No Hot Air

Smart Grid Savings

Before we discovered Shale Gas,  No Hot Air was very interested in Smart Metering.

We want to help business users control their costs. One way is to avoid long term prices and their associated risk of paying through the nose, or through the teeth of shark consultants,  for the sake of a fixed price.

We also wanted to point out the bleeding obvious that the cheapest energy of all, is the energy not used.  Why obsess about a few decimal points per kWh on price, when the lowest hanging fruit is wasted energy?  So, one thing that hasn't changed since April 2008 is that the best savings are from combined smart metering and index prices.

We haven't done a Smart Meter story for a while.  From a UK viewpoint the continual bickering, pointless consultation upon pointless consultation and general inablility to make a decision are symptomatic of all that's wrong in UK energy.  If half the energy wasted on deciding the reasons for one of many organisations (DTI,DECC, Ofgem, National Grid, Suppliers, Manufacturers) to avoid making a decision were instead spent on implementation....

We'll leave the depressing news to www.smartmeters.com:

UK SmartMeter Rollout – Not Likely This year or The Next or the Next.....

The UK government is still procrastinating on Smartmeters, and UK energy firms are wasting millions of pounds in dumb pre-pay meter rollouts.

The UK Government announced on the 11th of May 2009, the rollout of 46 Million Smart Utility Meters, this was hailed the revolution of the 21st Century. SmartMeters were the answer to see the end of the highly controversial Estimated Billing, a sigh of relief must have been heard across the entire UK population.

Estimated billing, you either pay too much, therefore giving the utility an interest free loan;  or you pay not enough, only then to be hit with a massive shortfall and demands for payment

Positive news of the potential which we could achieve, or negative news in how much we squander in time wasting comes from the NY Times:

A smart grid pilot project in Fayetteville, N.C., has resulted in an initial 20 percent decline in average electricity consumption

A smart grid is the next iteration of smart meters in that everything down to plug level is just another node on a wireless network.  The chance of the UK having a smart grid anytime before 2050 are slim to none judging from the Smart Metering Fiasco. Still, we can dream....

Consert attached controllers on hot water heaters, air conditioners and pool pumps and then let customers go online and set targets for their monthly electricity bill. Smart meters and a wireless communications system provide real-time electricity consumption data to allow the utility to cycle appliances on and off to achieve the savings and help it manage peak demand.

One of the problems of the UK system where financial institutions have sliced and diced every part of the energy chain into miniscule pieces (generator, upstream, terminal operator,national transmission, local network, meter provider, meter operator, data provider, data comms provider, emergency service provider, supplier, billing contractor, energy consultant etc) is that getting a network of people like that to work together makes linking plugs together childs play, especially with the Ofgem mantra of competition solves everything. One of the really pointless discussions is obsession with costs. Any one of the above actors worries about their selfish costs of literally pennies per user per year.But the opportunity costs of not acting are far higher for both energy users (all of us) and the planet (that's all of us too!).

But the crazy thing is that a smart grid is far cheaper overall:

The Consert system, which is based on IBM software, would allow the Fayetteville Public Works Commission to selectively reduce demand among its 80,000 customers without having to, say, shut off everyone’s air conditioners at the same time.

Utilities typically spend hundreds of millions of dollars building so-called peaking power plants that provide electricity when demand spikes, and otherwise sit idle for most of the year.

Keith Lynch, an executive at the Fayetteville Public Works Commission, said the utility hopes the Consert system will help it to cut such capital costs and reduce greenhouse gas emissions.

“We’re looking at building a new gas-fired generation plant, but this solution would mitigate the need to build the size power plant that we had anticipated,” he said.

 

Can Energy Charges encourage Energy Efficiency?

We sure think so, no surprise there, considering  www.igasandelectric.com is our other business, where our only product is market match pricing.  We think AMR plus market rates are the way to go for 95% of energy users, and we think dynamic pricing of various structures is tomorrow's solution today.

But the big surprise is where the above titled thought provoking and sensible document comes from.  Not descriptions we usually apply to Ofgem.

