Environmental Engineering Reference
In-Depth Information
consumers may face high transaction costs simply to get started using the new consumer
applications.
An ethical concern related to economic risks associated with smart grid is that those
who cannot afford to upgrade their home infrastructure or shift their energy use may
not be able to benefit from smart grid. Additionally, low-income customers who are
unable to pay increased electricity costs could also lose access. Consumer advocates
caution that not everyone will benefit from smart meters and that time-of-use pricing
could disproportionately affect vulnerable populations. Vulnerable groups, particularly the
poor, sick, and elderly, may fall victim to price fluctuations. If electricity is a basic need,
then what right do providers have to refuse it to anyone? This raises questions of energy
poverty and challenges regarding incentives. What is enough and what about questions
of equity? Ratemaking is essentially social policy. Regulators and utilities have explored
different rate structures, or providing “sustenance” levels of electricity, to separate out the
issuesofenergypovertyandenergymanagement,butdynamicpricingremainsapolitically
challenging issue.
Some question why utilities are focusing smart meter initiatives on residential
customers, because large industrial customers may have the greatest ability and greatest
incentive to shift demand and reduce system costs. Dynamic pricing experiments have
shown that even if just a few customers reduce their electricity use a lot in response to price
signals, those reductions benefit the entire system. Some argue that investments to change
small-scale residential electricity usage might be better spent focusing on larger electricity
users. Many residential customers are relatively small energy users and some may have
limited ability to shift energy use.
Increased Risks to Electric Utilities
Electric utilities are also exposed to economic risks with smart grid. Utilities are required
to reliably and affordably meet their customers' electricity demand at all times. Any system
service or operational failures result in increased scrutiny. State regulations have been
created to protect ratepayers and ensure adequate and reliable service. In traditionally
regulated states, most regulators have not historically offered many incentives for utilities
to invest in innovative new technologies. While there are exceptions to this - for example,
California, Vermont, and New York Public Utilities Commissions (PUCs) were leaders
in promoting energy efficiency and renewable power - most PUCs remain risk-averse.
For example, the current regulatory environment in many states may not allow cost
recovery for smart grid investments. Shorter anticipated lifetimes of some smart grid
technologies, including software-based smart meters, are affecting utilities' ability to invest
in upgraded equipment. Additionally, taking operational advantage of smart grid requires
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