at least until they come up with something much more cost-effective than the boondoggles in SC and GA.
But the fastest and cheapest contribution to keep supply in sync with demand when the weather is variable and much of generation is intermittent is to reshape demand to more closely track supply. California policymakers talk about demand responsiveness, but efforts so far have been pretty halfhearted.
The most prominent attempt to reshape the state’s demand when there might be a supply shortage is the Flex Alert program, in which the state puts out pleas for voluntary conservation. The state has used this program during the roughest days this month, and it probably helped, though it is difficult to tell intentional conservation from changes in the weather or other factors. The best research suggests that these sorts of voluntary conservation measures can be somewhat effective if used infrequently, but lose their punch with repeated use. I’m not aware of any credible studies on the impact of California’s Flex Alert program. if we are going to continue to rely on it, we need reliable evidence on what it delivers.
Get Pricing Right
Research on demand programs suggests that a better, and more long-lasting, approach is price incentives. Critical peak pricing (CPP) programs give customers lower prices throughout most of the year, but impose a much higher price when supply is tight. Numerous careful studies, covering both residential and commercial customers, have demonstrated that CPP yields substantial demand reductions in response to the high price. And one study by Catherine, Meredith and co-authors demonstrates that making CPP the default gets very high participation and also high satisfaction among customers.
[To respond in advance to those who argue we should pay customers to reduce their demand rather than charging them for peak usage, I addressed that problematic approach in a 2014 blog, which I stand by today. Back in 2009, the Market Surveillance Committee of the California Independent System Operator also evaluated this approach and came to a similar negative view.]
Getting customers to make small demand changes is a cost-effective way to reduce the need for additional grid hardware, whether it is more generation, more storage, or more transmission. California’s demand on the hottest days of the year is about 50% higher than on a typical summer day, and that difference is virtually all cooling. If the outdoor temperature is 95 degrees, it takes about 20% less electricity to keep a building at 78 degrees rather than 74 (details of calculations in this blog are at the end).
And the savings are even larger if you keep the house at 74 until the critical time period begins and then let it gradually drift up to 78. Or, better yet, pre-cool the building to below 74 prior to the critical time and get even more reduction during the peak from this thermal mass form of storage. When you do the math, those sorts of changes in cooling could cut more than 3000 MW, probably much more, when California needs it most.
But to make demand adjustments work, we need to give customers the right signals. It’s time to change the antiquated time periods used for some critical peak pricing, or even for messages about conservation. Many of the programs encourage demand reductions until 6 PM or 7 PM, but that is exactly the wrong time for customers to crank up electricity usage. With so much solar generation now on the grid, the biggest supply crunch comes later in the evening as the sun is setting, typically between 6 PM and 8 PM in the most challenging months, July through September. On most hot days, the best conservation window is more like 5 PM-9 PM than the 2 PM-7 PM that we were hearing from many authorities last week.
And Get Communication Right
Then we have to make clear to customers what actions are important. Air conditioning matters, as does shifting use of electric clothes dryers, dishwashers and ovens, and shift EV charging. Unplugging your cell phone or ipad doesn’t.
Over four hours, changing your A/C setting 4 degrees will probably cut electricity usage by more than 2 kWh. Not charging your phone will save about 0.03 kWh, and unplugging your charged devices will save, well, about zero (Sorry, but it’s true. Test it out with your own watt-meter.) So why are these often put on the same “things you can do” list? (Along with keeping the refrigerator door closed? What household without teenagers needs to be told that? And what household with teenagers would be helped by that suggestion?)
As for turning off lights, it’s always a fine idea if no one is in the room. But over the four-hour peak period, four strong LED bulbs (surely you don’t light anything with incandescent hogs anymore, right?) use about 0.2 kWh.
We will still need more storage, and some of the gas plants will play a critical role for at least another decade, but reshaping demand is the most agile strategy. That’s particularly important given the uncertainties that climate change is throwing at us. It is time to take demand response as seriously as we take the hardware solutions to grid reliability.
DISCLOSURE: I am a member of the Board of Governors of the California Independent System Operator (CAISO). CAISO dispatches power on the California grid and was the entity that required utilities to institute outages when supply ran short on August 14 and 15. CAISO does not determine or make investments in generation and is not part of the policy process that sets retail rates.
