California Dream 2.0

Electricity Pricing: The Times, they Might be A-Changing

Electricity pylonsLast week, the California Public Utilities Commission (CPUC) issued a proposed decision on residential rate reform. Residential rate reform – how and what Californians pay for electricity – is a thorny subject, and the Commission’s proposed decision is being met with a range of reactions.

We at Environmental Defense Fund (EDF) want to highlight a bright spot in the 300-page document that we’re thrilled about: the attention paid to time-of-use electricity pricing (a type of time-variant pricing). Buried in this long legal document, we see EDF’s fingerprints in the Commission’s call for California investor-owned utilities to ramp up their use of this innovative yet well-proven pricing tool starting with pilots in 2016 and going to scale in 2019.

How TOU Works

If you’ve been following EDF’s work in this area, then you know we’ve been involved in this process for many years and have probably gathered that we’re big fans of time-of-use pricing (TOU) because it better reflects the true cost of electricity, which fluctuates throughout the day. This type of pricing also empowers customers to better control their own energy bills and reduce our reliance on fossil fuels.

TOU pricing works by breaking up the day into two or three large intervals and charges a different price for each. Rates can be divided into off-peak prices (generally during the middle of the night to early morning), semi-peak prices (daytime and evening), and peak prices (occurring during periods of highest demand, usually afternoon to early evening). These rates remain fixed day-to-day over the season.

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Posted in Clean Energy, Electricity Pricing, Energy, General / Read 1 Response

Nest’s Promising Results for Reducing Peak Electricity Demand

Back in January when Google announced it would spend $3.2 billion to purchase Nest, EDF knew this was a company to watch. The results of three new reports, released today, confirm that controllable thermostats like the Nest Learning Thermostat are both customer-friendly and useful for energy system planners. Moreover, the reports signal that smart devices, such as those Nest manufactures, have potential for generating marked savings for utility customers.

The reports analyze 2012-2013 energy use data gathered from four major utilities across the U.S. that offer Nest energy services programs: Austin Energy, Reliant Energy, Green Mountain Energy, and Southern California Edison.

The first report evaluates the results of Rush Hour Rewards, a demand response service that changes the temperature of the homes of Nest users during energy “rush hours”, or times when demand on the grid is highest. The second examines Seasonal Savings, a program that runs for three weeks and slowly modifies the temperature according to the customer’s behavior (which this smart thermostat is able to ‘learn’ via its built-in motion sensor and understanding of its owner’s temperature preferences). Both operate during times of heavy usage, namely winter and summer. The third report analyzes home energy data of Nest customers more broadly, comparing energy use before and after the installation of a Nest Thermostat. Read More »

Posted in Clean Energy, Energy Efficiency, Smart Grid / Comments are closed

California on Course to Give Power to the People

Jamie Fine PhotoIn a report issued by the Energy Division at the California Public Utilities Commission (CPUC), experts demonstrated their commitment to the transition toward greener electricity rates in the Golden State. This is good news for two reasons: It will give customers more control of their utility bills and it keeps the state on course to cut pollution.

Today, most Californians are frozen by energy bills that are hard to understand and even more difficult to keep under control.  Fortunately, recommendations from the CPUC released Monday will put the power in the hands of customers by transitioning to rates that vary with the time of energy use.

These “time-variant rates” (TVR) can cut pollution by giving customers tools to directly influence how much money is spent on the least-efficient, most-expensive, and most-polluting power plants.   Critically, it’s also a way to avoid ever-growing, system-wide peak demand that leads to the building of additional power plants, known as “peaker plants” as they are specifically designed to serve customers at times of peak demand.

Because peak power plants run so few hours a day and are so inefficient, EDF estimates that if half of consumers participate in time-variant rates, California would save nearly $500 million annually.

The savings – from avoiding costly enhancements to grid infrastructure – will mean lower bills for customers and cleaner air for all.  The CPUC report affirms EDF’s analysis that total system costs will be reduced with wide-spread participation in time-variant rates, estimating that peak demand – and the associated costs of peaker plants – would be reduced by 12%.

As required by law, the rate reform proposal sets expectations that adequate protections be put in place for vulnerable customers.  The law also requires that people will always be able to choose their rate structure, but most will find that participating in time-variant rates will lower their bills with little or no effort to change their daily patterns.

