Residential Real-Time Pricing is the Real Deal

Transcription

1 Residential Real-Time Pricing is the Real Deal Lawrence Kotewa Senior Engineer and Project Manager CNT Energy (Formerly known as the Community Energy Cooperative) Monday April 21, 2008

2 Who is CNT Energy? Center for Neighborhood Technology is a 30 year-old Chicago-based non-profit that works to build sustainable urban communities through research, advocacy and program implementation From 2000 through 2007 operated place-based demand response programs and piloted residential real-time pricing under the Community Energy Cooperative name. Changed name to CNT Energy this past summer CNT ran large energy efficiency rehab programs during the 1980s Other programs include I-Go car sharing, Location Efficient Mortgage, Equity Express, Climate Change Analysis

3 The Problem 95% of all customers residential, small commercial, municipal have absolutely no idea that the price of electricity varies by the hour and that the average of the hourly prices is likely to be significantly lower than the hedged retail price they have traditionally seen. And until they know that, they won t realize that there is something in it directly for them; that investing in smart meters will give them access to lower cost electricity. Testimony of Illinois Commerce Commission Commissioner Bob Lieberman to the Sub-committee on Energy and Air Quality, Committee on Energy and Commerce, U.S. House of Representatives. May 3, 2007.

4 Every Financial Planner Will Show You This Risk/Return Graph

5 Why Not Have the Same for Electric Rates? Flat Bills Real-Time Pricing Critical Peak Pricing Time-of-Use Pricing Flat Rate

6 What s Keeping Us From Having Those Options? To have an appropriate risk/reward scale requires the ability to differentiate supply and demand Supply: The emergence of wholesale markets allows for price discovery at the hourly level Demand: The individual load shape now matters, not just total usage The culprit for creating bad load shapes:

7 The Meter Has Been The Barrier Since before 1900, the best measuring device available Inexpensive, long lasting but limited

8 Connecting The Pieces Interval metering allows for the creation of individual load shapes Time-of-Use and Critical Peak Pricing address creating value on the demand side, but not on the supply side Wholesale markets create a transparent set of prices that with good rate design create value for RTP Consumer behavior changes can change load shapes, but we need to think about automated controls (e.g., smart thermostats) as well to maximize the potential of smart meters

9 What We Have Learned About Residential RTP So Far? Four years of Energy-Smart Pricing Plan pilot program results have demonstrated Good demand response (15 to 20% cuts in peak demand) Increased energy efficiency Bill savings (~10%) and strong customer interest/satisfaction Value to a range of customer types The next step is to understand how widespread RTP can transform markets In Illinois we are exploring if residential RTP will Lower prices for everyone? Create meaningful customer choice? Develop a platform for technological innovation to encourage conservation and efficiency?

10 Energy-Smart Pricing Plan Pilot Program ( ) Key Details Energy unbundled from distribution and transmission Consumers paid hourly, market-based prices (pass through of PJM hourly price) Interval meters, read by traditional meter readers We provided an intermediary role providing outreach, consumer education, high price notifications, ComEd remained the supplier and billed the participant

11 Its More Than Just A Rate: Helping Consumers Manage Prices Information about hourly energy prices Education about general price shapes by season Access to daily prices via a website or phone number Notification of high price days (over 13 cents/kwh) By telephone or , issued the previous evening Access to web-based tools to view charts and graphs of energy use, price and cost down to the hourly level Online and printed summaries of energy use, costs and comparable flat rate bills Educational materials on energy efficiency and how to reduce usage during peak times These tools can create changes in behavior

12 ESPP Bill Impacts Year Average Bill Average Monthly kwh Savings Percent Renewing 2003 $ % 99% 2004 $ % 99% 2005 $ % 87% 2006 $ % N/A Consistently high retention rate, even in 2005, despite a very hot summer, and high power prices driven by natural gas costs (Does not include participants who moved during the year)

13 Residential RTP Creates More Efficient Customers Evaluations show Participants in real-time pricing cut summer usage 3 to 4 percent Are more likely to buy Energy Star appliances Feel more knowledgeable about their energy use and feel more able to control it Lower income households were more responsive to price signals than higher income households

14 Peak Demand Reductions from Residential RTP 5% RTP without enabling technology RTP with air conditioner cycling 0% -5% -10% -15% -20% -25% 1:00 AM 7:00 AM 1:00 PM 7:00 PM

15 Customers Like Real-Time Pricing How Overall Program Experience Compared to Expectations 70% 60% 50% 40% 30% 20% 10% 0% Exceeded expectations Met expectations Did not meet expectations Blank

16 Reducing Demand Doesn t Strain Participants 60% 50% 40% 30% 20% 10% Difficulty in Participating During August 2006 Heat Wave 0% Extremely easy Fairly easy Neither easy nor difficult Fairly difficult Extremely difficult Blank Other

17 Conclusions from the Pilot Program RTP can be successfully implemented with relatively inexpensive incremental technology Useful, reliable pricing information is critical component Creates a real opportunity for energy awareness messages Consumer education is needed (want and use energy information relevant to their situation) High price notifications focus people s attention An automatic curtailment option such as an air conditioner cycling switch or a smart thermostat produces added benefits

18 Gauging Customer Interest in Realtime Pricing Would You Be Interested In A Fixed Or Variable Rate Plan? 35% 30% 25% 20% ComEd Ameren 15% 10% 5% 0% definitely possibly possibly definitely probably probably Fixed Rate Variable Rate [Summer 2006 Survey. 282 ComEd, 399 Ameren households]