I’m still tweeting energy news stories/research/blogs most days @BorensteinS
Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas
Showing my work
“If the outdoor temperature is 95 degrees, it takes about 20% less electricity to keep a building at 78 degrees rather than 74”. In steady state, the amount of energy required to keep a building X degrees below the default level is linear in X, as explained here, which I confirmed consulting with two engineers. There is some subtlety about the default level, based on sun exposure and thermal mass of the building, but a simple calculation would use the outdoor air temperature. So, energy savings would be 1-(95-78)/(95-74)=0.19.
“When you do the math, those sorts of changes in cooling could cut more than 3000 MW, probably much more, when California needs it most.” Assume that all of the load between a 32,000 MW weekday and a 48,000 MW week day is cooling and the calculation in the previous paragraph applies. Then, 0.19*(48000-32000)=3040. This does assume that demand response comes from all of that incremental cooling, but it ignores the fact that much of the load at 32,000 MW is also from cooling and could also respond to peak pricing (as could as many other uses). And, as mentioned in the blog, all of this understates the savings if buildings are kept at 74, or pre-cooled to an even lower temperature, and allowed to drift up to 78 during the beginning of the critical period.
“Over four hours, changing your A/C setting 4 degrees will probably cut electricity usage by more than 2 kWh.” If a customer has central air conditioning, a reasonable estimate is that it pulls 6000 W when operating. I assume that it would be cycling on for half the time during the critical period – likely to be an underestimate during the worst days of the year – which implies 3000 W over four hours or 12 kWh. 0.19*12=2.28 kWh saved.
“Not charging your phone will save about 0.03 kWh, and unplugging your charged devices will save, well, about zero”. My iPhone 6 (yes, I know it’s time to get a new one) uses 7w when charging. So, even if it charged for all four hours of the critical period, it would use 28 Wh or 0.028 kWh. But that overstates the potential savings, because even if my phone is nearly dead, it reaches full charge in less than four hours. As for leaving charged devices plugged in, I tried this with both my iPad and my laptop computer, as well as my phone. In all cases it was 1-2 Wh per day or less. Now, getting your idle computer, and particularly your screen, to go to sleep when they aren’t in use, that actually amounts to something, about the same as turning the LED lights off in a room.
“But over the four-hour peak period, four strong LED bulbs use about 0.2 kWh.” Replacements for 75 W incandescent bulbs typically use 13w or less. 4bulbs*13w*4hours=204 Wh or 0.204 kWh.
Severin Borenstein View All
Severin Borenstein is Professor of the Graduate School in the Economic Analysis and Policy Group at the Haas School of Business and Faculty Director of the Energy Institute at Haas. He received his A.B. from U.C. Berkeley and Ph.D. in Economics from M.I.T. His research focuses on the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. Borenstein is also a research associate of the National Bureau of Economic Research in Cambridge, MA. He served on the Board of Governors of the California Power Exchange from 1997 to 2003. During 1999-2000, he was a member of the California Attorney General's Gasoline Price Task Force. In 2012-13, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. In 2014, he was appointed to the California Energy Commission’s Petroleum Market Advisory Committee, which he chaired from 2015 until the Committee was dissolved in 2017. From 2015-2020, he served on the Advisory Council of the Bay Area Air Quality Management District. Since 2019, he has been a member of the Governing Board of the California Independent System Operator.
Glad to see you’re up to the iPhone 6 now! That’s a big upgrade over your old iPhone 3GS.
Ouch. But I’m glad to see that someone is reading the fine print.
Severin, somehow I never hear anyone who’s on the verge of bankruptcy; anyone who’s lost their job due to the Covid-19 crisis or job outsourcing, or who’s living below the poverty threshold asking the question, “Why don’t we shift the problem of insufficient electricity on the people least able to afford it?”
Sure, so-called “demand-response” is justified on the premise bills will be lower for people who use electricity at the right times. In practice, however, electricity costs are first raised for everyone – then, customers wishing to merely maintain their costs of electricity are forced to use electricity at the times least convenient to do so. They’re paying the price in convenience, and that price is significant.
So the answer to your question, “Why don’t we do it with demand?” might be, “Because it’s unethical?”
Hi Carl. Glad to see you get time to take a break from advocating for nuclear power in order to address the issues of equity. However, history suggests that the alternative you are proposing just results in high prices for everyone. I have actually studied the distributional impact of using critical peak pricing (https://haas.berkeley.edu/wp-content/uploads/WP229R.pdf#page=1) and found that low income customers on average benefit slightly from it. Of course, to address that concern, one could also have the default be no-CPP for customers on CARE and CPP for customers who are not on CARE.