The paper is meant to prompt debate and is interesting for looking for answers in the pre-Smart Metering world. Too bad they didn't think of that ten years ago, but we're thankful all the same.

Well worth reading.

More hot air.

The hot air comes from UK domestic (and we're sure I+C Third Party Introducers as well) switching sites to whom the idea that energy is going up validates their reason for existence:

Chris Eagle, commercial manager at EnergyChoices.co.uk, believes customers should not be made to foot the bill: “The energy market overhaul will effectively see a ‘green tax’ whacked on to our energy bills; an extra cost that households already struggling could do with out.”

He said: “Making sure you’re on the best gas and electricity tariffs for your needs is the quickest and easiest way to cut the cost of your energy bills. You could save over £140*, by simply taking the time to compare the market.”

They would say that wouldn't they?  The reality is that delivery and associated costs are rising, which at the same time give a incentive to use less. This isn't a stealth tax, this is a an optional tax which provides incentives to avoid it. 

As we've said many times before, energy  commodity itself is not increasing, and we see at worst a flat lining of energy prices, not increase.  www.igasandelectric.com is now live for further details.  We at least provide far more choice than the average stitching site.  Stitching?  sorry, we meant switching of course.

 

Smart Tweetering..

We've always recommended Smart Metering as step one for anyone interested in reducing energy costs.  How can you save what can't be measured?  Our forthcoming launch of www.igasandelectric.com  underlines that.

News from Germany's Yello Strom shows how at least in the German market at least, competition is breeding innovation:

The Internet has already revolutionised how consumers access and consume media, purchase products, work, and communicate.  It’s not much of a stretch to consider what broadband Internet can do for energy conservation and the environment.  Yello Strom believes the energy revolution will redefine the role utilities play as well

The emergence of Yello Strom reflects the need to innovate in order to attract customers.  Germans are free to choose what company will provide their energy.  Realising that consumers want more than the lowest rate from their utility, new and revolutionary products and services have become available as a result. 

Google's Power Meter and the forthcoming Microsoft Hohm show what the future will be.  For business users the question is simply: Why Wait?

Building around public networks is a much more cost-effective option than developing a proprietary one.  It’s also much easier to introduce new services, such as the new Twitter application.  The Sparzähler meter has a Twitter account that is automatically updated with energy consumption data.  When a consumer “follows” the account, Twitter pushes the Sparzähler meter’s “tweets” and the customer is prompted to read them.  Vesper says that the service can also be integrated with Microsoft’s Hohm when it becomes available

SM as it stands right now in the UK is ten year's away for everyone, but Automatic Meter Reading supplies the functionality of both monitoring energy use and enabling access to wholesale prices.  No more projected use or projected prices mean an efficient use of both.

Joggling the memory...

Maybe we should get out more, but the O2 Joggler looks like it's just waiting to have a smart meter app put on it.

The only question is how long?  Remember a smart meter is only the gadget. The money is going to be made on the widget.

What do they know that we don't?

Compare and contrast UK and US, in this case New York State, energy buyers.

Both have a wide range of energy suppliers. In fact New Yorkers have more: at least 10. Both countries have had "choice" for over ten years. Another similarity we can't resist pointing out is that National Grid have a large supply base in New York State as well as the UK. (They fell for that old Amurrican way thing from GWB. The first thing that amazed them was how strong US unions are.)

But New Yorkers are underwhelmed by choice:

They just don't want to know. First the facts:  Only 17.1% had changed supplier by January 09. Even among the very largest end users, 48%  remain with what we would call the host utility, with the towers of Manhattan providing the highest rate of those who have switched at 82%. SMEs have only a 25% switching rate and 17% for domestic, the same as we recently discussed in Ontario.

