Consumer-Powered Energy Programs: It’s Not Just About the “Smart Grid”

With each passing month, more and more emphasis is being placed on residential “energy efficiency” and “demand response” in the electricity and natural gas markets.

Jan 1st, 2009
Th Consumer 01

By Tim Enwall

With each passing month, more and more emphasis is being placed on residential “energy efficiency” and “demand response” in the electricity and natural gas markets. Business leaders, industry executives, government employees and politicians alike all seem to be taking some sort of position on the issue. In a recent survey of utility industry executives, many ranked new or increasing investments in these two areas as one of the most important in the coming years.

It is also difficult to spend a day without hearing the term “smart grid,” especially if you are in any way connected to the electric or gas utility markets. Most industry veterans have described for some time now an aging electricity infrastructure, the inability to effectively and efficiently move electricity from point A to point B and the significant public-works style effort—a la the 1950s Interstate Highway investment—that may be necessary to bring our energy infrastructure into the 21st century. Doing so will give us a fighting chance at energy independence and the ability to significantly lower carbon emissions.

Some of the most promising residential energy efficiency and demand response activities are taking place in electrical domains where the “smart grid” is most advanced today. These include the familiar territories of the three large California IOUs, two of the largest Texas Transmission & Distribution Service Providers and a smattering of other utilities across the country. These activities combine the best of high tech networking to deliver real-time pricing, weather, energy portfolio, billing and event information to residential equipment consisting of smart thermostats, in-home energy displays, smart outlets, smart circuit breakers, load control switches and even smart appliances. Energy efficiency efforts today focus dominantly on giving residential consumers the information to manually affect a change in their consumption while demand response efforts today focus on some form of utility-controlled automation to lower consumption.

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Lost in this dialog are two critical constituents: 1) utilities who have already invested in Automated Meter Reading (AMR) infrastructure and whose depreciation cycle for said investments have at least 10 years remaining on them and 2) consumers who want to have a significant voice in their own automated and reduced consumption rather than signing up for exclusively utility-driven control.

With new and emerging technologies from companies such as Tendril, both constituents can now be placed front and center in the overall “energy efficiency” and “demand response” debate.

Consumer Empowerment Drives Energy Efficiency and Demand Response

Historically, energy efficiency programs (e.g. energy audits, better insulation, LED light bulbs) and demand response programs (e.g. the one-way pager Air Conditioning shut-off programs) have been almost exclusively the domain of the utility with very little market “pull” from consumers. To be sure, many consumers have availed themselves of the opportunities offered by their utilities to become more energy efficient. In some jurisdictions, one-way pager systems comprise as much as 10-15 percent of the entire residential consumer base. However, it would be hard to argue that these programs have been enormously successful or “consumer focused”—primarily because these programs have been pushed by regulators and utilities on a consumer base that experienced relatively little change in overall prices and concern for global warming.

Times are changing—there is rapid increase in consumer awareness of global warming and the need to combat carbon emissions, as well as a broadening knowledge of the global demand for the commodities that fuel our electricity and gas needs. Even though the current recession has dampened these commodity prices, few argue the macro trend of increasing demand and shrinking supply that is leading politicians, governments and regulators to stay focused on solving the longer-term crisis. This increase makes for a ripe sea-change in consumer behavior toward energy efficiency and demand response if and only if consumers see a substantial benefit to themselves in the form of a) lower overall utility bills, b) increased utilization of renewable energy, c) reduction in carbon and d) beating their neighbors or social community in becoming “the greenest on the block.”

To achieve this, consumers need products that have the familiar ease-of-use, accessibility of price, mobility, interchangeability and overall accessibility that they have become accustomed to through now-mainstream products such as the iPod and iTunes. They will not accept a generation of products that look like they come out of the industrial controls business or appear to come from quasi-governmental entities. And, they want these products personalized.

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This is where consumer-empowered energy efficiency and demand response enters the fray. Previous models of demand response call for the utility to own the entire infrastructure and create some modest incentive (say $25 per season) in order for them to “turn off” a customer’s cooling (or heating) apparatus a few times per year for a “demand response event”. This works for a small percentage of dedicated consumers and provides some small percent of consumption curtailment—but it does not scale to the mass market.

Instead, consumers want to be able to sign up for a variety of programs that enable elements of energy efficiency or demand response, or even create their own customizable programs. They want the ability to have their electrical/gas apparatus consume or reduce energy when:

  • Prices are cheaper;
  • The renewable energy mix is higher;
  • There are incentives to curtail consumption;
  • They are missing or exceeding their target monthly expense amount;
  • In competition with the neighbors; and
  • Any number of infinite and new methods that innovative companies will come up with to satisfy consumers’ ever-changing needs.