I suppose somewhere there’s an optimal balance between CPP and TOU, where critical peaks can be met but essential access to electricity relies as little on time-of-use as necessary. I can’t see any strictly-TOU scenario that doesn’t shift cost to financially-disadvantaged customers.
“Glad to see you get time to take a break from advocating for nuclear power in order to address the issues of equity. ”
Actually they’re one and the same, but why is for another day/discussion.
“There are many ways to make the system balance with high levels of renewables.”
With high levels of solar and wind, it’s yet to be achieved on any grid in the world.
“We could build a lot of storage, including batteries and/or pumped hydro storage.”
Actually, we couldn’t. By my calculation, the capital cost of constructing and installing enough Li-Ion batteries to power CAISO for one day without wind and solar would be >$1 trillion. I’ve encountered resistance to that figure from another poster who confuses energy and power, watts and watthours, storage capacity and output capacity. But I’d welcome criticism from someone of your experience and standing.
“We could keep gas-fired plants online for very occasional use.”
Seems I’ve heard that proposal since 1990-something, but it never seems to get much traction. We keep adding more gas. And more.
Again, intermittency is to blame. We can’t keep one or two gas-fired plants online if renewables are unavailable – we have to keep them all online, and profitable. For that reason, renewable solar and wind will never exceed grid penetration in excess of their capacity factor, a theory advanced in a remarkable 2015 paper by Jesse Jenkins and Alex Trembath. It’s been supported ever since.
Why wind and solar eat their own lunch
“We could build nuclear plants, like in South Carolina and Georgia. We could do a little of each of these – OK, not the nukes, at least until they come up with something much more cost-effective than the boondoggles in SC and GA.”
That Watts Bar 2 in Tennessee was on budget when it went online in 2016 is a fact seldom recited by anti-nuclear advocates, nor is its cost of $4.7 B. No wonder – for its capacity, that’s one-third the cost of Vogtle.
Maybe the problem is not nuclear as much as deregulation. Maybe, the current 5-year investment horizon demanded by U.S. venture capitalists is limiting projects to renewable toys with a 30-year lifetime (?)
First, allowing full scarcity pricing (or related instruments like CPP) as a way of tapping into cost-effective demand flexibility actually lowers average energy prices for everyone, not raises them, by tapping into a more cost-effective way to keep the lights on while allowing those consumers willing and able to contribute to save money relative to those now-lower flat 24/7/365 rates.
Second, there are hundreds if not thousands of loads on a modern power system that can be shifted up to several hours without any inconvenience at all, and it can be done easily and cheaply. Lawrence Berkeley Lab released a study a year or two ago that delved into the options available in California.
Third, there are any number of ways to structure rate options (or make available through competitive service providers) so that consumers who wish to remain on a flat rate (which, by the way, is a premium service in which is bundled quite a lot of risk mitigation and other costs incurred to provide a flat round-the clock rate) can do so, or so that ToU rates are applied selectively to those loads that lend themselves conveniently to automation or third-party control (or, in the case of the truly geeky, direct control by the customer). There are successful examples of many of these approaches already available.
These are all tired, anachronistic arguments raised by those who would like us to focus on much more costly alternatives in which they have a vested interest. Unfortunately, many consumer “advocates” too often fall for these arguments, either out of genuine lack of knowledge about the latest evidence or because they’ve been “influenced” by financial support from interested parties.
Michael, there is plenty of support for TOU pricing from people who never need to use it. Ask someone who’s been unemployed by COVID (they’re easy to find) whether they’ll adjust their schedule to PG&E’s so its customers in Los Altos can have reliable electricity whenever they like. You might get a different perspective.
Carl’s steadfast unwillingness to contemplate all of the many ways to accomplish this while honoring the principles of convenience, ease of use and equity (some of which have been laid out here, if he wants to read about them), reducing the cost of the transition for all while giving consumers choices that can lower their bills even further, gives rise to questions about why he is so invested in an anachronistic and unrepresentative take on flexible demand.
Michael, in what parallel universe has California “reduced the cost of electricity for all, while giving consumers choices that can lower their bills even further”?