19 Illinois Legislators and Consumer Advocates Supported Expansion of Residential RTP This just seems to make eminent sense to me-- if you're in a position where you can hold out in the heat of the day and run your air conditioner at night, you're gonna save some money. Representative William Black (R-Danville) during floor debate on SB1705, April 4, 2006 CUB views Ameren s Tariff as a necessary and important step toward the development of substantial demand response that can provide the discipline lacking in the markets today. Testimony of Chris Thomas of the Citizens Utility Board in support of Ameren s rate filing in Docket (cons.), December 4, 2006

20 Potential Annual Benefits Assumes 10% of residential customers participate. Program cost approximately $16 million per year (including metering using today s technologies and costs) (Millions per Year) $80 $70 $60 $50 $40 $30 $20 $10 [Adapted from CUB/City of Chicago Exhibit 3.5, Testimony of Bernie Neenan in ICC Docket ] $0 C&I Customer Benefits Other Residential Benefits RTP Participants 239% increase over base case 121% increase over base case 3% increase over base case 85% increase over mid case 112% increase over mid case 178% increase over mid case Base Case Mid Case High Case Weighted Average

21 Can Residential RTP Benefit Everyone? Increasing level of demand response benefits nonparticipants more than participants! [Adapted from CUB/City of Chicago Exhibit 3.6, Testimony of Bernie Neenan in ICC Docket ] (Millions per Year) $70 $60 $50 $40 $30 $20 $10 $0 C&I Customer Benefits Other Residential Benefits RTP Participants RTP today ( elasticity) RTP w/some increase in response ( elasticity) RTP w/more increase in response ( elasticity)

22 Illinois 2007: Full Scale RTP Programs Roll Out Power Smart Pricing for Ameren Illinois customers ComEd RRTP for ComEd customers Debate over new retail rates only settled in August Over half the year lost to legislative uncertainty Goals are to enroll 3% of customers over next four years and then evaluate programs to see if they generate net benefits Smart meters not yet part of the story

23 Power Smart Pricing

24 Power Smart Pricing Details Rider PSP adds on to Ameren s Rider RTP to create an optional program for residential customers. $2.25 per month fee to cover part of the cost of metering and program administration Initial 12 month stay required CNT Energy s role as Program Administrator is to provide Outreach/program marketing Education tools for both efficiency and peak demand management High price notifications Online tools Research and evaluation

25 Both Everyday and High Price Tips

26 Marketing Plans Full scale marketing has just begun to largest communities in Ameren s service territory Direct mail Media outreach Advertising Partnering with local community organizations Bill insert in November 2007 and February 2008 to all Ameren residential customers

27 Technology Roll-out New website launched in March 2007 New online functionality was developed including Energy audit Sophisticated usage and price graphs and analysis tools Bill comparisons Customized s for high price notification and new bills

28 Enhanced Online Experience Enhanced On-Line Experience Examples of web based software displays

29 ComEd RRTP Details Rider RRTP adds on to ComEd s Rate BES-H to create an optional program for residential customers. $2.25 per month fee to cover part of the cost of metering. Initial 12 month stay required Comverge s role as Program Administrator is to provide Outreach/program marketing Education tools for both efficiency and peak demand management High price notifications Online tools Research and evaluation

30 Leveraging Technology: Comverge s thewattspot.com Website for ComEd RRTP

31 2007 Results For Ameren Power Smart Pricing First year of program for all participants Overall savings of 16% on customer s electric bill costs Nearly 500 participants at year s end For ComEd RRTP Fifth year of hourly pricing for almost 400 participants and the first year for an additional 1600 new participants Overall savings between 7% and 12% on customer s electric bill costs Nearly 2000 participants at year s end

32 Nothing is Constant except Change For Ameren Power Smart Pricing Summer 2007 capacity charges consolidation Rate redesign for electric space heat customers recreates a subsidy for them that will likely be a better deal than Power Smart Pricing Just filed, a change from Real-Time prices to Day- Ahead prices For ComEd RRTP Summer 2007 start of PJM RPM capacity For Both June 2008 through May 2009 first 1/3 of Illinois Auction contracts replaced with utility purchases June 2009 and beyond Illinois Power Authority purchases energy for both utilities

33 Lessons Learned There is a segment of consumers who will respond to price signals Small changes at peak times can have big impacts Technologies to manage energy use are both soft (web, education) and hard (cycling switches) The challenges ahead What is the potential market? Will regulatory climates tolerate exposing some customers to more risk in exchange for more potential rewards? Can residential real-time pricing inform the debates on smart metering?

34 What could Come Next Changing people s behavior and awareness opens them up to interest in Innovative information communications systems New homes with enabling technology built in Grid friendly appliances PriceLight: Engages Consumers The home as a generator: Participate in the market New Technology: Automates efficiency

35 Getting Past the Smart Meter Debate A meter just provides measured information The challenge is what do you do with that information? Smart Meters + Dumb Rates = A wasted opportunity Smart Meters + Smart Rates + Smart Technologies = Value to Consumers, The Electric Grid and the Environment

36 For More Information Lawrence Kotewa Senior Engineer and Project Manager 773/ CNT Energy 2125 West North Avenue Chicago, IL