Balancing the load

Mark Case of Baltimore Gas and Electric tells Power & Energy why, rather than building new nuclear power plants or wind turbines, his company plans to use its smart grid program to cope with rising energy demand.

“Tougher economic times and higher energy prices just encourages this sort of program even more”
-Mark Case

In 2008, Constellation Energy’s subsidiary, Baltimore Gas and Electric (BGE), conducted two related pilots, the first being a deployment of 5000 smart gas and electric meters to test performance functionality – analyzing their communications and ability to interface with the company’s outage management systems. The first was hugely successful; the technologies used produced the outcome that was intended, allowing BGE to hit their performance targets of a minimum of 99.5 percent hourly reads for the advanced meters, and set them in good standing to begin the process of implementation of their smart grid system.

Mark Case, the company's SVP for Strategy and Regulatory Affair, outlines a related piece of the pilot that tested dynamic pricing for 1300 BGE residential customers. "We were measuring customers' willingness to reduce usage during peak periods in exchange for the opportunity to earn rebates on their bill," he explains.

"We tried out three different pricing structures: one that was called critical peak pricing, which provided a very high price for power during the peak hours and then a discounted price for power during the non-peak hours. Typically, we were looking at the window of 2:00 p.m. to 7:00 p.m. on the 12 hottest, highest demand days last summer.

"The other two pricing structures we tried were both rebate-based. The low rebate level was $1.16 per kilowatt-hour, and the high rebate level was $1.75 per kilowatt-hour. We used smart meters to measure how much would customers reduce their usage during those 12 hottest, peak-demand days, between 2:00 p.m. to 7:00 p.m. How much would they reduce their usage below their otherwise baseline level? How much would they reduce in exchange for the opportunity to earn those rebates?

"We found that customers were very enthused about the program. We had an average savings per customer of better than $100. More than 95 percent of the customers did take action to reduce their usage on at least a few of those peak days, and the overall satisfaction rating at the end of the program was 93 percent. A strong majority of customers wanted to be able to continue that sort of program going forward, so that really gave us a lot of confidence and data with which to build our business case for the full deployment of AMI, knowing that customers had demonstrated in a very strong, compelling fashion their interest in these opportunities to lower their bills and help reduce the need to build new power plants," he explains.

Education
Case explains how BGE enrolled its residential customers through a random selection process in order to produce statistically valid results of the pilot; this is important because if customers were able to self-select their interest in the programs, then bias could occur within the data. All demographics were taken into account - income, age, location and so on - and once the customers were enrolled, BGE produced an informative package explaining how the pricing structure worked, how customers could take advantage of the real-time pricing options and how they could earn rebates during these peak periods. "It could be things like making sure lights or electronics that are not in use during those hours are shut off," says Case.

He notes that many of the company's customers tended to reduce their air conditioning load. By notifying customers the evening before a peak event, via a phone call, text or email, customers would receive the price signal and reduce their load manually. He adds that come customers only got the price signal, whereas others also had a switch on their air conditioning unit that allowed BGE to cycle the air conditioning pressure on and off during the peak periods in order to reduce the load.

"We found that for customers that had the price signal and no additional technology, their typical reductions range from 22 to 27 percent. Customers that had the price signal and the incentive along with a switch on their air conditioning unit, would save up to 37 percent, so much higher numbers.

"We also had a third group of customers who had an in-home display device, a product called the ambient orb. It is a little frosted glass ball around the size of a soft ball that was plugged in and sat on the kitchen counter. We then sent a radio signal to that to indicate when a peak period was occurring. Normally the orb would be glowing green, and then as we approached a peak event it would begin to pulse in color, and then as we got to the peak event, we would light it up red to provide an additional indication that we were in a peak period. We found that the combination of pricing information and incentives, and in some cases the additional technology, was very effective in reinforcing behavior," Case explains.

Case cites the challenges that residential customers have faced in light of the economic recession that have contributed to the success of the pilot program. Customer participation was high and interest was robust. The rise in energy prices in Maryland over the last few years has also had an on the behavior of BGE customers. The focus of the state on better managing and controlling energy costs has reflected on to the customers, and Case notes that more than 95 percent of the customers took action, not necessary on all 12 days of the pilot, but on enough for them to earn a rebate.

"After each event we would send them a report letting them know how much they saved or in a few cases, didn't save. Then as the next event would come along a week or two later, that tended to reinforce that positive behavior. Maybe on the first event the average savings was about $7 on that day per customer, but by the time we got to the second and third, that number had gone north of $10 to $12 per event. There was really a lot of interest in it. Tougher economic times and higher energy prices encourage this sort of program even more."

Project actualization
Following the success of the pilot, BGE filed with the Maryland Public Service Commission in mid-July to begin rolling out its smart grid and meters across its service territory, a total of two million. The filing was due to be heard in November, with a decision being issued by the end of 2009; if the approval is reached, BGE hopes to begin the project in 2010, with the aim of completion within four years. Phase I will launch the software applications: the meter data management system that will capture the hourly data for two million of the company's customers and feed it back into the billing system. Chin adds that this phase will also involve integration with outage management systems.

"One of the benefits of smart metering and smart grid is that the meters will send a signal back to BGE letting us know if a customer loses power, so we'll be working on those integrations," he says. "We'll start a pre-deployment mode of the meters in the second half of 2010. We will probably have somewhere close to 15,000 meters deployed next year and then begin the very intense installation process in 2011 through to 2013.

"We have projected that the combination of our smart grid and what we call smart energy pricing, which is another word for dynamic pricing, along with our demand response and energy efficiency programs, will reduce peak demand by more than 1700 MW. For BGE, that's around a 25 percent reduction in overall peak demand, which equals a lot of new power plants we don't need to build in order to meet growing demand. It also improved overall reliability because with the same level of resources and a reduced demand, this is a region that has been worried about the potential for reliability problems in the next three to five years. By taking advantage of lower cost ways to reduce demand, we improve reliability significantly.

"Secondly, at a more local level, by virtue of the advanced meters notifying BGE's outage management system when an outage occurs, it allows us to quickly capture the scope of how large the outage is, diagnose what the probable cause is and then dispatch the right amount of crews. We no longer have to rely on a phone call from a customer to let us know that they've lost power at their home; we will be able to diagnose the extent of an outage and cause much faster, and therefore restore service faster," explains Case.

He, as well as the leadership of BGE, understand the direction the industry is taking regarding smart grid - the Obama Administration's stimulus package will provide up to $5.5 billion in federal grants to help stimulate smart grid projects, such as the one BGE is hoping will be approved. The company has recently submitted its application to the Department of Energy for a $200 million grant for smart grid deployment, and if successful this is sure to accelerate the pace of the project. "There's a lot of economic development in job creation that goes along with smart grid. It will allow us to bring the benefits of smart grid to our customers even faster," Case says.

"Ultimately it lowers the cost of the project. BGE's project is estimated to be about $500 million, so a $200 million grant from the federal government would help to significantly lower the cost to customers of implementing smart grid. I believe it's going to be successful and BGE's customers are going to benefit in a number of ways.

"In total, we have estimated the savings from smart grid at $2.6 billion over the life of the new meters. The benefits to customers include significant savings on their energy bills, significant improvements in reliability and a great deal of environmental benefits through reduced carbon emissions. We will also gain the ability to accommodate greater levels of renewable energy and to accommodate plug-in electric vehicles as they begin to develop and deploy, as well as a number of service-related benefits in terms of outage protection and doing away with estimated bills and then the economic development benefits. There's a whole robust set of benefits that will accrue to customers and we're very enthused about it and believe it will be successful," he concludes.