Smart Meters and Prepay: Will Realtime Data Create Value for Residential Solar?

Cash Reserves Low, Fuel Prices High
Cash Reserves Low, Fuel Prices High

If you drive a car, it is likely that you can quote the miles per gallon statistics for your vehicle. In some cases, you might even have a rough idea what your dollars per tank value is. But do you know your home’s peak electricity use per kilowatt-hour cost? In other words, do you your home's "dollar per kWh" cost? Do you know the effect of how what appliances you use and when you use them cost you?

Toyota’s Prius introduced the mass-market concept of providing realtime and longer term data about how driving habits impacted fuel use. In summer 2008, when record gasoline prices were at the pump, America became obsessed with miles per gallon and gained a clear understanding of "dollars-per-tank." Since then, many major automakers have incorporated their own versions of either an average or realtime mile-per-gallon readout to new vehicle models.

Part of why connection between use and cost is easier to make with autos is because consumers not only prepay for their energy but prepay frequently, on average three times per month. What if Americans prepaid for their electricity like their gasoline and had access to realtime information about their electricity use? Would this information provide not only a deeper understanding for the value of electricity, would it also help create a better understanding of the value of residential solar energy?

While prepay electricity service in common in other parts of the world like Central America, rural United Kingdom, South Africa, and many others, it is a relatively newer entrant to the US marketplace, where it is currently targeted toward customers with poor credit or who have had hard time keeping up with their bills. According to a recent article by Greentech Media, some prepay electricity services are available in Arizona and North Carolina.

In Texas, the First Choice Control First program couples Smart Meters with the prepay program to help customers plan and make informed decisions about their electricity use. Until this program rolled out, most prepay retailers estimated how much a customer used, rather than tallying exactly. Prepaid customers wanting to conserve didn't see much immediate benefit, and had no feedback telling them when their accounts would hit zero. With the prepay and Smart Meter coupling, prepaid home electricity consumers can begin to gain a better understanding of their realtime and average energy use vs. cost statistics.

So why does this all matter?

In the 1950’s, total residential electricity usage in the US was 288 billion kilowatt-hours. In 2001, household electricity use was four times that at nearly 1,140 billion kilowatt-hours and quickly growing since. Growing demand for electricity has created urgent need for new generating capacity often times meaning the building of more coal, natural gas, and possibly nuclear generating facilities. Or, utilities need to prioritize putting aggressive conservation strategies in to place to reduce the need for new generating facilities.

A study released in February this year conducted by Lawrence Berkley National Laboratory of Oklahoma Gas & Electric (OG&E) customers showed that people will significantly conserve electricity during peak demand if given price incentives and tools to modify usage. According to a 2009 study filed by the Federal Energy Regulation Commission, if 60 to 75 percent of customers stay on dynamic pricing rates or participate in demand response/reduction programs like Smart Meters, the nationwide reduction in peak demand would be 138 GW by 2019, representing a 14% reduction in peak demand for 2019 compared to a scenario with no demand response programs. This would equate to avoiding construction on many generating facilities.

According to Ken Devore, director of Southern California Edison’s SmartConnect program, US utilities have deployed more than eight million smart meters with 60 million expected by 2020. This represents a significant potential for prepaid electricity programs to roll out nationwide and emerge into a wider marketplace outside of the traditional credit-poor consumer markets. If marketed correctly, these programs could help consumers better understand the cost of the electricity usage in the context of appliance usage.

As a corollary, this has a great potential to better contextualize the value of designing residential solar energy as a conservation measure that can reduce demand during peak hours of use, as opposed to many more traditional solar design approaches which aim for best year-round production. At the recent Greentech Media Solar Summit, Fong Wan, VP of Energy Procurement for PG&E, delivered a keynote outlining how predictability of output and the buffering and storing of output from solar and wind resources would be key to their growth as  viable energy generation options. As solar becomes more dense on the grid, utilities will likely begin to require more stringent requirements for how the output of those systems, from residential up through utility-scale solar, match the demand from energy consumers.

At least on the residential side, prepaying coupled with the feedback from Smart Metering could have an enormous potential to revolutionize the design and understanding of the value of home solar energy systems.

Illustration Credit: Christian Science Monitor/Bennett

Posted on March 28, 2011 and filed under analysis.