U.S. Smart Grid Market –A Customer Perspective on Demand Side Management

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“Partnering with Clients to Create Innovative Growth Strategies” © 2010 Frost & Sullivan. All rights reserved. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan U.S. Smart Grid Market –A Customer Perspective on Demand Side Management June, 2010

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Frost & Sullivan analyzes the U.S. smart grid market.

Transcript of U.S. Smart Grid Market –A Customer Perspective on Demand Side Management

Page 1: U.S. Smart Grid Market –A Customer Perspective on Demand Side Management

“Partnering with Clients to Create Innovative Growth Strategies”

© 2010 Frost & Sullivan. All rights reserved. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan

U.S. Smart Grid Market –A Customer Perspective on Demand Side Management

June, 2010

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Focus Point

• Understanding Objectives for Utilities

• Market Definition for Demand Response

• A Customer Perspective on Smart Grid

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Primary Objectives for Utilities

Increase Power Availability

-by minimizing interruptions in power delivery

Improve Energy Efficiency

-by reducing waste in power delivery and energy losses

Accommodate Renewable Power

-Prevent congestion on the power lines and interruptions

Preparing for Growing Power Load

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State Level Regulatory Acts

Renewable Portfolio StandardsRenewable Portfolio Standards Market AdoptionMarket Adoption

• Renewable Portfolio Standards (RPS) requires electric utilities to have a certain amount of their electricity come from a renewable source:

• Wind• Solar• Biomass• Geothermal sources

• Utilities need to meet this goal as soon as 2015.

• Renewable Portfolio Standards (RPS) requires electric utilities to have a certain amount of their electricity come from a renewable source:

• Wind• Solar• Biomass• Geothermal sources

• Utilities need to meet this goal as soon as 2015.

• Overall close to 29 states have a renewable manadate, while an additional six states have renewable goals without a financial penalty.

• Goals by 2015• Michigan: 10%• Montana: 15%• Nevada: 20%• New York: 24%

• Overall close to 29 states have a renewable manadate, while an additional six states have renewable goals without a financial penalty.

• Goals by 2015• Michigan: 10%• Montana: 15%• Nevada: 20%• New York: 24%

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State Level Regulatory Acts

Energy Efficiency Resource StandardsEnergy Efficiency Resource Standards Market AdoptionMarket Adoption

• Energy efficiency resource standard (EERS) in place is designed to reduce or flatten electric load growth through energy efficiency measures.

• In some instances, states have expanded their renewable portfolio standard to include energy efficiency.

• Energy efficiency resource standard (EERS) in place is designed to reduce or flatten electric load growth through energy efficiency measures.

• In some instances, states have expanded their renewable portfolio standard to include energy efficiency.

• Maryland requires statewide peak demand and electricity reduction of 15 percent by 2015. This includes peak demand reduction of 5 GW and electricity savings of 10.5 GWh.

• Texas electricity-restructuring laws require electric utilities to offset 10 percent of their demand growth through end-user energy efficiency.

• In Pennsylvania, the Act 129 of 2008 requires 3 percent electric consumption and 4.5 percent peak demand reduction by 2013.

• Maryland requires statewide peak demand and electricity reduction of 15 percent by 2015. This includes peak demand reduction of 5 GW and electricity savings of 10.5 GWh.

• Texas electricity-restructuring laws require electric utilities to offset 10 percent of their demand growth through end-user energy efficiency.

• In Pennsylvania, the Act 129 of 2008 requires 3 percent electric consumption and 4.5 percent peak demand reduction by 2013.

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Power Transmission & Distribution Energy

Storage & Distributed Generation

HAN Appliances

Consulting & Systems

IntegrationDemand &Response

Software

Network & Connectivity

Meter Manufacturers

Smart Grid

Smart Grid Web

Smart Grid Components

The Smart Grid consist of a web of technologies aimed at automating, improving efficiency, and increasing availability of the electric grid ranging from generation, transmission, and distribution levels.

Automation also includes tools to conduct predictive, preventative and supply analysis based on data collection that is conducted at the transmission and distribution level.