The next step is for the CPUC and utilities to implement these recommendations and to put customers on the path to more cost- and environmentally-friendly rates.  With robust plans for education, outreach and enabling technologies (like programmable thermostats) to help customers reap the benefits of greener electricity prices,  time-variant rates can become another shining example of California’s commitment to innovation, the environment, and its people.

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How’s Your Electric Bill Treating You? Time To Give It Some Thought

When was the last time you really gave a lot of thought to your electric bill?

If your answer is “not very often”, then you’re not alone. In fact, the typical household thinks about their electric bill only six minutes a year.

The California Public Utilities Commission (CPUC) now has the opportunity give people another way to control household energy bills by creating a system where changing the time you use electricity can save money. This won’t mean you’ll need to invest more time thinking about energy use, but you’d be well-served to think about the timing of it.

Last week, the CPUC held a public workshop inviting stakeholders — PG&E, SCE and, SDG&E, along with consumer, industry, and environmental groups — to present and discuss their proposals for revising the system of charges for residential electricity use. I had the pleasure of presenting EDF’s proposal for a time-of-use (TOU) pricing system: For customers looking for another option for saving money on their monthly bill, EDF sees TOU as the best pricing policy for both people and the environment; customers uncomfortable with this option would be able to “opt out” and choose another pricing structure.

Currently, the standard “tiered” rate charges customers higher prices for higher electricity usage. The approach is intended to send the message: “The more you use, the more you pay.”

Yet, current rates hide the true cost of electricity service at certain times of the day – and most customers don’t know where their usage falls until they actually see the bill at the end of the month. Ultimately, this lack of information prevents customers from making informed decisions about their energy use, limits their options for keeping bills within budget, and makes the overall energy system in California dirtier and more expensive.

As detailed in our proposal, EDF has found that updating the current pricing policy to be based on the timing of actual energy use will empower consumers to save money, dramatically lower overall system costs, facilitate more efficient usage of electricity generation assets, lower peak energy demand, provide more accurate and effective energy conservation incentives, and more equitably share energy system costs amongst customers. Here is a short list of what TOU can do for you, and California:

  • Dramatically Lower System Costs.  Using the utilities’ own data on the costs of serving electricity to customers, EDF estimates that if half of residential customers adopt the optional TOU rates available already , we’d reduce the cost of service by around $500 million each year.  If translated directly into savings for residential electricity customers, electricity rates could be reduced significantly: a roughly 15% rate decrease would be enjoyed by all customers. How can this be so?  Simply put, it is most expensive to provide customers with electricity at times when demand for electricity is highest.  If customers paid for energy based on actual costs of electricity service, they would see higher prices at peak times and thus be motivated to shift energy use to cheaper times of the day.  This shifting is better for overall system costs, and better for your wallet.
  • Avoid Adverse Environmental Impacts. TOU will: (1) reduce the need for “peaker” power plants that tend to be fossil-fueled, expensive to operate and among the most polluting resources on the system, (2) reduce the environmental impacts and costs of siting, operating and building power plants and transmission lines, and (3) help to integrate increasing quantities clean, renewable resources.
  • Attract Clean Energy Investments for Residential Consumers. TOU will spur innovation in the electricity marketplace, promoting the development of new services and technologies that enable utilities and customers to better manage electricity production and use through distributed, resilient, clean, and low-cost energy services and products. While the average customer may not think much about how and when they use electricity, service and technology companies live and breathe it. TOU rates provide new value propositions that clean energy innovators will deliver to our doors.
  • Reward you for your choices. A recent survey of nearly 5,000 customers by Pacific Gas and Electric and Southern California Edison found that 75 percent have tried shifting their energy use already – even though they receive no financial rewards to do so.

EDF’s proposal is a win-win for people and the environment, and takes us along the path to a cleaner, cheaper, and more resilient energy system. I urge the CPUC to conclude the same with a decision this Fall that will set the direction of California electricity pricing and prompt utilities to provide the robust consumer education and enablement with set-it-forget-it technologies.

While the concept may be complex, TOU will be better for you, for the environment, and the clean energy marketplace.

