Are Consumers Willing to Pay the Cost? July 31, 2013

Transcription

1 Are Consumers Willing to Pay the Cost? July 31, 2013

2 Today s Presenters Moderator Patty Durand Executive Director / Moderator Smart Grid Consumer Collaborative Chris King Global Chief Regulatory Officer Siemens Smart Grid Services Wilson Gonzalez Senior Energy Policy Advisor Office of the Ohio Consumers' Counsel SGCC Thought Leadership

3 Agenda 1. Siemens Smart Grid Services Smart grid business case and the place for the consumer Customer survey results 2. The Office of the Ohio Consumers Counsel Ohio smart grid overview Consumer case study 3. SGCC Research Consumer Pulse Wave IV 4. Q&A Session SGCC Thought Leadership

4 Speaker #1 Name Background Chris King Global Chief Regulatory Officer Siemens Smart Grid Services Responsible for policy-oriented and strategic activities, including market analysis and product strategy 30 years industry experience Co-founder and Chair of the Brussels-based Smart Energy Demand Coalition Board of SGCC, Demand Response and Smart Grid Coalition, and Association for Demand Response and Smart Grid Author of numerous industry articles and other publications on consumer response to dynamic pricing, effects of energy information feedback, smart grid business case, and advanced metering and related technologies Masters degrees in science and business from Stanford University and a doctorate in law from Concord Law School SGCC Thought Leadership

5 Smart Grid: Are Consumers Willing to Pay for It? Presented by: Page 5 Chris King Global Chief Regulatory Officer, Smart Grid Services July 31, 2013 Protection notice / 2013 Siemens Smart Grid Services.

6 Policymakers Smart Grid Vision Where does the consumer fit? Regulatory policy goals More reliable grid through automated sensing and response to fluctuations and outages Financial savings via improved load factor and system efficiency Faster and wider adoption of renewable energy and electric vehicles Empowered demand side for efficient markets Consumer empowerment triad Detailed, timely usage data for understanding Pricing options for financial savings off-peak or timing usage when renewables are available Automation for set and forget response Page 6 Protection notice / 2013 Siemens Smart Grid Services.

7 Billions of Dollars Smart Grid Business Case Summary Societal Perspective Annualized Savings and Costs for U.S. $80 $70 $60 $50 $40 $30 $20 $10 $0 Consumer Driven Benefits Average of potential net benefit: $387 per customer-year Page 7 Protection notice / 2013 Siemens Smart Grid Services.

8 Energy Efficiency Energy information feedback Real-time displays Next-day online Mailed or ed reports Efficiency mechanisms Behavioral changes: turn lights off, reduce vampire loads, etc. Equipment changes: buy more efficient appliances over time Information feedback yields average savings of 5.1 to 8.7%; more timely and more detailed feedback yields higher savings Source: VaasaETT Page 8 Protection notice / 2013 Siemens Smart Grid Services.

9 Peak Reduction/Demand Response Mechanisms Dynamic pricing (Peak Time Rebate, Time-of-Use, Critical Peak, Real-Time Pricing) Automated equipment and appliance or thermostat control Over 7 million residential participants in U.S. and Canada now Typical peak reductions for pricing alone range from about 5% for TOU to 25% for CPP; automation typically doubles the response while increasing customer satisfaction Source: Brattle Group Page 9 Protection notice / 2013 Siemens Smart Grid Services.

10 Value of Reliability How much is it worth to a customer to avoid an outage? Type Duration Time of occurrence Methodology Customer surveys Total estimated value of avoiding outages: $80 billion/year Customer Type Large C&I Small C&I Residential Interruption Cost Summer Weekday Cost Per Average kwh Cost Per Average kwh Cost Per Average kwh Source: Lawrence Berkeley National Laboratory Interruption Duration Momentary 30 mins 1 hr 4 hr 8 hr $173 $38 $25 $18 $14 $2,401 $556 $373 $307 $2,173 $21.60 $4.40 $2.60 $1.30 $0.90 Note: this value is in addition to the economic benefits calculated in the earlier slides Page 10 Protection notice / 2013 Siemens Smart Grid Services.

11 Do Consumers Want This? 100% 80% 60% 40% 20% Interested in timebased prices Desire more energy usage data 0% Sources: Accenture, IBM, Parks, Puget Sound Energy, Power Perceptions, Genesis, Zpryme Page 11 Protection notice / 2013 Siemens Smart Grid Services.

