Demand response is topic number 1 at utility gatherings around the world. Many view universal interval metering, combined with real-time pricing, as the best possible answer to three separate but intersecting issues:

  • Rising consumption
  • An ageing grid increasingly plagued with bottlenecks and outage-threatening congestion 
  • Global warming exacerbated by emissions from power generation.

Can interval metering really meet these infrastructure and environmental challenges? Or should utilities consider alternative solutions? To better assess potential answers to these questions, one needs to look briefly at the problems that are trying to be solved.

What is wrong with the grid?

Transmission and distribution grids are a troubling investment issue in most countries around the world. In long-industrialised countries, grids are now 70 years old or more. The need for repair and replacement has outstripped investment. And the move to supply competition has exposed ‘flaws’ in a grid designed neither for multiple input sources nor for long-haul power movement.

Grid improvements frequently require new routes, which generate public protest. It is tempting to deride outcries against grid expansion as shortsighted NIMBY (‘not in my back yard’) concerns. But protests are not without reason. In much of the world, a home is a citizen’s primary economic investment; devaluation can represent real hardship. Equally rational are environmental arguments for the preservation of landscape, habitat and wilderness.

Distributed generation can be an alternative to grid expansion, but opportunities are limited. Except in the most remote locations, the total cost of solar generation – even when local grids can accommodate net metering – far exceeds that of grid-delivered power. The aesthetics of living next to a windmill will almost certainly preclude the zoning changes necessary to permit their use in populated areas. Few live on sites suitable to micro-hydro.

There is, it seems, no ‘free lunch.’ Difficult as these issues are for industrialised nations, grid problems are far more troubling in developing countries. Economies cannot advance without a sound energy infrastructure.But governments’ and NGOs’ focus on poverty and health, agricultural and educational needs, and in some cases an unfortunate confluence of government corruption and consumer theft, frequently combine to deny transmission and distribution utilities the steady stream of funds needed to expand their grids.

Further complicating grid expansion are two words with the potential to paralyse even the most fair-minded and forward-thinking utility leaders: stranded investment. Utilities’ regulated rates of return are tempered by requirements for a high standard of investment prudence. In the face of consumption growth, regulators are clearly predisposed to view grid investments positively. But the political climate in which regulators work is not always forgiving of good intentions that fail to pay off. Utilities understandably fear investing in technologies or technology strategies that scientific advance or political decision render obsolete before they are fully amortised.

Unfortunately, unanswerable questions complicate the effort to determine clearly prudent paths to grid improvement:

  • Superconducting could dramatically reduce needs for new transmission routes. But when will this long-promised technology become viable?
  • Efficient battery storage could dramatically reduce the cost of power from remotely sited non-dispatchable renewables. Is such a breakthrough likely within the amortisation period of power lines that would link remote renewables to the grid? 
  • Should the grid be redesigned to accommodate competition? The European and Australian answer is clearly ‘yes’. Ten years ago, it would likely have been the same in North America. Then came competitive market reversals in California and Virginia. Is there a trend here? If so, what is it? 
  • Should long-distance bulk power transmission be accommodated through modifications to the existing grid or via a new network of dedicated lines?
  • Will proposed new types of sensors and grid intelligence produce meaningful improvements in efficiency?

Even if the technological answers to all these questions were clear, utilities would still face the typical 25-year amortisation period for today’s grid assets. What is a prudent balance between grid efficiency and rate increases?

So difficult is this Gordian knot of grid questions that governments around the world have begun to intervene. Typical is the US government’s Grid 2030 project, a multifaceted programme aimed at achieving consensus on grid architecture while also speeding up long-promised grid technologies. Also under the project’s umbrella lie the development, testing, and deployment of new programmes that attack consumption through both conservation and smart appliances.

The lure of advanced metering

Many grid advancement initiatives are focused on longterm achievements – but not all. Advanced metering and accompanying demand response programmes promise near-term grid improvements using such readily available technologies as:

  • Interval meters, whose prices have plummeted in the last few years to less than US$100.
  • Network designs that can overcome the difficulties of terrain and buildings to provide reliable two-way communications between utilities and meters
  • Meter data management software to handle the huge increase in data handling requirements. 
  • Revenue and customer information applications with built-in complex billing functions.

