FALMOUTH – Recent questions about smart meters have overshadowed the many ways in which this technology can reduce costs for consumers while benefiting the environment.

While serving in the state Legislature, I introduced Maine’s first bill to promote smart meters. I was convinced that smart meters could help cut energy costs and lower the environmental impact of fossil fuel-generated electrical power.

Although the bill did not pass, it did set the stage for the deployment of thousands of smart meters across the state.

The value of smart meters comes from the unique characteristics of the electricity market. The wholesale production of power varies from hour to hour – sometimes substantially. Compared to peak afternoon power, electricity generated at night is cheap, plentiful and clean.

But residential customers pay a single rate for power no matter when it is used.

For years large industrial and commercial consumers of electricity have saved money by shifting their use to less expensive periods of the day. To make that possible, meters must record not only the amount of power used, but when it is used.

That is what the smart meter can do. In addition, the retail price of power must be pegged to the wholesale price at that time of day. That is what variable “time-of-use” pricing does.

Although variable pricing may sound like a bold innovation, it is commonplace in other markets, including airline flights, ski lift passes and theater tickets. Some toll booths now have “congestion” pricing to encourage motorists to drive when the roads are less busy – reducing the expense of building new lanes.

Nearly everyone with a landline or cell phone – where evening and weekend calls are free or deeply discounted – is already using variable pricing.

Until recently there was no way to implement variable pricing for residential electric power. With smart meters, however, homeowners can enjoy off-peak discounts just as industrial and commercial consumers do.

The possible discounts are substantial. A 2007 Carnegie Mellon study estimates that smart meters could help American consumers save $23 billion each year by shifting just 7 percent of their consumption to off-peak times. Right now, some customers in Oregon pay 66 percent less for power used between 10 p.m. and 6 a.m.

It would not be difficult to schedule laundry, dish washing or water heating appliances to operate during off-peak hours. Other potential applications include night-time charging of electric vehicles, and the use of electrically heated thermal storage devices.

These technologies will succeed or fail on their own merits, but why not remove artificial barriers such as a single rate structure that does not reflect economic reality?

Since off-peak power is inherently cheaper, shifting demand away from the busiest hours of the day does not necessarily mean that prices will rise for others. In fact, even those who do not take advantage of variable pricing may see lower bills.

This is because reducing peak power usage helps prevent the need for expensive new power plants – a cost passed on to all consumers.

The combination of smart meters and variable pricing gives consumers greater control. It adds economic efficiency to the electric power marketplace while also increasing competition, forcing those who sell power to pay more attention to the needs and interests of those who buy it.

Smart meters also promote fairness. Why should consumers pay the same for power late at night, when it is cheaper to produce, as they do for peak power? When technology exists to give consumers greater control over their electricity use, why should cost-conscious consumers subsidize others?

And smart meters increase consumers’ awareness of their consumption patterns, leading to greater adoption of efficient lighting and appliances.

Equally important, smart meters will help reduce power plant emissions and increase energy security because off-peak power is less reliant on dirtier fuels. The Environmental Defense Fund recently praised smart meters for their promise of cleaner air and reduced dependence on fossil fuels.

Smart meters and a smart grid also improve reliability, reduce maintenance costs, and open the door to the benefits of decentralized renewable power generation.

Few innovations have garnered so many accolades from both market oriented economists and environmental activists.

Some New York consumers recently received cash payments plus several hours of free power for voluntarily turning off appliances when they didn’t need them.

With smart meters and variable rates for power, that could be possible in Maine, too.

– Special to the Press Herald

 


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