Today we feature a guest column from WorldChanging Chicago ally Jeannette LeBoyer.

The concept is simple. Give customers incentives to lower their electricity bills, and it stands to reason they'll do their best to pay less. If Chicago's ComEd customers knew they could pay a fraction of the cost by washing dishes or drying clothes at night, for example, most people would take advantage and wait.

This is the idea behind real-time pricing. Until recently, only industrial warehouses used thermostats that track hour-by-hour electricity costs. Recent innovations have extended that technology to households, and the results look promising.

The Community Energy Cooperative of Chicago (as part of the Center for Neighborhood Technology) began a pilot program with ComEd in 2003 to show that consumers can save energy and save money if given the right incentive mechanism. Using simple supply and demand pricing schemes, the consumer makes a choice to save money by using less electricity during peak periods -- like in the middle of hot summer days when everyone and their neighbor turns on electricity-guzzling air conditioners. From the PRNewswire article on the program:

The first 110,000 customers to enroll in the Residential Real-Time Pricing Program will pay an additional $2.25 per month service charge on their bill to cover a portion of the cost associated with the installation of a new meter, capable of maintaining hourly usage data. Additional program participants may face a higher monthly service fee and other program related installation costs.

Participants will receive hourly pricing information from the program’s third party administrator, Comverge, who was selected following a competitive bidding process held in December. Over the past four years, 1,100 customers participated in a pilot program administered by the Community Energy Cooperative.

In the end, this pricing scheme not only helps the customer to save money but also allows the utility company to reduce their energy load during the highest demand of the day. It's similar to the argument in favor of including mileage gauges in all automobiles; just as people tend to drive more efficiently when they can watch their miles-per-gallon rate fluctuate, so too can they be counted on to meter their own electricity usage. In some cases this could mean the difference between a sufficient energy supply and a brownout. Unfortunately, there is some hesitancy on the part of utility companies, because peak-demand prices also provide them with their highest profits, so not everyone wants to lose out to well-informed consumers.

The Illinois General Assembly is on consumers' side in this debate; in December, they voted to increase the real-time pricing program from 1,100 to 110,000 households over the next few years, a policy that has potential to move Chicago one notch up on the worldchanging scale.

PG&E in California is installing the SmartMeter which will give customers information about their gas and electric usage. This is a way to encourage less peak-demand power use.

Decreasing peak power use helps the environment because it helps to avoid the need to build new power plants. Typically, daytime power use is the highest. This is largely because so much electricity is used for industrial purposes. Because the electric grid needs to be able to supply power during peak times, the peak energy is the most expensive because it requires the infrustructure to produce energy that is only used a fraction of the time. Decreasing peak demand and making demand more even overall decreases the need for such an extensive power generating infrustructure.

Photovoltaic solar is ideal for peak demand. Solar output is often highest during peak demand because solar only produces energy during the day. Many of the sunniest days are often the hottest, which is when the air conditioning is cranking and energy demand is very high.

Posted by: Sarah Feinstein on February 1, 2007 5:19 PM

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