This commentary was originally posted on EDF's California Dream 2.0 blog.
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.
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:
- Customers would upgrade their old programmable thermostat,
- 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),
- 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.