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This form of energy efficiency and demand response calls for a rich availability of information from the utility, but requires a relatively hands-off manipulation of this information. If real-time (or time of use) price signals, energy mix, auction-rates, real-time monthly billing and current consumption, and comparative information are all available, then the consumer gets what they want. And, to a much greater extent, so does the utility. If 20-50 percent of consumers participate to drive their individual consumption down, utilities and regulators also win: time-shifted consumption, renewable-driven consumption, less consumption at peak times and ultimately much more efficient consumption.

But do these benefits have to simply accrue to those utilities and consumers who are in emerging “smart grid” jurisdictions? What about all of those utilities and areas where AMR investments have been made over the past five to 10 years?

Consumer-Empowered Energy Efficiency and Demand Response for AMR-based Utilities

Many of the same benefits of consumer-empowered energy efficiency and demand response can be achieved by utilities with strong AMR investments.

The key to the approach of these programs lies in the availability of information. If the information can be brought into a residential household over existing network access methods, then virtually all of the same benefits can be experienced as those in a “smart grid” jurisdiction.


Because the focus is on the consumer. They engage with the same software on their mobile phone, PC, in-home display and smart thermostat as they do in a “smart grid” area. Most important, household consumption information can be read off the AMR meter by the same energy efficiency/demand response products; there is virtually no difference to the consumer experience when products are brought to bear.

This lends itself to the next question. If there are virtually no differences in the consumer experience, then what is the benefit of the smart grid for energy efficiency and demand response programs?

The major differences between the information flow to a smart grid home versus one to an AMR household relate primarily to security, reliability and availability. Assuming a home has broadband Internet access, a piece of information can be delivered into the home just as easily as it could over a “smart grid”. It will have to traverse the public Internet, requiring slightly more engineering work to secure the data and, even then, not be as completely secure as that information which traverses a completely private “smart grid” network.

Additionally, home broadband networks are not always available—they “go down” due to power failures or other network losses, whereas a private “smart grid” network is built to achieve a much higher level of reliability so information will always be present. The impact here, again, is on engineering a system which can survive such reliability lapses.

Lastly, and perhaps most importantly, is network availability—unfortunately not every residential consumer in the U.S. has or can afford full-time Internet access in their home. The “smart grid” network overcomes this availability issue by delivering network access to all homes in the jurisdiction and therefore does not appear to favor any one demographic group over another. These are all significant differences—but they have almost no impact on the consumer experience for energy efficiency and demand response.

So, the major drawback for an AMR-based utility is the fact that some small percentage of their consumer base will not have full access to all of the elements of energy efficiency and demand response (unless a third network access method, such as cellular, was procured). Is this really a drawback when the alternative is delivering none of the consumers in the jurisdiction these powerful capabilities?

With an in-home AMR meter reader and an in-home display, AMR-based utilities can offer any consumer in-home energy efficiency. This type of offering requires no outside information while delivering the consumer some mostly-real-time feedback about consumption and, thereby achieving the so-called “Prius Effect” to limit consumption. By adding a broadband gateway to the mix, the consumer can now have available all of the outside information affecting consumption. By adding smart thermostats, outlets, load controls, appliances and circuit breakers, these same consumers now complete the set-up with the ultimate consumer-empowered demand response. Systems need to be “plug and play,” extensible, easily modifiable and provide consumer choice and a wide variety of consumer value propositions.

Lastly, by using open standards-based technology, the AMR-based utility has a simple and easy transition plan for when its AMR depreciation schedule runs out and a smart grid is installed. A utility needs to just install the smart grid, and then deliver all of the same benefits to the consumer using an alternate more-secure, more-reliable and more-available network.

Today, any AMR-based utility can offer all of these benefits—and have a transition path to the future.

Energy Efficiency and Demand Response for All of Us

Many, many people in and related to the energy industry want to achieve a greater level of consumer awareness, energy efficiency and reduction in carbon emissions. Governments are increasingly creating incentives and regulators are increasingly driving the presence of variable pricing, energy efficiency portfolio standards and the need for demand response.

The good news for all of us is that we don’t have to wait. By focusing on the consumer experience and delivering all of the same benefits to consumers in both current AMR as well as future “smart grid” jurisdictions, the industry and our country can make substantially greater progress toward an energy independent, energy efficient and carbon-reduced future.

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About the Author:
Tim Enwall is president and chief operating officer of Tendril, a residential energy management systems company based in Boulder, Colo.

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