How Private Innovation Leapfrogged Political Plans for Smart Meters

The 21st century has been a time of change and opportunity for the U.S. electrical grid.

New technologies have expanded the ability of utilities to engage electricity consumers in conserving energy and reducing electricity demand during peak hours. Innovations are providing consumers more information about how and when they use electricity. Innovations are also giving customers more control over their own power consumption.

A decade ago, the deployment of smart meters was expected to be an important part of that change. Smart meters, it was claimed, would help consumers save energy by providing price transparency and information about how homeowners use energy.

In 2009, President Barack Obama outlined his hopes for the new technology. “Smart meters,” he explained, “will allow you to actually monitor how much energy your family is using by the month, by the week, by the day, or even by the hour.” The change was presented as a dramatic improvement over the existing system in which people receive a bill at the end of the month and had to figure out what was driving their costs.

A decade later, however, the promise of smart meters has not been fulfilled. The Center for Growth and Opportunity’s newly released study, “Leapfrogging Smart Meters,” explains how private innovation quickly surpassed smart meter technology and today is more effective at helping consumers manage their electricity use.

As the United States increases its reliance on intermittent sources of power such as wind and solar, there is an increasing need to shift consumer demand to match supply. Currently, peak electricity demand typically occurs in the early evening, about 6 p.m.

Even in California, which has far more solar capacity than any other state, solar generation has declined significantly at that hour, and wind production is also typically low. Increasing storage capacity is one option, but helping consumers shift their energy use to earlier or later in the day would reduce the need for non-renewables.

As my research demonstrates, smart meters have not successfully encouraged homeowners to shift their electricity demand.

The Long Island Power Authority experimented with smart meters, giving consumers a webpage to track their energy use patterns. The utility combined the information with a pricing system that increased the cost of electricity during peak demand. The utility found, however, that many people forgot they had the smart meters and that “frequent and creative reminders” were necessary to get them to engage.

Similarly, in Oregon, Portland General Electric provided smart meters to customers combined with increased prices during peak demand. They found the pricing system confused people, leading to only modest improvements in behavior.

By way of contrast, private innovation of smart thermostats, such as Google Nest and Ecobee, are far more successful at helping people shift demand. After the disappointing smart meter experiment, Portland General Electric joined with Google Nest to offer rebates for homeowners who shifted their energy use to off-peak hours. Called “Rush Hour Rewards,” homeowners could volunteer to have the system automatically adjust their thermostat during periods of high demand, and the utility would provide a small rebate on their utility bill.

The program reduced average demand by 20 to 30 percent in the first hour and a similar amount in the second hour. Southern California Edison, which serves a large portion of the state northeast of Los Angeles, found that people with smart thermostats were twice as successful at reducing electricity use during periods of high prices than those without.

Providing homeowners with technology tools and price transparency helps reduce electricity costs and will be necessary as unpredictable and intermittent renewable energy sources become more prevalent. The most successful technologies that adjust to this changing reality are likely to come from private entrepreneurs outside the existing utility structure, rather than from within the existing politically regulated framework.

As politicians and regulators consider how to accommodate the power variations that come with renewables, they should keep the lesson of the last decade in mind. Rather than assuming we can accurately plan for the future based on today’s technology, the best way to integrate renewables and empower consumers is to create flexible systems that make it easier to integrate innovation that is unimaginable to us today.


Todd Myers is the director of the Center for the Environment at Washington Policy Center in Seattle and author of the Center for Growth and Opportunity at Utah State University paper “Leapfrogging Smart Meters.”

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