DemandSide_Management.pdf

20 1 unlocking energy efficiency in the us economy

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–20% 1 Unlocking Energy Efficiency in the U.S. Economy, McKinsey Global Energy and Materials, July 2009.
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43 The smart grid and the promise of demand-side management Two-way networks. Smart grid networks allow utilities to collect usage data and verify reduced demand (load shed), as well as send time-of-use rates and other information to the customer. Network costs are low enough to justify near- ubiquitous deployment, allowing utilities to communicate in near real time with their entire customer base. Integration of utility information systems. The smart grid is driving utilities to stitch together many disparate information technology solutions into highly capable decision engines. By communicating the underlying cost of electricity, utilities can begin to develop a comprehensive view of their customer base, and build targeted programs to appeal to specific segments of customers. Shifts in customer behavior. The availability of real-time data on energy costs and consumption comes at a time when customers are increasingly aware of the cost and environmental impact of their energy usage, and have begun to expect price fluctuations and an ability to respond to price. Regulatory changes. Some states, including California, have enacted decoupling regulations that allow utilities to recover revenues lost due to DSM programs. Utilities and regulators have also explored opportunities to use demand response as another source of generation through “negawatts,” or the ability to reduce load upon request. Some states and regional grid operators, such as the New England ISO’s Ancillary Services Market Project, allow utilities to bid demand response capacity into the wholesale market as if it were generation. This encourages utilities to pursue DSM opportunities, and may improve the efficiency of the market as a whole. Capabilities required While smart grid technologies will make these savings possible, utilities will have to build new capabilities to capture the potential benefits fully. A primary focus will be on augmenting program design functions to enable the micro- targeting of customers. Increase the number of products and programs. Smart grid technology will slash the cost of developing, managing, and refining DSM programs. Smart meter networks provide near-ubiquitous connectivity to electric meters, which increases the ability to verify impact, and makes it easier to test and refine different design options. Lowering the cost of deploying DSM programs not only will make it cost effective to provide offerings to the mass market, but it will also enable utilities to use the demographic data they gather to target micro-segments of their customer base with tailored programs. Manage a partner ecosystem. Many utilities and regulators predict smart grid networks will become open platforms that allow third-party development of energy management applications.
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