I guess one might consider 31% higher utility rates, in exchange for worse maintenance and rolling blackouts, a “transition”. I would bet, however, most electricity customers would choose transiting back to 2010, when California’s average electricity rate was 11¢/kWh, when outages and gas reservoir blowouts were all but non-existent, when CAISO had 18 extra terrawatthours of clean nuclear electricity that was available when customers needed it – not only when the sun was shining, or the wind was blowing.
Whether my take is anachronistic or not I’ll leave for you to decide. But I reject the notion keeping low-income homeowners out of new homes by forcing them to purchase $30K solar systems, “Power Walls”, smart thermostats, and other playthings of the elite just to have enough electricity to keep the lights on, is unrepresentative. I reject, too, that the “renewables transition” is anything but a money grab by natural gas, wind, and solar interests, that California carbon emissions aren’t achieved by outsourcing generation to other Western states, that $140 million in energy lobbying by Chevron, Shell, and other natural gas interests hasn’t reduced Democratic state assemblymembers to the status of lapdogs on energy issues.
Given flexible demand is nothing more than shifting a responsibility previously demanded of utility generators to their customers, it’s not surprising that supporters might also consider energy equity an anachronism.
Carl, you continue to get the wrong end of the stick, misunderstanding my comment and flying off on rants about things that really are tangential to this conversation. You’re stuck in 1975 and unwilling to consider empirical evidence offered here by many commenters that the world has moved on. We all get it – equity matters at least as much as economic efficiency, and none of this will work for anyone if it’s based on inconvenience, especially for low-income customers. No one is saying otherwise, there are many ways to do this and respect those principles. It’s not at all clear whom you think you’re arguing with, at least not among the commenters to this blog post.
You correctly point out that customers on flat rates create additional risk mitigation costs above those on TOU and CPP rates. The problem is the political resistance from residential ratepayer advocates who oppose any type of risk premium pricing for flat rate customers. Commercial customers in California on TOU rates have been subsidizing flat rate residential customers for decades. Unfortunately, those residential ratepayer advocates also have not yet acknowledged that tiered rates do not produce conservation savings either based on the 2014 study out of UCEI.
Your statement as an important and unusual premise–that customers have an entitled property right to their current electricity consumption level. There are few other commodities that I’m aware of that have that sort of property ownership arrangement. (Water under appropriative rights is one example, but is only for a specific set of water uses.) There are situations were customers may be entitled to a certain use of electricity, but that arises from a preexisting contractual arrangement. Severin wrote about an alternative two-part tariff where consumers contract for a specific amount of electricity at a fixed price (say, 80% of their average use) and a variable component priced at the marginal cost (e.g., the remaining 20%). But that still requires an explicit step of customers committing to a certain level of consumption, which they generally do not do now.
Richard – not sure what you mean by “property rights to a certain electricity consumption level”. No one is entitled to a minimum amount of electricity, or should be. Like water, every customer is expected to pay a fee proportional to what they use in a given month.
Whether anyone should be denied access, or be allowed privileged access, are other matters. The word utility itself, literally “the state of being useful, profitable, or beneficial”, came to be used as a shortening of the phrase “public utility company”. Though it had origins in anti-trust sentiment dating to the end of the 19th century, it was during the Great Depression when reformers began to view electricity as an essential public good:
“Campaigning for President in 1932, Franklin Roosevelt (FDR) vowed to fight ‘the Ishmaels and Insulls, whose hand is against everyman’s.’ Subsequent New Deal reforms established…programs designed to bring electricity to rural America, [when] private industry demonstrated little interest in serving rural America due to the high construction costs, low population density, and perceived lack of ability for customers (e.g., poor farmers) to pay for the electricity. Electrification was seen to be an important technology to combat poverty and improve the quality of Americans’ lives.”
Click to access UTAustin_FCe_History_2016.pdf
Free market capitalism deprived U.S. farmers of access to what FDR considered (and I consider) to be an essential public good, and there is scant difference between being denied access to electricity because a customer can’t afford a flat electricity rate, and because a customer can’t afford to buy it when it’s most useful.
Appreciate Jim Lazar’s comments, especially Maryland example. In my experience at CPUC, concern for low income and seniors in inland areas has scuttled CPP; Critical Peak Rebates might be more likely to succeed. Also of note: residential customers in California were so willing to conserve when paid that OhmConnect lost money and had to redesign their program….