12 Customer Willingness to Pay Summary Cost to customer is the net amount Utility operating savings cover majority of implementation cost Customer payment is in form of behavior change Demand response and energy efficiency Voluntary action by voluntary participants Action by a subset of consumers results in benefits for all For example, lower wholesale power costs Consumers put a value on reliability benefits that would more than double the total benefits Increase from $58 billion/yr to $138 billion/yr SCE AMI Business Case Page 12 Protection notice / 2013 Siemens Smart Grid Services.

13 Speaker #2 Name Background Wilson Gonzalez Senior Energy Policy Advisor Office of the Ohio Consumers' Counsel Case team lead on all four AMI/Smart Grid cases filed by Ohio utilities and subsequent Smart Grid cost recovery cases 25 years of experience in the energy community Extensive knowledge in energy efficiency, renewable energy, and smart grid issues Previously held positions at American Electric Power, the Columbia Gas Distribution System, and the Connecticut Energy Office Bachelor s degree in economics from Yale University and a master s in economics from the University of Massachusetts SGCC Thought Leadership

14 Are Ohio Consumers Willing to Pay for the Cost of Smart Grid Deployments? Wilson Gonzalez Senior Energy Policy Advisor The Office of the Ohio Consumers Counsel SGCC Webinar 7/31/13 Disclaimer: The opinions expressed in this presentation are mine and do not necessarily reflect the views of the OCC.

15 Smart Grid Headlines in the National Media (circa ) Smart Grid Fallout: Lessons to Learn from PG&E s Smart Meter Lawsuit Smart Meters have security holes, researchers say Just Say Hell No to Smart Meters, Urges CA Consumer Advocate A Rising Consumer Wave The Ethics of Dynamic Pricing Hacked smart Meters, A Timely Reminder Smart grid may glean more data than watts Funds Fizzle for Smart Grid Projects Wallingford balks on smart grids 15

16 Proponents of AMI/Smart Grid Large Operational Savings Reliability Benefits, more resilient grid DSM Benefits Will usher in many rate options for customers Societal Benefits Cost-Effective State Policy Supports Peak Demand & Energy Efficiency Reductions in SB 221 (1% of utility peak load in 2009 and.75% in addition each year through 2018, 22% efficiency improvement by 2025) Policy of State to Encourage innovation and market access for cost-effective supply- and demand-side retail electric service including, but not limited to, demand-side management, time-differentiated pricing, and implementation of advanced metering infrastructure Distributed Generation and Micro Grid 16

17 Critiques of AMI/Smart Grid Utilities Gold Plating Rate Base (Averch-Johnson rears its ugly head) Will Harm Low Income Customers and Fixed Income Senior Citizens Increased Costs and Onerous Rate Designs Don t Need to Undertake Effective DSM Bill Savings from AMI enabled DR are small and will not encourage meaningful customer participation Prefer Hard Wired Energy Efficiency Not Cost-Effective AMI/Smart Grid related savings do not exceed costs Smart Grid is vapor ware, not proven commercially Privacy, Cyber-security, and Health Concerns Obsolescent because no national standards (interoperability) 17

18 Brief History of Smart Grid In Ohio AEP Self-Complaint in 2006 (Case No EL-SLF) Proposed SG deployment that was withdrawn after our Office complained that no detailed business plan was filed Generic Smart Grid Proceeding Opened in 2007 by PUCO (Case No EL-UNC) Utilities required to produce SG business case Smart Grid Deployments Approved Starting in 2008 for 3 Ohio Utilities in Separate Cases Duke: Full Deployment (680,000 meters, DA) American Electric Power: Central Ohio Pilot (125,000+ meters, DA) FirstEnergy: Cleveland Electric Illuminating Pilot (40,000 meters, DA) Dayton Power & Light (filed for full deployment and later withdrew) 18

19 Consumer Protections in Duke Smart Grid Deployment Robust B/C Analysis challenge getting technical consulting assistance Annual Rate caps to avoid rate shock ($0.50 to $5.50 in 2013, current residential charge =$3.31 per month) Net of Operational Benefit cost-recovery rider (performance based cost-recovery) See Case No GE-RDR Stipulation 966c-27ff809bb7bb Detailed third party audit of deployment to establish savings Extensive benefit tracking system Risk Sharing between Consumers and Shareholders Defray future $ savings against current costs used and useful standard of utility investment honored 19

20 Consumer Protections in Duke Smart Grid Deployment (cont.) Reliability and System efficiency Metrics Annual improvements in SAIFI Track 30 Non-financial metrics related to reliability, efficiency and customer impact have been developed three million customer outage minutes saved and saved 550,000 truck rolls Protection against automatic shut offs for nonpayment Optional time-differentiated rate designs allowing consumers to better manage energy usage ARRA Funding for the 3 Ohio utilities (50% match) 20

