White Paper funded by ESMIG
VaasaETT - The potential of smart meter enabled programs to increase energy and systems efficiency: a mass pilot comparison
Short name: Empower Demand
Executive Summary
The European Union has set ambitious objectives for the year 2020 to lower energy consumption by 20%, lower CO2 emissions by 20% and ensure that 20% of energy is generated using renewable resources. At the same time, it is actively engaged in creating road maps and investment plans for developing smart grids throughout Europe. A core element of the smart grid is the active participation of the demand side and only through the involvement and cooperation of the demand side can the 2020 objectives be met. Within Europe and indeed globally, smart metering is viewed as a key building block in the smart grid and the most cost/effective method for increasing end-consumer involvement and engagement.
The aim of the research whose results are presented in this report has been to discover the potential and limitations of a range of feedback and dynamic pricing programs enabled through smart metering technologies. VaasaETT’s findings and conclusions based on a large pool of pilots are designed to gauge repeated results and surrounding requirements for success. The research involved collecting and comparing about 100 pilots. Typically, organisers divide participants in a pilot into sub-groups in order to test different solutions, for instance different feedback types, different dynamic pricing schemes, a group with home automation and one without, etc. Hence, the pilots were broken down into 460 samples. The samples were then analysed according to 22 different variables selected to gauge internal structural pilot variables influencing success as well as outside market factors which might also impact a pilot outcome. In total, over 450,000 residential consumers were involved in the reviewed pilots. Feedback pilots are designed to help participants reduce their overall energy consumption, lowering distribution and supply costs. In comparison with the other feedback channels, IHD resulted in the highest energy savings. The remaining channels for feedback, webpage, and informative bills produced almost equal consumption reduction levels. Quite possibly, the key advantage the IHD offers over the remaining channels for feedback is the almost real-time and visible aspects of the delivery of feedback. TOU peak reductions are the lowest, but they occur daily, while CPP and CPR produce the highest reductions but only for critical peak periods. The main findings demonstrate that consumers do react to feedback and dynamic pricing mechanisms positively, pilot results maintain over 2-3 years and they can also be effective in consumer groups of over 1,000 households. In addition, post pilot surveys show that on average 75 – 90% of participants were satisfied with the pilot with in which they took part. That said, results vary widely within a given program type; an IHD pilot can attain 3% or 19% reductions. Therefore the research findings also confirmed the assumption that surrounding variables have a substantial impact on program success levels over and above the supportive technology used or program structure.
The findings of Empower Demand demonstrate that technology provides an important but enabling function in creating a successful demand side program. It is one of five factors which decide success. These factors are socioeconomic factors, participant consumption patterns, program content/structure, supportive technology and household load sources. In this, socioeconomic factors and consumption patterns can overcome supportive technology and program type. For example, a good informative billing pilot can lead to higher savings than an IHD pilot depending on surrounding circumstances despite the fact that on average an IHD is 50% more effective than an informative bill at reducing overall electricity consumption. It is therefore important to perform a comprehensive analysis of markets when creating demand side programs; matching the program structure with the market realities.
During piloting, there can be a technological focus or a preconceived opinion that the technology is what decides program success. Our findings challenge this focus. The central difference we found between pilot success and failure is the ability of the program designers to meet consumer needs through the demand side program. Meeting a need is the foundation of consumer engagement and thereby of a program success. The technology is the enabler within this value chain. Therefore, unless a technology is equipped to act as a support to consumer engagement, it will not create savings or improve systems efficiency. Smart meters fulfil their potential due to the fact that they can support consumer engagement to a market-appropriate level through feedback and dynamic pricing and/or home automation. It is very well expressed by Chris Johns, President of PG&E shortly after the company undertook the SmartRate Pricing Program pilot project in 2010: “We thought we were undertaking an infrastructure project but it turned out to be a customer project”.
Program success is directly dependent on consumer involvement and the Empower Demand findings indicate that "more is more" at every stage of the piloting and roll out process. For example, within marketing, programs using consumer segmentation to create directed marketing messages for a particular consumer group increase consumer uptake and results. In program structure, feedback and pricing together tend to achieve better long-term overall results than either program type alone. Education improves dynamic pricing and informative billing programs. Multiple types of information on a display or a bill (current consumption, price, historical consumption, etc.) tend to achieve higher results than a display or a bill with only one message. Program layering is little explored but there are signs that hidden potential lies in starting with a relatively simple program and gradually creating offerings of increasing complexity and value. Hence, we are far from having perfected program structures or perfectly matching program structures to regional market realities. This should be seen as encouraging as even though program development is not mature, results are already positive. This also puts into question the current tendency to emphasise technological development over and above all other factors in European pilot schemes while comparatively little funding is provided to studying the best messages to deliver to consumers, their cycles of learning through program layering or the impact of surrounding socioeconomic and cultural factors.
Empower Demand has reviewed 100 pilots. The selected pilots alone included 450,000 consumers but the resulting rollout from these pilots now includes over 4 million consumers. Smart meter enabled programs are consistently effective when developed in accordance with the needs of end-consumers and enabled through constructive regulation. Research questions set limits around what it is possible to learn from a pilot; organizers will only get answers to the questions they ask. This is as much a limitation as it is a resource. It is essential to move forward in pilot development through innovative questions, taking into consideration the results of past pilots and comparative studies such as this one. Pilot organisers can now focus their research on better understanding who is in the market and what can be done to maximise their participation within that market’s reality. Long-term program success will require a comprehensive combination of marketing, technological support, directed communication and a constructive regulatory framework