Getting info out of Ofgem is a lot harder but in the UK, it seems that 60% of domestics have switched at least once, as have 48% of SMEs. So what compels UK users to move and US users to stay? We think the reasons US consumers don't switch start at the meter:

• US consumers have had accurate monthly meter reads for many years - first as actual reads being a consumer law requirement followed by rapid roll out of Automatic Meter Reading technology from the mid 90's onwards.
• Monthly reads developed to a norm of consumer pricing based on floating monthly prices that are connected to the wholesale markets.
• The only way for a new entrant to attract customers is by either offering a discount on the floating monthly rate or a fixed price. Offering a discount is difficult: who is going to consistently sell a new entrant energy prices below wholesale?  Discounts are usually in single figures which makes them relatively unattractive. (Similar discounts against published tariffs are widely offered in France, Ireland, Netherlands etc, with similar low levels of success.)
• But the most common form of marketing is through fixed term prices, which goes a long way towards explaining the low switching level. US consumers just aren't interested. They don't think they have expertise enough to guess market movements, so they stay on their default tariff. But going back to metering, they are provided with information which allows them to easily make decisions. They realise they can pay a lower price in January, but also  understand that prices can be lower later on. At least with monthly reads they are in a position to see much sooner the impact of using less energy or efficiency installation.

So simply put, US consumers don't switch because they have information, and UK consumers switch because they don't have information. And as Ofgem noted earlier this year, up to 40% of UK end users "inadvertently" switch to a higher tariff. 

In the US and Canada the third largest energy supplier is Direct Energy operating in 22 states and all over Canada. Despite being active in areas with a population double  of the UK,  the company has only 50,000 business customers, which is probably about a tenth of parent company Centrica's UK base .

 

Two Markets - Two Countries or Two Planets?

A couple of weeks back we mentioned in passing the ruckus in Ontario where utility companies are getting a lot of flak over fixed price marketing plans for energy. We particularly liked the part where door-to-door energy marketers aimed at a new to us vulnerable consumer demographic of naive energy users who can be talked into anything: students. During the story we uncovered a startling difference between UK and Ontario consumers. Almost all UK domestic and most business customers who switched supplier are on fixed price/long term contracts. The question being do consumers go for fixed prices because they like them or simply because they aren't offered any alternative?

In Ontario, the standard default tariff is for a floating monthly price that depends on wholesale prices (although it is subject to government oversight and regulation regarding the formula). Some consumers, including clueless students, through either deliberation or deceit have signed up for fixed price deals of up to five years. But the difference in the free market of Ontario is stunning: 83% of energy consumers are on floating monthly deals. By the UK standards this appears to be a very cavalier attitude to "risk". And it appears to us that Ontario is the kind of place that failure to keep an eye on energy costs can be a life or death matter.

Chicago is another location with severe climate issues. The Windy City is a textbook example of a continental climate with extremes of heat and cold. But Chicago consumers are even more suspicious of fixed price deals:

Relatively few Illinois customers have signed up with alternative suppliers. Of Peoples Energy's 1 million customers in Chicago and the North Shore, only about 16,300 use alternative gas suppliers.
Of Nicor's 2 million customers in northern Illinois, about 205,000 use alternative suppliers.

We knew that floating prices are the norm in North American markets, but the gulf in attitude towards fixed "insurance" or floating "risk" is wider than the Atlantic. There must be something else to this.

First the similarities: Both Ontario and Illinois have had domestic competition for over a decade, and there are over ten suppliers in each. That's even more competition than in the UK, but its presence alone doesn't influence users.

The big differences between the North American and the UK systems is not about what the market is now, but what it has been for some time. US and Canadian utility customers have had Automatic Meter Reading for up to 20 years which allows a monthly read as the norm. That allows a floating price to be exact to the cent, something that UK utilities aren't capable of on a mass scale. Consumer information is easy for anyone with a couple of gas bills lying in the drawer. No one needs to pay for experts.

UK consumers have enough trouble figuring out annualised savings, let alone be ready for floating prices. The UK market is essentially what energywatch (the UK consumer agency that was disbanded for being difficult) a "confusopoly". Even Ofgem who think that competition cures everything now admit that up to 40% of switchers end up paying more "inadvertently". What the UK does have is a large industry of switching sites and energy consultants who successfully sell "energy risk" while neglecting to offer the basic metrics available of monthly floating prices. And how could they?  How could they make money telling people not to do something.

Illinois does have the excellent Citizens Utility Board  the kind of non profit independent body we need here who analyze average monthly bills of all suppliers. Do they believe in the benefits of fixed prices?

