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Incentives Needed For Consumers To Support Grid Evolution

Originally published on ABB Conversations.
By Jochen Kreusel.

A major topic at the recent World Energy Congress in South Korea was how consumers can help integrate more renewable energy into the power grid

More than 7,000 people from around 120 countries attended the 22nd World Energy Congress in Daegu, South Korea, from October 13 to 17, 2013. The conference focused on the energy “trilemma”, meaning the conflicting requirements involved in supplying the still rapidly growing demand for energy in a secure, equitable and sustainable way.

Discussions ranged from the question of a renaissance in nuclear energy to the strong push of renewable energy in developed countries, to the rapid growth of demand in the emerging world, to the United Nations’ program Sustainable Energy For All (SE4ALL).

I was invited to participate in the panel discussion “Game Changer: Smart grid: Energizing social innovation”, which was driven by the assumption that consumers can help integrate more renewable energy into power systems. It also focused on the idea that getting consumers more interested and active might have social consequences that go beyond the economic and technical needs of power supply.

Consumer participation – Why don’t we care how we consume electricity?

The idea behind consumer participation is that if we want to use more renewable energy and maintain the reliability of power supplies, our electricity system must evolve. Since renewables provide a less predictable power supply than fossil fuels, electricity utilities are expected to try to influence when and how power is consumed. Pilot projects have shown that this is feasible, but also that consumers are often not particularly interested in participating.

This insight was the starting point for our discussion. I believe that before utilities can hope to gain more influence on consumption, they must first accept that consumers will expect to see tangible benefits, for example in the form of lower electricity bills or improved security of supply (where this is an issue), perhaps coupled with motivating comparisons of performance relative to peers. This means that before talking about deploying infrastructures to enable demand response, service providers should think about what could be attractive to consumers.

There are examples in the United States of the successful deployment of solutions giving utilities more influence over demand. States with regulatory frameworks that incentivize power distribution companies to reduce peak demand have enabled business cases that lower cost for participating customers as well as themselves.

Baltimore Gas and Electric Co. (BGE), for example, offers the PeakRewards initiative to reduce or defer the need for new transmission and generation capacity, and help customers save on power bills. It has signed up over 500 MW of peak-load control and has a penetration rate of 40 percent among residential customers with central air conditioning (see here for more).

In short, when talking about influencing demand, the focus should be on creating a legal and regulatory framework which enables utilities or other service providers to create value for their customers, instead of on how to roll out and fund the infrastructure.

As a consumer, I want companies to show me the benefits I can have before I adapt my consumption patterns: don’t you?

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