Advocates of universal demand response programmes point to their potential to produce:

  • Lower peak consumption that reduces the need for grid investments.
  • Fewer grid bottlenecks.
  • Consumption data that help improve grid design and reduce its cost. Today’s grid is purposely over-engineered to provide ample margins for uncertainties. Reducing those uncertainties means that, as grid equipment reaches the end of its useful life, utilities can replace it with lower capacity, less costly alternatives.

Once utilities have interval metering and communications systems in place, they may be able to reduce costs even further.

  • A high level of demand response participation could reduce the total cost of the supply portfolio.
  • The addition of prepaid meters – an easy addition to advanced metering deployment – could reduce credit and collection costs.
  • Two-way communication with the meter means savings on: Meter reader salaries, benefits, and insurance Turn-ons and turn-offs, which can now take place without field crew involvement Truck rolls, the need for which can be checked in advance through ‘pinging’ the meter.

Will savings like these outstrip the cost of buying and installing the hardware and software? Anecdotal information from pilot programmes indicates that advanced metering could pay for itself. But few utilities seem confident that savings will exceed costs; most apply for rate hikes or surcharges to cover the outlay.

Alternative near-term programmes to bolster the grid

The industry’s current focus on demand response has overshadowed suggestions for alternative, less sweeping grid improvement initiatives. Such alternatives may, however, prove more in keeping with utilities’ long practice of gathering in the low-hanging fruit before resorting to higher risk initiatives. Among the most attractive alternatives are:

Shaving peak use through adjustments to flat rates
Some studies have suggested that varying flat rates monthly rather than annually could produce 30 percent of the peak shaving gains anticipated through real time pricing. That is particularly true for residential programmes. While commercial properties can use chillers to time-shift air conditioning, for instance, most residential users cannot. Given this reality, it makes sense to try flat-rate adjustments before implementing the more elaborate and expensive real time pricing involved in universal demand response programmes.

Targeting high-consumption customers

Achieving a 1 percent peak reduction from a high consumption customer may result in considerably less grid congestion than a 10 percent reduction from a low consumption customer. And the higher the consumption – for business and residential customers alike – the more significant the savings available from such ‘low-hanging fruit’ remedies as ‘half lighting’ or heating/cooling optimisation.


Both studies and common sense show consumers use less when they must personally pay for electricity. The practice of sending a single bill to a building with multiple tenants encourages wasteful use of all utilities’ resources and penalises those trying to reduce their ‘carbon footprints’ by forcing them to pay for the profligacy of others.

Making consumers constantly aware of their consumption

Anecdotes indicate that, like the fuel optimisation displays in hybrid cars, prominent in-house displays of real time consumption can spark consumers to play ‘beat the meter’ and produce significant reductions in overall consumption. Chartwell, for instance, recently reported reductions of up to 15 percent from the deployment of such feedback monitors at Canada’s Hydro One.

Time-of-use rates

Moving to three or four time-of-use rates presents far fewer issues than does implementation of interval metering. Utilities may be able to convert rather than replace existing meters. Existing software may be able to handle the data increase as is, or with the addition of a module. That is far less costly than introducing a new meter data application.

Improving network management

Utilities in regions not prone to storms have tended to shy away from outage management systems. But outages can result from grid congestion and lack of maintenance too. Techniques to correct such problems quickly can be just as important in maximising grid efficiency as is fast recovery from storms.

Even without the elaborate consumption analysis available via advanced metering, distribution management systems can significantly improve grid efficiency. And while the complete ‘self-healing’ grid may still be far in the future, vendors have taken the first steps in that direction through major advances in fault location isolation and service restoration.

 Such measures are not a long term alternative to massive grid improvements, but they can help ease immediate grid pressures. And utilities can use the breathing space they provide to test and implement grid remedies that will, in the long run, prove orderly, affordable, and above all, prudent.