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Price incentives could regulate electricity demand

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One of the biggest advantages of smart metering is the ability for power utilities to dynamically regulate the levels of demand, via real-time pricing incentives to consumers. By Martin Vergunst, business solutions executive at T-Systems South Africa

Price incentives enable utilities to achieve greater operational efficiencies, culminating in a state of ‘responsive demand’ – where the country’s power requirements are perfectly balanced with the generation of electricity. One of the biggest challenges currently facing our utility is the fact that demand levels are not easy to predict or to measure in real-time, and are impossible to control. Both prepaid token sales, as well as ‘unconnected’ post-paid meters, do not provide an accurate view on actual usage at any given point-in-time.

In the case of prepaid metering, visibility over actual usage is further mired by problems like fraudulent token generation, meter tampering, and the on-selling of tokens to other users. By being forced to ‘work blindly’, the utility often struggles to maintain the optimal reserve margin levels. At times, generation fails to keep up with demand (resulting in rolling blackouts), and at other times excess generation results in an over-supply of electricity (the value of which is lost if it’s not used).

However, with variable pricing tariffs, the utility, municipalities or distributors can make electricity inexpensive at times of low demand – encouraging customers to use certain applications at different hours. For households, this may mean using timers so that dishwashers, washing machines and pool pumps kick into action at night time. For a commercial customer, it might mean shifting manufacturing schedules or pre-cooling equipment before the day starts, for example.

Regular communication to customers is an essential ingredient to achieving success. This could take the form of messages on a smart metering console, SMSes, emails or push notifications on a smartphone app. Irrespective of the medium, customers would be informed about the pricing incentives, and can choose to adjust their usage to benefit from the lower rates. In this way, price incentives empower users to make smarter decisions about their consumption – by giving them the information and the incentives to decrease their usage at the peak morning and evening periods when the national grid is most pressured.

To make the most of price incentives, customers can adopt the various forms of timers and information consoles which allow them to schedule certain applications to run during the hours when tariffs are lower. These technologies work harmoniously with the smart metering platform outside of the household – the infrastructure that sends real-time usage data between the household and the municipality or utility. But the often-used term ‘time-of-day pricing’ is something of a misnomer. It doesn’t fully express the dynamic capabilities of price incentives based on a smart metering foundation.

The most exciting aspect of price incentives is that a utility can become far more responsive than simply having two different rates for the different times of day. Special offers can be immediately promoted to users in times of excess demand, and withdrawn again when enough people have taken up the offer, or when consumption is nearing the reserve margin levels again.

In fact, the utility can constantly tweak the price of electricity, as responsively as a stock market adjusts the ruling prices of company shares, or a search engine manages bid prices on keywords. This creates the optimal balance of supply and demand, and ensures consumers are purchasing electricity in the most efficient way possible. With a smart metering ecosystem in place, utilities can configure any number of price incentive models, to ensure that demand remains at the right levels. Combined with other initiatives, price incentives are a critical tool in addressing the energy crisis – and avoiding that most drastic action, the dreaded load-shedding.