Will I save money by switching to an alternative gas supplier?”

It's likely that you will NOT save, as the statistics from CUB's Gas Market Monitor show here.
Summary of plans

Lost    Saved

91%    9%

Average $519.54 Loss
As of April 05, 2009

For years, Northern Illinois consumers have been able to switch from their utility to an unregulated gas supplier. Even those who switch may have trouble determining whether they’ve saved money.

It all depends on which company you choose and when you sign up. A fixed rate is basically an insurance plan against soaring natural gas prices. You’re likely to pay a premium for that insurance. If you happen to lock in a fixed rate just before prices skyrocket, you might save money. However, you may not be so lucky if prices plummet. You might do better with a variable rate, which changes on a monthly basis, according to the cost of gas or some market indicator of gas (plus a markup). However, there’s no guarantee. You’re simply gambling that the unregulated supplier will do a better job buying gas than the utility. Sadly, you would need a crystal ball to determine whether any of these plans are big winners.

Which is what we say all the time. We don't have a crystal ball. And no one needs to pay to enter the tent of "energy risk".

All end users need is the data to assess the risks and to be ready for surprises.

More than meters get smart

We like to approach everything from a different and sometimes disruptive perspective: energy buying, energy "risk", TPIs, energy "shortage" etc. And although we love Smart Meters, and have been a fan of SM from day one: Aren't we forgetting that it will all be about what SM can do despite (some) people getting hung up on arcana like technology and data flows?

End users are mostly content to get accurate monthly reads. If they can get half hourly reads, that's good too. Worrying about how reads are delivered is akin to sitting in a restaurant obsessing about what is happening in the kitchen. Most people would rather not know- their judgment of success depends on the eating experience, not the recipe or the ingredients or how skillful the chef is. As vital as those things are to delivery, end users don't generally find them important. And so with data. Just do it. Do you know how to program computers? Probably not.But you're reading this.

We have been saying for a while that the intersection between phone and metering will fracture. And why not? Phones themselves now include fixed and mobile while blurring the difference between computing and television while disrupting old models of content delivery. The visual display of energy metering information may not be as compelling as seeing a movie, but the mechanics behind delivery  isn't that much different.

The next generation of wireless technology will give rise to the internet of things, where everything has an IP address. Pulses of electrons and molecules in energy flowing through utilities will simply be one more type of digital information. But wireless or smart metering only refers to the medium - the important thing is the message. How food gets from field to factory to kitchen to plate is mere detail, even most of the time to the gourmet.

An example is to compare the  Verizon Hub Phone and the Onzo Energy Meter

The Verizon Hub Phone has several nifty features: Wireless and Fixed Calls, Cable TV, traffic reports, web access, call forwarding, contacts etc etc. In short a iPhone type experience based on touch technology that integrates several existing products. This is done to smarten up  the home phone and make it more accessible to the technophobes - they don't care how it works they just want to see their energy bill. Which they can't do. Yet.

You can't even see your energy bill on the Onzo, although you can see energy use. It looks really cool and geeky.  But why pay the same price as the Hub Phone for far less?  Surely the same experience can be delivered from a meter to any number of existing screens: Phone, TV, PC or the Verizon Hub Phone.  And probably to similar UK products coming soon from the likes of Vodafone or O2. Of course it can. And for cheaper. It's only a matter of time.The leap from meter to phone or a similar destination is only one of imagination.The whole point of modern ICT is to simplify things. Not to add yet another application or device, no matter how cool it might look.

Smart is another word for intelligence. And the intelligence in smart meters is the data and various levels of interpreting it. The device itself is actually as dumb as that hunk of metal currently residing under 26 million stairs. It's not the gadget - that's dumb in the meaning of silent. It's the widget on the screen - that's smart.

Google Power Meter

What's more important in saving money on energy?  Competition between energy suppliers or knowledge that makes every energy user an expert on their own energy?

We may find out soon from Google's power meter software's performance.  We can compare the UK experience to so called "developing" economies like India.

