AMI as demand response enabling technology
Among the myriad benefits ascribed to advanced metering infrastructure (AMI) by utility professionals, industry observers, policymakers, and smart grid advocates, is an expansion of demand response programs and practices. Demand response consists of changes in patterns of end-use electricity consumption triggered by changes in the price of electricity over time or incentive payments. (This is distinct from energy efficiency, which involves efforts to increase the level of service output for a given level of consumption.) The primary goal of demand response programs is to reduce load during periods of peak demand, thereby enhancing system reliability and diminishing the need to construct additional generating capacity.
Demand response programs such as time of use (TOU) rate structures and critical peak pricing (CPP) schemes have existed for decades, but implementation has mainly been restricted to large commercial and industrial customers. Limited participation in demand response programs has resulted from a preoccupation with demand reduction combined with the relatively high costs (and limited functionality) of equipment required to facilitate demand response. This circumstance has led program designers and managers to direct their efforts toward commercial and industrial customers, as the most cost-effective way to dampen or shift load.
However, smart meters and other AMI systems are widely viewed as enabling technologies for demand response that will permit greater and more effective use of demand response strategies. Two-way communications, intelligent networks, and multifunctional technologies will allow for demand response programs that are both more extensive and more efficient. Demand response programs built on AMI will not only promote increased participation by commercial and industrial customers, but will foster the integration of residential customers into demand response programs. The present article takes a closer look at specific ways in which AMI is enabling demand response, and considers the extent to which the potential of advanced meters and associated technologies to enhance demand response is being realized.
AMI technologies
Demand response expansion and improvement is premised on the advanced equipment and systems collectively referred to as AMI. These include smart meters, modules and interface units, Local Area Networks (LAN) and Wide Area Networks (WAN), communication technologies, network management platforms, and integration frameworks. In recent years, AMI deployment has entailed the development and installation of many products that are particularly suited to the needs of demand response programs.
One example is the PowerPortal Home, an in-home display (IHD) developed by Comverge. The PowerPortal Home provides residential customers with information on current energy usage and energy prices, as well as messages from utilities. The display is designed for use with ZigBee, and utilizes the smart energy wireless profile. By supplying consumers with real-time data and alerting them to utility developments, the PowerPortal Home makes possible the fuller application of TOU pricing, CCP, real-time pricing (RTP), and other forms of demand response to the residential market.
Expanding the reach of demand response to the residential customer base is also facilitated by SmartSynch’s Direct Connect eXternal (DCX) external interface. The DCX is a "wireless pipe" that is capable of communicating via public wireless networks with any device on the grid, using any protocol or messaging scheme. The DCX permits utilities to quickly and efficiently deploy a wide variety of applications to the grid. In particular, the interface allows for the remote retrieval of energy, demand, and interval data from residential customers in support of demand response programs.
Comverge has also led in the development of software designed to interweave AMI and demand response. The company’s Apollo Demand Response Management System provides utilities with demand response tools such as direct load control, price response, and messaging, permitting improved management of residential and commercial demand. The Apollo platform relies on open architecture, integrated support for a broad array of communications technologies and legacy demand response equipment, and real-time operational performance analysis and optimization. The Apollo system is one of the first platforms specifically intended to improve demand response programs through smart grid applications.
Demand response programs
AMI components have been incorporated into many demand response programs in order to improve program effectiveness. The direct load control program implemented by Florida Power & Light (FPL) is one prominent example. FPL has installed 800,000 control devices in residential units, employing the Two-Way Automatic Communications System (TWACS) produced by Aclara. FPL has also installed 500 devices for commercial and industrial customers, using a Commercial and Industrial Load Control (CILC) system. Equipped with this technology, FPL is capable of controlling up to 2000 MW of residential load and up to 500 MW of commercial/industrial load. The program is responsible for a ten percent load reduction in FPL’s service territory, and represents the largest load control program in the world.
In Washington, DC, eMeter Strategic Consulting and UtiliPoint International are jointly managing the PowerCentsDC residential demand response pilot program on behalf of a public-private consortium that includes Pepco Holdings. The program offers its 1,200 participants three different residential rate options: hourly pricing, CPP, and critical peak rebate. PowerCentsDC operates using technology provided by two AMI vendors, Sensus and Mincom. Sensus is providing advanced meters and a radio communication network, and Mincom has integrated its SmartBill system with Pepco’s legacy system in order to incorporate the three program pricing options.