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Cream Cheese and Time-Of-Use Electricity Pricing

“The cream cheese just fell off the roof of the car,” my 7-year old daughter said as I turned into my driveway after a trip to the grocery store.  Right now you might be asking yourself, “What does this have to do with time-of-use pricing?” Allow me to explain.

We live in Alameda, CA, where plastic bags are prohibited and stores must charge for a paper bag. Alas, I had forgotten to bring a reusable one.  To teach my children a lesson and avoid the public scorn (not so much the $0.05 per bag), I carried our groceries and asked the kids to lend their hands. And yes, I put the cream cheese on the roof of the car to free a hand to unlock it.

Once home, I realized that, in addition to almost losing my cream cheese, I’d been making potentially risky tradeoffs.  After all, exiting the supermarket with full hands prevented me from holding my children’s hands while crossing a busy – and dangerous – parking lot.

Don’t get me wrong; I’m not lamenting the ban on plastic shopping bags.  I think it makes perfect sense, but it takes time to start making the adjustment and the risk tradeoffs aren’t always obvious.

This scenario– making adjustments that may seem inconvenient and a bit scary, but are well worth the effort– plays out in other areas of life as well.  Particularly in rethinking how Americans use and pay for electricity.

Most of us don’t think about how the time of day affects the cost of serving us power.  In California, we aim to change that by moving to Time-of-Use (TOU) pricing – which will make electricity more expensive during times of peak, or high, energy demand and cheaper off-peak.  In fact, just yesterday, the Sacramento Municipal Utility District (SMUD) recommended moving all residential customers to time-of-use rates by 2018 in an effort to give customers more control over energy costs.

EDF believes that TOU pricing will be best for people and the environment, just as banning plastic shopping bags effectively reduces their environmental impact.  This approach can encourage conservation and reduce peak energy use while providing customers with more choices that can ultimately lower their monthly bills.

Switching to TOU electricity pricing may feel to some like being thrust into a busy parking lot with an armload of groceries and two children to monitor.  When should I use my dishwasher?  Do I need to reset my air conditioner?  Well, yes and no.  You can choose to do nothing, or you can exercise a choice you don’t have with our current pricing structure: shifting energy use to times of lower electricity prices.  It’s quite doable.

A recent survey of nearly 5,000 customers by PG&E and So Cal Edison found that 75 percent have tried shifting their energy use already – even though they don’t get paid to do it.  Two-thirds of respondents said they’d be willing to risk higher bills for the chance to save energy for environmental purposes.  This willingness, combined with wise policies – such as the “Try-Before-You-Buy” bill protection that prohibits bill shocks for up to one year after a customer changes rate plans – bodes well for the union of can-do attitudes and technology innovations like digital electricity meters and automated “set-it-and-forget-it” learning thermostats.

The rewards will be significant: TOU pricing will reduce the amount of peak electricity needed from dirty fossil fuel “peaker” power plants, thereby avoiding costs from blackouts and new energy infrastructure investments.  It can also help to incorporate more renewable, clean energy resources onto the grid – like wind and solar – with significant benefits for energy independence and reduced air pollution that will put us on a pathway toward stabilizing our climate.

Most consumers will see lower energy bills from TOU electricity pricing without doing anything.  Others will need to make adjustments, particularly homes that use a lot of energy during peak energy times of the day.  With a little planning, knowledge and helpful technology, it can be as easy as keeping extra shopping bags in your car.

Just as banning plastic bags is helping to reduce environmental degradation, so too can TOU electricity pricing.  We just need to get comfortable with the idea.  That way we can have our cream cheese and clean environment, too.

Posted in Clean Energy, Energy, General, Smart Grid / Read 1 Response

Nest Labs: Proof Life Exists in the Smart Grid Ecosystem

There are many conceptions of the smart grid; what it is and what it should do for us – the “ratepayers” – who will finance the necessary upgrades to California’s electrical system.  I find the concept of a “smart grid ecosystem” — with smart customers, smart utilities and smart markets — to be a helpful guidepost as we seek to evaluate what should be accomplished by the utilities trusted to deploy our smart grid.

