Energy companies will have to pass on benefits of smart grids to consumers

November 10 2010 - The appliances for the smart grid are there, but the customer is not yet convinced at all that smart meters and all the rest of it are beneficial to him. That is one of the main conclusions of the congress 'Smart Grids, smart cities, smart future', that has been held in Amsterdam in the past few days. IBM, Alstom, Honeywell, they are all ready to 'take off' and they offer all kind of appliances. There was even a company, Prolan, that deploys existing masts with a height of 300 meter that broadcast broad waves and that can be used to switch off millions of customers at the same time.

Demand management
They are doing all kind of things, these companies. Because 'smart grids' seems to refer to everything that's new about the grid nowadays. “If you ask ten people what smart grid means, you get ten different answers’, so one person in the audience said. According to him a lot of it is just an "instinctive reaction to the technical capabilities". But some notions pop up again and again: demand and load management, electrical vehicles, the smart meter of course, and the idea that electricity is going two ways: not only from energy company to consumers but also from consumers (households, offices) to the rest of the grid. And 'measurement' of course; the curse of this time. A lot more will be measured in the future than in the past.

Local Dutch grid
Smart grids are however not only about technical appliances. It also means smart thinking by people. Example: transmission cables can be uses more intensively when it is windy because the cables will be cooled of by the wind. The Dutch TSO Tennet is experimenting with this. And think about how to connect big cables. A cable from a wind-farm in the North Sea could be connected directly to the grid in de Ruhr-area in Germany, bypassing the Dutch grid, which will be in the future only a distribution grid, so Mart van der Meijden of Tennet said.

Avoiding the peak
Another important part of the smart grid is demand management or loadmanagement. Supply not only follows demand in the future but demand will also have to follow supply and capacity. That means that demand is reduced if capacity is limited or that demand is shifted, if possible, to other parts of the day, so that the big peaks (five, six o'clock in the evening) are being avoided. Surprisingly, all people working in the energy-sector are convinced demand for electricity will only go up in the future, despite the severe recession of these days and all kind of means to save energy. To prevent heavy investments in the grid demand will then have to be distributed more evenly over the day, so it is thought.

Marginal benefits
But still, home-owners need to be stimulated to plug in their car during the dull hours of the day, or to wash their laundry at night and not during the day time. And this is the weak point in the story. Because why would they do it? Suppose energy companies offer a contract that makes washing during some parts of the day cheaper than during other parts; benefits for the consumer will only be a few cents because washing takes only one kWh. And it will lead to discomfort. “For me it is not clear what the advantages of the smart meter are”, so somebody in the audience said. "Energy companies need to give more insight".

The big aggregator
One solution that is being thought of is the 'aggregator': a company that steps in and that offers services that automatically switches on and off appliances when the time is right. This system then makes sure that not everybody who lives in the same street plugs in the electrical car at the same time, or switches on his washing machines at the same time. For this aggregating company the benefits can be greater than for the individual because he can in total ‘shave off’ a lot of megawatts from the peak. He can pass this on to the consumers. The Dutch grid operator Enexis starts a project in Breda, Easy street, in which people get the possibility to sign up to such a contract that allows an aggregator to step in, in exchange for a rebate on the energy bill.

This can save al lot of costs. Two person working at Enexis told us about the studies they are doing. They take as a starting point that 75% of the people in Holland have an electrical car. What will that mean when the grid in the future remains as it is today? And how much money can be saved if this 'stupid grid' is replaced by a smart grid, that can regulate which car is connected at which point in time? A lot, so it turns out. But energy company will have to pass on this savings to the consumer and to make clear that the investments now will lead to cost reduction and lower tariffs in the future. Because all said and done, it is the grid owner who benefits most from the smart grid and not the consumer, however hard organisations try to make the smart meter a sexy application.

Wasting tax payers money
A lot of people in the sector do not yet realise this. 'Cooperation is the key', so Leo Cornelissen of the Dutch grid owner Liander said. Cornelissen is involved in the smart meter project in Amsterdam. He works closely together with the municipality of Amsterdam and with other organisations, to install as much smart meters and load facilities for electric cars as possible. The danger is of course that these government bodies spend too much and that they will spill tax payers money. They will then not be able to pass on benefits to the consumers. Dutch grid companies, owned by local governments, are not at all cost conscious. They want to keep the grid in good shape and do their bit in making a transition to sustainable energy happen, so somebody from Enexis said.

Learning from telecom
For Cornelissen the businesscase for the consumer is there. Others, however, are more sceptical, or realistic. “It is not even clear what kind of problems are solved by the smart grid”, so one person said. "Companies are mainly responding to technical possibilities." Energy companies could learn from the telecomsector in informing their customers, Michelle O’Neill  from Honeywell said. “We are not very good at explaining complicated things to consumers. Unless home owners show interest the project will flop”, so she said. “Don’t link the smart meter only to smart grids, but also to energy efficiency from which the consumer can benefit”, somebody else said. “Interaction with customer is still scarce but it is extremely important.”

Waiting for the killer application
“We have to wait until some ‘killer application' before the consumers will embrace the smart meter", so said Bill Levis, who works for an American consumer organisation. Opposition to the smart meter is mounting in the States because people think it enables companies to spy on them, it will increase cost and because they can catch fire spontaneously, so they think.

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