Utility Companies are Preparing for Smart Grid

by scrosby on August 17, 2009

Utility companies across the country are trying out technologies for a new generation of power grid. The so-called ‘smart grid’ includes not only power transmission to customers, but two-way communication between the company and households. WFPL’s Stephanie Sanders reports on those efforts in Kentucky, and how the upgrades could affect consumers.

envisioncenter1In Erlanger, Kentucky, there is an education center operated by Duke Energy. It’s called The Envision Center, and it features a movie-set-like town that utilizes smart grid.

This is where Duke Energy introduces utility regulators to their concept of smart grid. It includes everything from distribution lines that can tell when they’ve lost power and re-direct it from somewhere else… to a smart refrigerator that can skip a defrosting cycle if it’s peak usage time and electricity costs more.

Kathy Meinke leads the tours at Envision Center, and she’s preparing a thunderstorm for the town, to show how the system can repair itself until technicians arrive.

In this case, smart grid seems quite enticing: the two-way communication allowsenvisioncenter2 electric companies to pinpoint where an outage has occurred, and more efficiently restore it.

Inside the home, smart grid technology could provide homeowners with personalized information on where their home is using the most energy, and how they can cut back in certain areas.

Mark Brian signed up for a smart grid pilot program in Louisville with E.ON, the parent company of LG&E. In partnership with G-E, Brian’s employer, each of the two-thousand households in the program received a full suite of smart appliances.

“My wife joked that I was turning our house into a science project,” he says.

envisioncenter3Brian says in his home, with his wife and daughters, ages 8 and 13, they managed to cut their energy bill by 20-percent. But, he says, if he had to pay for all the appliances…

“For the money I’m going to have to shell out for it or the higher rates, I would want there to be a carrot out there,” says Brian.

LG&E is hoping that carrot is a range of different rate packages. Vice-President of Energy Delivery John Malloy says, for example, customers would be able to choose a package that would provide lower rates for running appliances during the overnight hours, when most people aren’t using energy, and higher energy rates at high-usage times. There would also be an even higher rate if the energy system reaches peak-usage.

“That’s if the consumption gets so high that our costs are going to go way up if we have to serve it… to try to drive people’s decisions to a cheaper period,” says Malloy.

envisioncenter5So they’re hoping when you see that higher price signal in your home, you’ll choose to turn off the air conditioner or run the dishwasher a little later. Nice, right? But what’s in it for a company that literally makes its money selling kilowatts?

“The real story about smart grid and utilities is that it changes their business model,” says Peter Fox-Penner, a Principal with the Brattle Group, a research and consulting firm. He specializes in economic, regulatory and strategic issues in network industries.

Right now, utilities make money selling actual power and on structural investments – like the estimated two-billion dollars LG&E would spend in rolling out smart grid technology. Much of that project will be paid for with rate increases, if approved by the Public Service Commission. But how would this new model work?

“In the future, it’s quite possible that services will be charged differently in the utility industry,” says Fox-Penner.

envisioncenter4He thinks utilities could eventually charge for services instead of the amount of energy you use. He thinks maybe a lighting charge, or an air conditioning charge wouldn’t be out of the question, to replace the current method of measuring kilowatts.

The companies we spoke with for this story haven’t disclosed whether they’re considering such a concept.

But LG&E is planning to go before the PSC later this year with a proposal for an education program, to let their customers know what to expect from smart grid, because as the company’s John Malloy put it, ‘smart grid is coming, the question is when.’

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