Pepco is combining AMI and demand response in Washington’s Maryland suburbs as well. The utility recently entered into a five-year agreement with Comverge to provide full turnkey demand response services using Pepco’s future Maryland AMI system. In addition to the PowerPortal IHD and Apollo platform systems discussed above, Comverge will deploy its Dual Mode Digital Control Unit incorporating both VHF and ZigBee communications channels. It is anticipated that the program will provide Pepco with up to 200 MW of peak load reduction. Comverge’s contribution represents the successful bundling of AMI products and demand response services as a single, comprehensive package offering multiple benefits to utilities and customers.
Overall trends
Apart from technological developments and program innovations, broader indicators also suggest that AMI is enabling more effective use of demand response. In a recent report titled "Demand Response and Smart Metering Policy Actions since the Energy Policy Act of 2005," the National Council on Electricity Policy (NCEP) documented a proliferation of demand response and smart grid policies at state and federal levels. The report noted a growing complementarity between smart grid and demand response policies, and observed a convergence between the two policy spheres. NCEP attributed these trends in large measure to state implementation of demand response and smart metering provisions contained in the Energy Policy Act of 2005 (2005 EPACT).
In a discussion paper titled "The Power of Experimentation," the Brattle Group examined the extent to which AMI is promoting demand response among residential customers in particular. The authors examined fourteen separate residential demand response pilot programs ("pricing experiments"), and concluded that dynamic pricing is effective in reducing residential electricity consumption. Furthermore, AMI is particularly helpful in reducing peak load: "Based on the pilot results, the combination of dynamic prices with enabling technologies appears to be the most effective program design for reducing electricity usage during high-priced periods." While residential TOU rates alone reduce peak consumption by five percent, when they are paired with AMI, peak demand falls by 25 percent.
The staff of the Federal Energy Regulatory Commission (FERC) reached similar conclusions in its "2008 Assessment of Demand Response and Advanced Metering." Advanced metering penetration and demand response participation have both risen in recent years. However, the report observes, "Enabling technology, such as advanced metering infrastructure, … is necessary in order to fully develop demand response at the residential level. Without enabling technology, utilities are less able to facilitate customer response, measure reductions in consumption resulting from demand response programs, and compensate customers for these reductions." The staff recommended that FERC take additional steps to more closely integrate demand response and smart grid initiatives.
Similarly, the Demand Response and Smart Grid Coalition (DRSG, formerly known as the Demand Response and Advanced Metering Coalition or DRAM) recently issued a number of recommendations for both the Obama Administration and Congress, advocating robust policies to promote demand response and advanced metering. DRSG emphasized the mutually reinforcing relationship between demand response and AMI. The Coalition identified multiple concrete actions that would serve to advance both these policy goals.
Barriers remain
Despite these positive trends, a number of barriers remain that impede the capacity of AMI to fully empower demand response strategies. Most of these barriers derive from problems associated with AMI deployment. AMI technology remains relatively expensive, and considerable uncertainty exists among utilities regarding cost recovery. Apart from the high cost of advanced meters and associated equipment, there is a prevailing concern about technology obsolescence given the rapid rate of innovation. Process issues pose additional obstacles. No consensus exists on the benefit streams that should be included in AMI business cases. Agreement is also lacking on appropriate cost-effectiveness methods for screening demand response programs with enabling technology.
Limited deployment of AMI restricts the effectiveness of demand response in numerous ways. Dynamic pricing programs are difficult to implement using mechanical meters. Customer demand responsiveness declines in the absence of real-time data. Insufficient data also restrict the participation of demand response resources in organized markets. In particular, lack of transparency hampers the efforts of demand response aggregators to compete at the wholesale level.
So long as AMI deployment is obstructed, demand response programs are unlikely to realize their full potential to reduce or otherwise shift load during periods of peak demand. Nevertheless, even under today’s restrictive conditions, new products and services are being unveiled, and demand response programs are being created or updated. Moreover, evidence demonstrates that demand response, particularly among residential customers, is growing in terms of both participation and impact. Removing barriers to investment in AMI, and increasing AMI spending, will serve to accelerate these encouraging developments.
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