A smarter power grid has a lot to offer the Pacific Northwest as the region adds more wind and solar energy to meet renewable energy mandates. Smart grid technology can help store and balance these variable sources of energy and deliver them more efficiently. And it could ultimately help alleviate the need to build new gas-fired power plants and transmission lines.
In some ways, the Northwest grid is getting smarter, but it’s lagging behind other regions on the more exciting (and controversial) smart grid technologies that put the average home on a two-way communication system with grid managers.
The potential: Big energy savings
The vision for this kind of smart grid technology is a world where everyone’s homes, workplaces, computers and smart phones are seamlessly wired into the electrical power system for maximum efficiency.
People would be able to schedule smart appliances to use renewable energy when it’s abundant and prices are low. They could sell the battery power of their electric cars when they’re not driving. They would be able to see on their smart phone how much power their house is using, and how much they could save by dialing down the heat or running appliances at night.
The technology exists. The potential is here. But the reality is different for the Pacific Northwest than it is elsewhere around the country. Experts say the Northwest will continue to lag behind California, New York, Illinois, and most of Europe in using smart grid technology at home.
The reality: Price matters
Why are we lagging? Because in reality, all these new home technologies are spurred along by one x factor: The price of power. And, more specifically, the difference between the price of power at the peak of demand and the off-peak price. That difference determines how much people can save by shifting their power use to off-peak hours. And those savings are the incentive for people to invest time and money in smart grid technology at home.
In reality, the Pacific Northwest has relatively cheap power at prices that generally don’t swing wildly between the middle of the day and the middle of the night. In reality, many people don’t really want to think about the price of powering each individual appliance in their homes or spend more money on smart appliances. And some don’t want to risk having their personal information hacked through a two-way electric meter. The payoff is a key selling point.
That’s what Pat Egan has found in examining smart grid systems for Pacific Power.
The cost-benefit analysis
“Our power system makes smart grid a greater challenge for us. We don’t have the price incentives.” —Bob Procter, Oregon Public Utility Commission.Pacific Power is considering its options for installing two-way smart meters in homes across the region. Egan said the problem is that installing the meters costs money, and once they’re installed they collect a lot of data that needs to be stored and managed. That also costs money.
“It’s that massive amount of data that you have to manage, house and do something with that keeps our folks up at night,” he said. “The real question is what’s the actual cost, what’s the actual benefit, and what are people actually going to do with smart grid technology?”
There are several ways of putting smart grid technology to work through home electricity meters. One is to have a one-way radio signal that sends information about home energy use to the utility. There are a lot of savings in that system for utilities; it saves them from paying people to drive around and check everyone’s meters.
Then there’s the two-way system that sends information both ways and would send customers price signals and invite more interaction between customers, grid managers, and smart appliances.
Egan said regular meters cost $30 to $40; one-way meters are around double that price; and two-way meters that have the ability to manage appliances are around triple the price.
“There needs to be at least that much benefit,” Egan said. “If we put all the technology out there and incur all the cost, we need to be able to say to the Public Utility Commission and our customers, ‘There’s the benefit – as opposed to building new generation or making other investments.’ Right now it kind of doesn’t work out that way.”
Why doesn’t it pencil?
Bob Procter, a senior economist with the Oregon Public Utility Commission, said peak power prices in California and other regions is between three and 10 times more than the off-peak prices.
In the Pacific Northwest? It’s hardly even double. Peak prices here range from $30 to $35 per megawatt hour; off-peak prices range from $15 to $25.
“Our power system makes smart grid a greater challenge for us,” said Procter. “We don’t have the price incentives. We have a lot of hydropower; we’ve got all these transmission lines all over the place that we can use to move power around. So, we may be slower here in adopting smart grid measures to improve the efficiency of our electric system. There’s a whole lot more happening in other places compared to what’s happening in the Northwest.”
That’s essentially what Federal Energy Regulatory Commission Chairman Jon Wellinghoff told me earlier this year, but he also proposed a solution.
Wellinghoff said unlike other regions, the Pacific Northwest doesn’t have a voluntary competitive energy market that would set real-time, regional prices for power and balance supply and demand.
“I think those systems will provide for efficiencies and savings on one hand,” he said. “And they will also enable things like demand response and electric vehicles – and other things on the consumer side to participate in those markets. By participating, they lower their costs and create businesses that can scale those kinds of technologies into the consumer market so consumers can continue to control their energy costs. Without those kinds of structures – without a market like we have in the Eastern states and in the Northeast and Midwest and throughout California and Texas – you cannot effectively have the types of economic drivers that will allow that technology to scale. Demand response and smart grid will not scale unless you have those markets in place.”
All in good time?
Power managers in the Northwest are looking more and more toward trading power generation and transmission capacity with each other to balance the ups and downs of renewable energy in smaller sections of the Northwest grid. Wellinghoff said this so-called “power imbalance market” could substitute for the independent power markets that other regions already have in place. But we’re not there yet.