Love your pointing out the fatuity of recommending unplugging devices, but am surprised you didn’t include electric vehicle charging in the loads that need to be shifted–my EV is my highest load by far, and one survey showed a shocking number of Californians just start charging when they get home from work.
Finally, assume you are focused on residential class; what is demand management potential for Commercial and Industrial customers regarding rotating outage prevention?
Thanks for your comment, Claire. You are exactly right that I should have included shifting EV load as one of the responses recommended. I will now edit the blog. One of the links in the paragraph about the effectiveness of CPP programs is to a study of commercial customers. I am not aware of a great study on industrial customers, but I know that some of my colleagues at EI are working on one.
CPP relies “critically” on a functioning end-use communications infrastructure. I just installed a Nest thermostat with two remote sensors. The Nest app then crashed and deleted all connections to my wi-fi devices. Nest has been sold to Google, and I have yet figured out how to fight my way through the underbrush of that major platform to restore the app. Remote control of major electricity-consuming devices, such as HVAC systems, won’t work if we can’t talk to our devices.
We do have to talk to the devices. But since we’re considering customer response to pricing – not payment for utility control or load shed – the devices don’t have to talk back. A one-way price broadcast would have spared your Wifi.
As long as the systems make sure that the price gets through the intertubes to the devices.
Are there any estimates of what it would cost to keep some of the natural gas units online longer to be used during the summer A/C season when we have peak demand and during the time solar power is waning and the wind is not strong? It seems like we need more of something to “serve the neck of the duck” so to speak.
I am wondering of how quickly such a market incentive could be put in place, and the relative time needed to do so, and the cost of this option vs the cost of your enhanced consumer price option. As you say, both could be done, and a combination of these two approaches may be the best option. I think it may be a good idea to retain and use more of the natural gas fleet, at least until we get enough battery capacity online in the best places, and some experience using the batteries for this purpose.
Few Californians have an appreciation for how insignificant the contribution of batteries is – or will ever be – to their electricity grid.
LS Power’s Gateway Energy Storage Project, billed as the Largest Grid Battery in the World, was rushed online in August “just in time for California’s heatwave”, according to an August 19 report from the starry-eyed hopefuls at GreenTech Media. LS didn’t quite make it in time to keep A/C online during the widespread outages of August 14-15, but it wouldn’t have mattered.
Truth is, the Largest Grid Battery in the World would be capable of powering California’s grid for a little less than 3 seconds. From LS Power’s point of view, it’s useful eye candy for greenwashing the gas generation making up 98% of its power portfolio, and its exorbitant capital cost will be billed to PG&E ratepayers.
But that’s not all. Gateway will be charged not by solar panels or wind turbines, but with electricity from the direct output of Moss Landing Power Plant, a 640-MW gas plant on the premises, ensuring plenty of gas is used – and wasted – to promote its batteries. Why would PG&E want to waste gas? Because its parent company, PG&E Corporation, makes a profit on the gas it sells to PG&E to generate electricity. The more gas their tangled scheme wastes, the more PG&E Corp. profits. The cost of its fuel, too, is billed to ratepayers.
Quite a racket, isn’t it?
Central battery storage may not ever play a huge role in state, but that does not mean distributed batter storage won’t. Local battery storage combined with PV can provide resiliancy to the building as well as to the grid. EVs add to that capacity and could become especially useful during critical peak events.
I think of natural gas or even (shudder) hydrogen as the central storage of the future. If we get “too much” renewable generation we can use fuel cells to generate it for future peaking use.
I agree with Severin that some form of time-based pricing is necessary. The impediments are political, not technical. While I have removed myself from these debates for quite some time, I still remember a former Executive Director of The Utility Reform Network, an alleged consumer advocacy organization, attaching the label “Heat Wave Pricing” to CPP and other, similar ideas, which is probably why they remain off-limits.
Up here in the Sierras we don’t have air conditioning but we do use window fans to precool our home at night so that even on the warmest summer days the indoor temperature never gets above 74 degrees. Our secret, by the way, is to have fans pull air through the house just like a whole house fan would. I’m not so sure I’d require new construction to include whole house fans, but I think they should be publicized far more than they are(n’t) right now.