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Core Technologies

Advanced Meter InfrastructureAdvanced Meter Infrastructure Market AdoptionMarket Adoption

• AMI supports bi-directional information flow from the smart meter at the customer site back to the utility business system.

• Through AMI, utilities will be able to record electricity usage on a time differentiated basis.

• AMI enables information exchange between the electricity supplier and the customer.

• AMI is also expected to aid the adoption of renewable power.

• AMI supports bi-directional information flow from the smart meter at the customer site back to the utility business system.

• Through AMI, utilities will be able to record electricity usage on a time differentiated basis.

• AMI enables information exchange between the electricity supplier and the customer.

• AMI is also expected to aid the adoption of renewable power.

• There are approximately 2.7 billion meters worldwide and only 8 percent of these meters are automated.

• In North America the meter market is expected to generate $950 million by 2010.

• Europe were early adopters of smart meters with Italy and Sweden taking the lead.

• In Asia growth is expected to be driven by AMI rollout in South Korea, Australia, New Zealand, and Japan.

• Australia is expected to replace roughly 10 million meters between 2011 and 2012.

• There are approximately 2.7 billion meters worldwide and only 8 percent of these meters are automated.

• In North America the meter market is expected to generate $950 million by 2010.

• Europe were early adopters of smart meters with Italy and Sweden taking the lead.

• In Asia growth is expected to be driven by AMI rollout in South Korea, Australia, New Zealand, and Japan.

• Australia is expected to replace roughly 10 million meters between 2011 and 2012.

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Core Technologies

Demand Side Management (Demand Response)

Demand Side Management (Demand Response) Market AdoptionMarket Adoption

• Peak load power management program. • Programs are differentiated by the tools

and incentive plans offered for reducing peak power periods.

• With the advent of smart meters, utilities will be able to offer dynamic pricing programs to residential customers to offset peak power usage.

• Peak load power management program. • Programs are differentiated by the tools

and incentive plans offered for reducing peak power periods.

• With the advent of smart meters, utilities will be able to offer dynamic pricing programs to residential customers to offset peak power usage.

• There is evidence that rolling out smart meters without power management programs may result in negative return on utility investment in the programs.

• AMI and power management programs must be integrated in a utility’s smart grid strategy in order to meet some of the expectations placed on it.

• There is evidence that rolling out smart meters without power management programs may result in negative return on utility investment in the programs.

• AMI and power management programs must be integrated in a utility’s smart grid strategy in order to meet some of the expectations placed on it.

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Demand Side Management

“Demand Response is a temporary change in electricity consumption by Demand Resources in response to market or reliability concerns” –National Institute of Standards and Technology

Interruptible tariffs

Other DR

Programs

Direct load control

Dynamic pricing with

enabling technology

Dynamic pricing

without enabling

technology

Demand Response

Demand Response Market Categories (United States), 2009

Source: Frost & Sullivan

Provides the advance notice that the price rate for electricity will be lower during certain periods of the day, and subsequent manual adjust of power usage

Could involve a smart thermostat, or a programmable switch that is connected to major home appliances such as air conditioner, heater, etc., that is programmed to automatically lessen power use based on information received directly from the utility company detailing peak and off-peak power prices.

Incl. capacity and demand bidding

The ability, or more importantly, the permission for a utility company to cycle on and off appliances (air conditioners, dryers, etc.) for brief periods during peak usage times in return for lower utility bills.

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Typical DR Model:

Shared Savings Model

• Power dispatchers typically monitor electricity usage and alert their customers to reduce their power usage during peak periods to avoid escalation of brownouts or blackouts.

• In return, grid operators or utilities pay power dispatchers a stream of recurring revenues for managing this demand response capacity, such as on a monthly basis.

• Power dispatchers make payments to commercial, institutional, and industrial end users of electricity for both contracting to reduce electricity and actually doing so when called upon.

Demand Response Market Participants

Source: Frost & Sullivan

Demand Response Market Participants (United States), 2009

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Customer Groups

10%

90%89%

11%

Residential

C&I

2009

2016

All figures are rounded; the base year is 2009.

Source: Frost & Sullivan

Demand Response Market: Percent by Customer Group (United States), 2009-2016

Residential Sector

Early commercialization stage. In majority of the places demand response is being pilot tested and is in the evaluation phase

C&I Sector

Is an established market with set protocols.