Ecosystems achieve resiliency through diversity.  We want a variety of clean energy resources on the supply side – hydropower, wind, solar photovoltaic, solar thermal – spread across a variety of locations (but never too far from customers).  Similarly, on the demand – or customer – side, Californians, buildings, appliances and electric vehicles create an intricate, synergetic web that can be made more efficient and flexible with customer education and empowerment, customer-focused energy pricing policies, and demand response (which allows customers to voluntarily reduce peak electricity use and receive a payment for doing so in response to a signal from their electric utilities).

There are other ways to contemplate diversity in the energy context:  Unlike some other states, most Californians can’t choose their power providers, though they can choose among rate “plans” (which are payment schemes, not plans to help manage energy use and costs).  EDF recognizes that a smart energy marketplace will thrive with a greater variety of competitors, products and services, and would like to see “3rd party energy service providers” able to participate (that catch-all term includes organizations that deliver energy services and products to customers at a variety of levels throughout the smart grid ecosystem).

Yesterday’s announcement by Nest Labs (Nest) is more proof that the smart grid ecosystem is alive and well.   With utility partnerships in California and Texas, among other places, Nest uses their intelligent, WiFi-connected thermostat to help customers smartly and painlessly trim energy use by learning, and mimicking, their temperature preferences automatically.  For example, the Nest’s Seasonal Savings services will alert your thermostat when new rates apply with a change of season and the device will begin slight adjustments to presets to adapt to predictable weather trends.

Source: Nest Labs

Even more exciting is Nest’s Rush Hour Rewards service that provides centralized, automated small reductions to heating or air conditioning at times of peak demand, when energy use is highest.  The offering in particular is designed to enable customers to be good environmental stewards by enrolling in peak energy trimming programs, such as Southern California Edison’s Peak Time Rebate rate.  Another benefit of participation is lower energy bills.

While customers retain the ultimate authority to override thermostat settings, the basic premise is to accept a payment to adjust settings by a couple of degrees when the electric grid is most stressed.  The trouble is involving people in energy conservation actions is less reliable and slower than communicating directly to appliances with computers.  Enter the Nest, strategically located at the interface between utility and customer, with specific dominion over the biggest energy hog in your home – the heating and cooling system.

The reality is that the electric grid as we know it is changing, driven by California’s quest to secure an environmentally safe and affordable energy system. Increasing the amount of clean, renewable energy on the grid will mean that more generation is variable (meaning electricity output from solar and wind depends on sunshine or windiness, respectively).  Up to this point, California has met this challenge by backing up clean resources with dirty fossil fuels.

Smart grid ecosystems can provide hot beds for innovation, like Nest’s learning thermostat, but they must start by getting energy pricing right.  Nest’s business model will thrive when residential customers see time-variant prices (where the price customers pay reflects the cost of electricity produced at a given time of day) that align with the actual costs of delivering power.  We’ve already seen it work in large, statistically-valid studies.

This is how Nest’s learning thermostat will make a difference to your electricity bill and the environment:

  1. Customers would upgrade their old programmable thermostat,
  2. Customers would sign up for a time-variant electricity rate (perhaps at the same they are online for the utility rebate on the new learning thermostat),
  3. On peak demand days when electricity use is highest and the utility will pay consumers handsomely to trim their energy use for a few hours, Nest Labs will signal customers’ thermostats via WIFI.  It’ll feel to customers like an air conditioner turned up a few degrees when it’s over 100 degrees outside (aka, hard to notice any difference).

For California overall it will add up to avoiding more harmful  pollution from fossil fuel power plants in the coming years and, eventually, could be tuned to work harmoniously with variable clean energy resources like wind and solar.  Nest thermostats are among a growing number of products capable of precooling buildings in advance of peak electricity demand, a strategy that will become commonplace once time-variant pricing pervades.

California has already spent billions of customer dollars installing a robust digital metering infrastructure – and it’s time to put these meters to work by enabling customers to participate in demand response and other demand-side programs, such as building weatherization.  Coupled with technologies that now allow for fast, reliable, automated ‘set-it-and-forget-it’ adjustments to electricity use – like Nest’s learning thermostat and other exciting energy innovations – we can seamlessly integrate variable clean energy resources, such as wind and solar.  In California’s energy ecosystem, customers can now choose to actively, or passively, be part of the clean energy revolution without leaving the comfort of their own nests.

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