21 Consumer SG Enabled Pilot Rates To date, daily energy usage data provided via portal to 74% of customer base (Duke) RTP (AEP) & Dynamic/Critical Peak Pricing (Duke), Peak Time Rebate (Duke and FE), TOU, Direct Load Control (AEP) Lesson on Consumer Engagement Customer Choice (Opt-In) and Menu of Options (including hold harmless rates) Customer Friendly (ease of use, smart grid enabled automation) Anxious to see future SG Rate Offerings by marketers to Customers 21

22 Distributive Generation and Net-Metering Enabling Technology All AMI meters must be compatible with customer netmetering requirements Time sensitive pricing programs available for net-metering customers (supports new state alternate energy requirements, including a solar carve out) and electric vehicle owners Back office billing must be able to handle net-metering debits & credits and carry them over from month to month for annual net-metering Supportive of future Micro Grid Applications 22

23 Are Ohio Consumers Willing to Pay the Cost of Smart Grid Deployments? Smart Grid has been under the radar in Ohio Out of 550,000 smart meters only 300 customers have refused or less than one-tenth of one percent (Duke) Duke has addressed and resolved 13 PUCO complaints/inquiries associated with smart meter installation refusal Consumer smart meter opt-out rules have been proposed by the PUCO In total, participants of pricing pilots have saved some money and have indicated satisfaction in participating. Overall, to date, Ohio Consumers appear passively to have been willing to pay. The jury, however, is still out on the ultimate value to consumers. 23

24 Consumer Pulse Research Program Wave 1 Wave 2 Wave 3 Wave 4 September 2011 January 2012 October 2012 October 2013 Answered questions about what consumers think and know about the smart grid Breaking new ground in gauging consumer interest in smart grid programs and technology and assessing consumer price sensitivities

25 Consumer Pulse Wave IV: Program & Technology Interest Gauging consumer interest in: Utility Programs Online energy analysis & energy efficiency tips Personalized energy reports Energy audits Online billing and payment Online outage reporting and tracking Smart phone applications for billing, payment, outage reporting/tracking, and energy analysis Pre-pay energy programs Energy efficiency incentives Energy assistance programs to help customers in need and Technologies Smart appliances EVs/PEVs Programmable thermostats Home energy management tools PV

26 Assessing Consumer Interest in Smart Grid-Enabled Programs How interested would you be in using the following if your electric company provided it? 1. Online analysis of your specific energy usage with suggestions 2. Personalized energy reports mailed to your home showing your home s energy use compared to the usage of similar households in your area. 3. Energy audits, where an expert visits your home and recommends ways to save 4. Online billing and payment 5. Online outage reporting and tracking 6. Smart phone applications for billing and payment outage reporting and tracking analysis of your specific energy usage with suggestions on saving money 7. A pre-pay program, where you pay for your electricity upfront, have flexibility of when and how much you pay, with no late fees or reconnect charges 8. Incentives or rebates to help you switch to more energy efficient products 9. Energy assistance programs if you need help to pay your electric bill

27 Gauging Consumer Interest and Price Sensitivity in PV Please assume for the moment that, if you did decide to install a rooftop solar power system to generate electricity for your home, it would take about [5/10/15/20] years to save enough on your electric bill to offset your cost to install the system. Based on that assumption, how likely would you be to invest in a rooftop solar system? 1 Definitely wouldn t invest 2 Probably wouldn t invest 3 Might or might invest 4 Probably would invest 5 Definitely would invest

28 Gauging Consumer Price Sensitivity for Clean Energy Suppose your utility wanted to greatly expand its use of a range of clean energy sources, such as solar energy, wind power, geothermal and biomass, and estimated that the extra cost for the average residential customer would be about [2/5/10/15] dollars per month per customer. Based on that assumption, how likely would you support or oppose your utility s plan to expand clean energy? 1 Definitely would oppose 2 Probably would oppose 3 Probably would support 4 Definitely would support

29 Gauging Consumer Price Sensitivity for Reliability What if your utility had a plan to upgrade the electricity distribution system to achieve significantly improved reliability. There would be about one-third fewer outages, and those that did occur would be fixed more quickly. The estimated extra cost for the average residential customer would be about [2/5/10/15] dollars per month per customer. Based on that assumption, how likely would you support or oppose your utility s plan to invest in improved reliability? 1 Definitely would oppose 2 Probably would oppose 3 Probably would support 4 Definitely would support

30 Consumer Pulse Wave IV: Price Sensitivity Gauging consumer price sensitivity/elasticity of: On-site solar PV Utility-procured clean energy (PV/wind/biomass/geothermal) Investments leading to increased reliability