Majority of C&I consist of medium and large industrial customers. However, more recently hospitals, school districts, high schools, government buildings have been signing on.

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Demand Response Programs (N=600)

60%

77%

78% 7%

9%

22% 18%

14%

15%

0% 20% 40% 60% 80% 100%

Yes No Don't know

Customer Participation

Direct load control (also called demand-response -- appliances that can be cycled on and off by the electricity supplier during times of peak load) is a possible aspect of Smart Grid technology. If your electric utility offered to either cycle central air conditioners off and on for brief periods during peak usage times in return for lower utility bills, would you sign up for such a program?

Dynamic pricing with enabling technology (Smart Appliances, Smart Thermostats) is a possible aspect of Smart Grid technology. If you were equipped with a smart thermostat or a programmable switch that is connected to your major home appliances such as air conditioner, heater, etc., would you program it to automatically lessen power use based on information received directly from the utility company detailing peak and off-peak power prices (off-peak prices are lower than peak prices)?

Dynamic pricing without enabling technology is a possible aspect of Smart Grid technology. If you were given a day advance notice that the price rate for electricity will be lower during certain periods of the day, would you manually adjust your power usage (i.e., such as running appliances during off-peak hours, turning off air conditioning or adjusting the temperature, etc.)?

Source: Frost & Sullivan

Most respondents are willing to participate in the varying demand-response programs. However, the price points at which respondents would participate vary considerably. Dynamic Pricing With or Without Enabling Technologies are most popular.

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Customer Participation

Demand Response Programs (N=600)

12%

12%

22%

13%

20%

24%

12%

11%

15%

16%

19%

18%

7%

15%

7%

9%

22% 18%

14%

15%

0% 20% 40% 60% 80% 100%

Yes, even if there was no savings Yes, if savings was $1-$15 per month Yes, if savings was $16-$30 per monthYes, if savings was $31-$45 per month Yes, if savings was $45 or more per month NoDon’t know

Direct load control (also called demand-response -- appliances that can be cycled on and off by the electricity supplier during times of peak load) is a possible aspect of Smart Grid technology. If your electric utility offered to either cycle central air conditioners off and on for brief periods during peak usage times in return for lower utility bills, would you sign up for such a program?

Dynamic pricing with enabling technology (Smart Appliances, Smart Thermostats) is a possible aspect of Smart Grid technology. If you were equipped with a smart thermostat or a programmable switch that is connected to your major home appliances such as air conditioner, heater, etc., would you program it to automatically lessen power use based on information received directly from the utility company detailing peak and off-peak power prices (off-peak prices are lower than peak prices)?

Dynamic pricing without enabling technology is a possible aspect of Smart Grid technology. If you were given a day advance notice that the price rate for electricity will be lower during certain periods of the day, would you manually adjust your power usage (i.e., such as running appliances during off-peak hours, turning off air conditioning or adjusting the temperature, etc.)?

Slight price point variations exist. Yet, Direct Load Control is the least popular option, with 22 percent having no interest.

Source: Frost & Sullivan

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Motivators and Challenges for Residential Customers

Upgrades electric grid

14%

Reduces DependenceOn foreign

oil16%

Increases reliability of

electricitysupply

18%

Increases efficiency of electric grid

21%

More informationOn energy

consumption 23%

Get more Control of electric bill

38%

Reduce electric

bill 54%

Motivators

Too complex7%

Don’t want tochange energy

habits10%

Don’t seebenefit

13%

Don’t UnderstandSmart Grid

30%

Not Offered In my

community34%

“Big Brother” concerns

36%

Think cost too high

44%%

Challenges

Reasons for Not Participating in a Smart Grid Technologies (N=600)

Perceived Benefits Smart Grid Technologies (N=600)

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Conclusions

Frost & Sullivan projects that sales for the smart grid market will flourish in the coming years.

The market is still in very early stages of implementing a true smart grid.

Support from the stimulus funding and the drive for utilities to enhance its customer service operations improve energy efficiency increase automation save the environment

- has and will create growth opportunities for energy as well as non-energy industries.