See the box on the following pages the six levers of

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(see the box on the following pages, “The Six Levers of Effective Demand-Side Management”). The first wave of DSM programs were limited by the technology available –measurement and verification efforts were time-consuming and Exhibit 1 How it works DSM means load shifting, energy efficiency, and energy conservation Critical peak shift Daily peak shift Energy conservation Energy efficiency Shifting customer demand during the ~20 hours per year with the highest demand for electricity Shifting customer demand during the ~1 hour per day with the highest demand for electricity Reducing overall demand for electricity by reducing the amount of utility the customer receives Reducing overall demand for electricity while maintaining the amount of utility the customer receives Increased customer satisfaction through an easy-to-use, more controllable energy offering Description Impact area Load shifting Energy efficiency and conservation (load reduction) The major impact areas of demand-side management
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40 McKinsey on Smart Grid Summer 2010 Based on our work with major utilities, we have identified six key levers of successful DSM initiatives: rates, incentives, access to information, technology and controls, education and marketing, and customer insight and verification. Each lever has a distinct impact on customer behavior, and, depending on the circumstance of the particular utility, such as its customer base and geography, certain combinations of actions within and across levers will produce greater results. Rates. Utility tariffs are already designed to achieve a range of objectives, from making electricity more affordable for lower- income customers to making electricity prices better reflect the cost of generation. Fully 60 percent of the benefit from demand response predicted by FERC for 2019 will come from altered pricing programs. Utilities will need carefully to tailor their tariff designs, including opt-in or opt-out participation, to yield the desired behavior. Utilities (and their regulatory partners) must also account for the winners and losers in any rate design and ensure that particular segments, such as socio-economic classes, do not bear unnecessary costs. Incentives. To encourage participation in demand-side management programs, utilities have found that rebate checks, compensation for participating in a pilot, or free technology such as an in-home display can increase customer adoption. Access to information. When consumers have access to real-time information they become much more aggressive about managing their usage. In a series of pilots conducted by Hydro One in Canada, customers reduced their electricity consumption by 6.5 percent based on information provided through an in-home display. OPower, a smart grid information services company, has developed software that analyzes a customer’s bill and compares usage to other customers in the area with similar attributes such as house size. The utility can then provide recommendations on how to reduce energy use.
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  • One '14
  • McKinsey & company, smart grid

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