Promises and Pitfalls of Smart Grid - Smart Grid (R) Evolution: Electric Power Struggles - page 24

2.2.2 Strengthened Economic Conditions
By making the grid more efficient and reliable, smart grid also promises to strengthen the
economy by delivering a host of economic benefits to many stakeholders, ranging from
individual consumers at the household level to large industrial customers, utilities, and
other electricity providers. Through better management of the system and its externalities,
consumers could pay less for electricity, communities could reduce municipal energy
expenditures and associated pollution, and states and countries could benefit from
economic growth as a result of efficient, cleaner, low-cost electricity systems.
Smart grid promises these economic benefits in part by changing consumer behavior,
enabling price-responsive demand-side management (DSM), and enhancing control and
communication throughout the system (Charles River Associates 2005 ). By providing
information on system costs to consumers, a smarter grid can help to align actual system
costs with energy prices. Smart meters installed in homes and businesses can provide
electricity customers with real-time data on their energy use and costs. Chapter 3 includes
more details on smart meters and other technologies that may contribute to a more
economically productive energy sector, Chapter 4 describes the various actors who stand
to benefit from these changes, and Chapter 5 provides a detailed case study on smart meter
deployment.
Economic Benefits for Consumers
One of the promises of smart grid is lower electricity costs for consumers through
mechanisms that allow them to reduce their electricity use and better match their use
to dynamic price signals. Currently, most U.S. electricity customers pay a flat charge
per-kilowatt-hour(kWh)andreceiveamonthlybillaftertheelectricity hasbeenconsumed.
Providingreal-timepriceinformationthroughin-homeorin-businessdisplayscouldenable
consumers to actively manage their energy use and shift their electricity use away from
times when electricity costs are high, saving the entire system money. One way of doing
this is through price-responsive DSM (Charles River Associates 2005 ) , or dynamic pricing
(EPRI 2011 ; Kowalenko 2010 ) . Dynamic pricing offers price signals to consumers so
they can respond actively to changing conditions by, for example, reducing electricity
consumptionwhenratesgoup(JessoeandRapson 2013 ).Smartmetering,real-time energy
use information, and more detailed billing offer the potential to expand DSM to offer
dynamic pricing to more customers.
There are different types of dynamic pricing programs, such as “time-of-use pricing,”
which may have different rate blocks throughout the day; “critical peak pricing,” which
charges high rates during emergency conditions such as a hot summer day; “variable