The root cause of California’s current problems involve both supply and demand, but your focus on demand and price is right on target. Almost twenty years ago during the states first series of devastating forced outages, a California Energy Commission effort pursued three initiatives to put in place the demand response capability to avoid future deliberate rotating outages: (1) advanced metering, (2) critical peak pricing, and (3) communicating smart thermostats. Collectively, these three initiatives would have provided the state with the ability to rapidly target minimal temporary reductions in service, avoiding crude indiscriminate rotating outages.
Advanced metering capable of supporting dynamic pricing and utility-to-customer communication was justified based on a solid economic business case. With CPUC and CEC support, all three California investor-owned and several municipal utilities made the investment and implemented systems that are still working today.
To support the move to critical peak pricing, the CEC and all three investor-owned utilities implemented the largest pilot test in US history to test demand response and customer support. That two-year test was successful on all counts. Customers fully understood and responded, reducing demand and achieving bill savings in excess of expecations. However, the effort to implement critical peak pricing failed to achieve support from either the CPUC or investor-owned utilities.
Finally, the CEC with engineering assistance from UC Berkeley developed minimum specifications for advanced communicating thermostats that could be used by customers to automatically respond to critical peak pricing, the same technology used successfully in the pricing pilot. However a CEC effort to incorporate smart thermostats in a new Title 24 building standard also failed due to lack of support. Ironically, over the last twenty years commercially available smart communicating thermostats have become a ubiquitous consumer technology, but not necessarily available for utility-to-customer applications.
The bottom line – the solution to problem that Severin describes is the same today as it was twenty years ago. The only question – are the utilities and regulators finally ready to implement a solution?
Sev is correct that some form of dynamic pricing would probably have eliminated the rolling blackouts.
I generally agree with him that surcharges for usage in critical hours (critical peak pricing, or CPP) is more effective that credits for load reduction in critical peak hours (critical peak rebates, or CPR).
But Maryland has made CPR the default rate and has very high customer acceptance and participation, while no state has made CPP a default rate design. Despite our agreement that CPR is inferior to CPP, we should both consider the advantage that 100% participation brings to the evaluation. I favor whatever form of dynamic pricing has the highest customer response — which is a combination of customer participation rate and the underlying effectiveness of the rate design.
But, doing nothing is definitely not the right answer. There are other choices, including direct load control of key loads like water heating, air conditioning, and swimming pools. Another is automatic underfrequency shedding of these loads, whenever the grid is under stress, with no communication from the utility required.
That California is still relying on the blunt instrument of rolling blackouts when it has invested billions of dollars in smart meters, smart grid controls, and smart system operators is really a failure of the state regulatory system: utilities should be penalized for their failure to implement some form of pricing or control mechanism to assure system reliability for the few hours per year when the system reaches its limit.
Absolutely agree with the failure to use the AMI network that we’ve invested billions in over the last 14 years. PG&E couldn’t use the system to detect line outages that led to catastrophic fires, and they are failing to exert true load management. I have sophisticated clients who cannot easily read their AMI data to manage their loads in real time. They often go to 3rd party vendor to pay yet again for data that they already paid for in the AMI investment. This is all a travesty.
There needs to be a cooperative effort among all parties, utilities, customers, EV makers, battery makers, grid operators, power plants, as to how to design the system so that there is a balance between load management, costs, financing of new equipment, and other in order to get a more advanced system up and running. The current system of competition between all the parties is creating chaos and just throwing money around is not the answer. For example if there were a law that funded people to clean up their yards, this would just stimulate a lot more people to have dirty yards. These price stimulations cannot drive the kind of system that is needed. Such a system needs to be centrally designed and funded by all parties coming to the table and together designing the future systems. Investments are bid out and reviewed and then selected and paid for and guaranteed to earn a small return with no risk, thus lowering the cost of those investments. Then the operating costs are optimized and paid by everyone. The fees appear on all bills and there are no wild price swings and no blackouts. So please throw away all your current system plans and market rules and start over with a new design that is better planned for the benefit of everyone.
Ah, the mythology of central planning. Centralized utility planning through the 1970s is what led us our current situation with too much pollution, too big of centralized power plants, catastrophic outages, and high retail prices. The core of almost all of our power grid woes arise from unwinding that mess. Decentralized technologies have arisen just fine for may other network applications, such as in telecommunications, natural gas, transportation. There are inefficiencies in both decentralized and centralized approaches (ask the Soviets how central planning went…) The question then is what are the relative tradeoffs. And further, to what degree does one process better foster other social benefits (e.g., liberty, equity, equality)?