31 Thank you! You will receive a copy of the slides to the address you used to register. Patty Durand Executive Director / Moderator Smart Grid Consumer Collaborative patty.durand@smartgridcc.org Chris King Global Chief Regulatory Officer Siemens Smart Grid Services chris_king@siemens.com Wilson Gonzalez Senior Energy Policy Advisor Office of the Ohio Consumers' Counsel gonzalez@occ.state.oh.us Links to Resources: Siemen AG s The Smart Grid: Constant Energy in a World of Constant Change video: /smartgrid/global/en/pages/video_smart_grid_trailer_en.aspx Office of the Ohio Consumers' Counsel s smart grid fact sheet: SGCC Thought Leadership

32 Reference Slides 32

33 General OCC AMI/Smart Grid Performance Based Accountability Approach Following SG Business case, produce an implementation plan for the Smart Grid program including its design requirements, performance goals, metrics, milestones, and quantified benefits. Every year prepare a summary report outlining deployment progress versus milestones, system performance levels, and customer benefits versus the plan. Companies should address deployment lessons learned and the desirability of continuing the Smart Grid program to the rest of its service territory including how the Company intends to move forward with newer technologies like HAN or microgrids. All plans and information should be made available to a DSM collaborative and the Commission. Smart Grid program cost-recovery should be undertaken in a rate case, or through a separate net of benefits rider specific to the Smart Grid program and subject to an annual Commission prudency review and audit. 33

34 General OCC AMI/Smart Grid Technical Approach Open Standards Protocols Development Process that is Vendor Neutral and Competitively Bid Clear & Comprehensive Development of: Functional Requirements Security Requirements (Cyber-security & Privacy) Management Requirements Strong Systems Engineering Cost-Effective Quantitative and cost-effective business case (McKinsey or other Model) Encourage utilities to make an effort at quantifying hard to quantify benefits and Societal benefits Encourage utilities to include Qualitative Benefits 34

35 NASUCA 2009 Smart Grid Resolution Summary A Smart Grid should be designed to improve the efficiency, reliability and security of the electric grid. States, federal agencies, and utilities should conduct a detailed analysis of the costs and benefits of a proposed Smart Grid project through an evidentiary proceeding and should only go forward with the project if the benefits outweigh the costs. States should encourage utilities to seek ARRA funds to reduce the cost impact on ratepayers and consumers of any approved Smart Grid deployment. An integrated approach to Smart Grid design includes adherence to FERC standards; optimization of regional and local planning to reduce rates, increase reliability and integrate renewable resources; and consideration of the interoperability with technology in neighboring utility service territories or grid systems and with existing or potential customer-side technology. Smart Grid technology is in many cases new and evolving and the FERC and states should take steps to ensure that the specific set of technologies associated with a utility s proposed installation is in fact capable of operation as proposed, and to insure against the installation of technology that is soon outdated or stranded. Such assurances could take the form of placing the risk of loss associated with stranded costs, buyers remorse or the like on shareholders. Smart Grid design should prioritize a secure communications network with appropriate safeguards to prevent security breaches and reliability deficiencies. 35

36 NASUCA 2009 Smart Grid Resolution Summary (cont.) Any implementation of a Smart Grid project should meet Federal and state requirements for cyber security and protect the privacy of customer usage information, both with respect to usage data derived by the utility for customer billing and information obtained concerning a customer s specific usage of electricity. Consumption information obtained should be used to properly and accurately reflect demand side data with respect to electric energy and capacity in order to improve load forecast capabilities. Smart Grid should be used to enable and inform the development of programs and policies that will lead to reduced costs for consumers. For example, Smart Grid should assist in the identification of portions of the grid that are nearing capacity in order for steps to be taken to reduce demand on that portion. In conjunction with the installation of Smart Grid technology on the local level, local distribution utilities must maintain and operate their infrastructure system in a safe, adequate, and reliable manner. That States and utilities should not be permitted to use Smart Grid deployment as a means for reducing consumer protections with regard to electric service in general and termination procedures in particular. That the implementation of Smart Grid should not lead to mandatory dynamic pricing of electricity usage for residential and small commercial customers. BE IT FURTHER RESOLVED that the Federal Energy Regulatory Commission should refrain from granting incentive returns for Smart Grid infrastructure, refrain from requiring the early replacement of otherwise useful transmission or distribution plant and refrain from making decisions that serve to restrict or otherwise impinge upon the ratemaking authority traditionally held by state regulatory commissions. The Need for Essential Consumer Protections: Smart Metering Proposals and the Move to Time-Based Pricing 36