Smart Meters Require Smart Customers

Consumers need to better understand how to save energy for smart meters to be beneficial.

Published: 08-Oct-2010

By Richard Caperton

Twenty years from now your relationship with your electric utility likely will be fundamentally different from today. Currently you use electricity whenever you want, pay a flat rate for all of the energy you use, and the only real service you expect from your utility is to keep the lights on. Consumers in 2030, however, will have houses that are optimized to use energy when it’s most efficient, pay rates more closely related to the power’s cost, and expect their utility to be much more of a service provider.

At the heart of this change is information: information about the energy we use, how we use it, and the real value of that power. Data will flow in a two-way conversation between homeowners using electricity—and maybe even producing it, too—and the energy companies managing the electricity grid.

The smart meter is a key to managing all these information flows, and new research shows that smart meters are technically up to the challenges of the future. Consumers now have to learn how to benefit from this new technology.

Several high-profile news stories document consumer opposition to smart meters. This opposition usually stems from consumers being unconvinced that the meters will provide benefits that outweigh their costs. But it is now clear that the meters themselves are already a marked improvement over the traditional electromechanical meters on most consumers’ houses.

For instance, Structure Consulting Group found that PG&E’s smart meters were incredibly accurate in its report for the California Public Utility Commission, or CPUC. One-hundred percent of the smart meters (611 out of 611) met CPUC’s rigorous accuracy standards, but just 141 out of 147 traditional meters did so.

The potential of these new gadgets goes well beyond the accuracy of their readings, however. PG&E’s meters will enable the utility to tell consumers how much electricity they’re using and help consumers manage their usage. In short, they are teaching devices that can help customers be better-educated consumers.

They can also offer new and enhanced services. Baltimore Gas and Electric in Maryland (a subsidiary of Constellation Energy) recently received approval from the Maryland Public Service Commission or PSC to replace all of their traditional meters with smart meters. BGE will implement a new pricing structure where all customers automatically earn rebates by curtailing energy consumption during high demand periods when the grid is stressed and wholesale power prices are high. Pilot studies from across the country show that knowledgeable consumers can significantly reduce their electric bills under such dynamic pricing structures.

Smart meters will help utilities manage their own operations, too. Virginia’s Dominion Power, for example, concludes that smart meters will help them run their distribution grid more efficiently. This will ultimately result in reducing the amount of electricity they have to generate by roughly 3 percent. These savings will reduce customers’ bills enough to fully offset the cost of the meters over 15 years, and they will cut pollution and strain on already maxed-out energy grids.

These three examples demonstrate that smart meters can work. But utilities need to do more than provide state-of-the-art metering technology for consumers to fully realize the benefits of smart meters. They need to educate their consumers on how smart meters will affect them.

Research just published in the Proceedings of the National Academy of Sciences shows that consumers have only minimal knowledge of how to save energy, and this knowledge is critical to them getting the full benefit of the information smart meters provide.

Of course, PG&E, BGE, and Dominion are all sophisticated companies. They know they need to carefully manage their relationships with customers, so their smart meter plans include education efforts. BGE, for instance, plans to spend $60 million educating consumers about their new smart meters.

The problem is that no one knows what education efforts will be effective. PG&E, as an early entrant into this market, had to struggle with this element of their smart meter rollout—and this almost certainly led to some of the rollout’s challenges. Maryland’s PSC voiced sizeable skepticism about whether or not BGE’s education efforts would be effective. And Dominion continues to formulate a customer communication plan as it demonstrates the smart grid technology in Virginia.

In each case it is clear that the technology is powerful but to put these tools to the most effective use more work needs to be done to effectively engage consumers, communities, and advocates as well as build the back-end systems for utilities.

The federal government can play a part in this education effort. So far it has invested billions of dollars in the smart grid as part of the stimulus bill. Most of this money will be spent on researching technological challenges that still exist or on investing in smart grid infrastructure, such as smart meters. It’s becoming clear, however, that consumer education will be just as important as technological soundness in the nationwide implementation of smart meters.

Instead of focusing entirely on technical solutions the government could invest greater resources into learning more about how to teach consumers about smart meters. The Department of Energy should request that either the National Renewable Energy Laboratory or the Lawrence Berkeley National Laboratory—both of which have significant expertise in electricity rates and utility operations—develop a framework to guide utilities’ education efforts in their smart meter rollouts. The framework would be based on research into a growing body of knowledge about smart meter education, including pilot studies, experiences with large-scale rollouts, and broader lessons from social marketing campaigns (such as national efforts to combat littering or forest fires). There are also important international examples, such as the smart meter program run by Enel, Italy’s largest utility, which has connected 32 million customers to the smart grid.

The framework would identify best practices and successful techniques, and it could include a sample education plan. In many ways the framework would be closely related to the Federal Energy Regulatory Commission’s recently released National Action Plan on Demand Response. Armed with this information a utility like BGE would be able to start with a template of proven educational methods and adapt it for their own unique local considerations instead of starting from scratch.

The Department of Energy and many others in the energy and engineering professions tend to think of energy as a technical challenge. But this isn’t always the case. If anything, smart meters’ ultimate success depends just as much on how utilities and their customers interact as metering technology. DOE should dedicate resources to education research that will help the nation take full advantage of the smart grid’s future promise.

Richard W. Caperton is a Policy Analyst with the Energy Opportunity team at American Progress. For more on the Center’s analysis in this area please visit the Energy and Environment page of our website.

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