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Market News

 June 20, 2007
Utilities Can Save $35B in 20 Years with Advanced Metering

 Cambridge, USA -- A new study by the Brattle Group examines how innovative new methods of monitoring electricity demand can dramatically reduce peak energy use and prevent new, polluting power plants from being built.

The report, "The Power of Five Percent," analyzes the results of a $20 million pilot program in California that enrolled 2,500 customers over three years and implemented a variety of measures to try and control energy use.

The report's authors write, "A consensus is forming that the best way to ensure reliability and competitive functioning of markets is to deploy an integrated approach that combines traditional solutions involving the supply-side of the business with demand-side solutions that give customers the ability to control their usage, especially during times when the power system encounters critical conditions."

The report takes a look at the results of the California Statewide Pricing Pilot, which was the largest electricity pricing experiment ever undertaken in the United States. The study examined electricity use patterns for commercial and industrial customers in the Southern California Edison service territory during summer 2004 and 2005.

The customers in the study were all offered the use of smart thermostats, which automatically adjust air conditioning settings during the critical peak pricing hours from noon to 6 p.m. Over the two summers, the average reduction in peak energy use on critical days for small customers was 4.83 percent and for large customers 6.75 percent. But customers with the smart thermostat technology posted the largest peak energy savings -- 13 percent for small customers and almost 10 percent for the large facilities.

Making use of demand response programs based on advanced metering and dynamic pricing could drop the peak load by 5 percent nationwide over the next few years, and if the latest technologies are adopted widely, peak load could be reduced by 20 percent or more.

A reduction in peak energy of 5 percent would, the report's authors say, result in $3 billion in avoided electricity costs, including generation, transmission and distribution. On top of that, it that amount of reduction would eliminate the need for 625 new power plants to handle peak energy demand.

On top of the cost savings, successful demand response programs, the authors note, make for more competitive power markets, reduce price volatility, cut emissions from peak generation, improve system reliability and lessen the chance for blackouts and brownouts, and improve customer satisfaction.

The full report is available by Downloading Here.