Our initial partners include utilities with millions of customers as well as smaller ones. They are rural and urban, privately held and municipally run. Some are in the United States, others in Canada and India. They all have one thing in common — a desire to serve their customers by providing access to detailed information that helps save energy and money

UK consumers shouldn't have to wait ten years, so the thing to do is put in your own smart metering ASAP.  Then ask for your supplier to offer prices based on the wholesale gas and power markets. Then fire your Third Party Introducer.  And then use the meter information to highlight savings possibilities.

On a £100k gas spend:  £100 spent on meter. Wholesale v fixed: 12 to 70% savings based on 2008 fixed price models. TPI fees eat up another 2 to 10 percent. Conservative savings estimate on power use: 4%.  That looks like £18K minimum to us. Worth £100. But some suppliers offer them free anyway.

Smart Metering provokes Stupid Marketing

Ontario is rolling out smart meters at a dizzying pace compared to the UK. Where we wasted two years debating whether there are even any benefits, followed by another year of consultation on how to pay for it, and still won't actually complete roll-out for another ten years, our Canadian cousins shamed even California in debating, consulting and delivering in four years.

At the UK rate, we may not need to learn these lessons for years to come, but in Canada, the fight back from a final push of confusion and scare marketing by some energy suppliers is starting.  

The use of smart meters will help reduce peak demand, which is better for the environment.

So, if time-of-use pricing encourages conservation, why are sales agents coming to your door urging you to get a fixed-price electricity contract for the next five years?

And why are they frightening you about smart meters to make their prices look more attractive?

Here in the UK, we haven't even had the North American norm of accurate and dynamic monthly pricing, so TOU, while inevitable, is probably too much for most energy buyers, even I+C ones, to digest straight away. We can't go from data drought to data tsunami without an interim education process. Most UK users have been talked into a presumption that quantity and supplier of energy is paramount. Without data on use, and with most consultants hiding any indices to make valid comparisons, few realise that commodity prices combined with when energy is used is the key driver in energy prices.

In Ontario,as in Ireland and many other markets, TOU pricing is seen as a tool to reduce peak use periods. Reducing peak use periods means lots of users using a little less results in substantial benefits. Ireland, for example was considering nuclear power before realising that SM presented a far quicker, cheaper and fairer option.

NHO is all about letting customers have data to enable them to make free decisions. An educated consumer can be a utility's best customer. But in Ontario, just as with UK TPIs, fear and deliberate concealment of key indicators scares many into acting against not only their own interests, but those of everyone else.

Sales agents like to compare their prices – typically, 7.5 to 8.9 cents a kilowatt hour – to the time-of-use peak price — currently, 9.1 cents a kilowatt hour.

They don't say that peak prices apply only on weekdays and only for a few hours.

Once you have a smart meter, you'll be able to shift your weekday use to mid-peak times (7.6 cents a kilowatt hour) and off-peak times (4.2 cents a kilowatt hour).

But with a fixed-price contract, you can't lower your bills by using more electricity at night and weekends. Moreover, you can't help lower peak demand in Ontario or contribute to conservation.

The free market means that some people are free to scare other people.  Which isn't good for anyone.

"Signing a fixed-price contract might not be in line with what the province is trying to achieve," says Paul Crawford, an Ontario Electricity Board spokesperson.

"But it's an open market and these retailers can offer what terms and conditions they want."

Time-of-use rates shouldn't have a significant impact on your bills, says Toronto Hydro spokesperson Blair Peberdy, if you make some effort to conserve electricity.

This means ... making simple behavioural changes – such as turning off lights, computers, and TVs when they aren't being used and going easy on the air conditioning in the summer.

"The more engaged you choose to get with conservation and load shifting, the more likely you will be able to save some money," he says.

Ontario has a target of Dec. 31, 2010 to install smart meters for all customers. Converting to time-of-use prices takes place whenever a local utility is ready to do so.

In Milton and Newmarket, customers already pay real-time pricing on their bills. Only 700,000 of Ontario's 4.3 million residential customers have a fixed-price electricity contract, Crawford says.

The rest pay 5.7 cents to 6.6 cents a kilowatt hour for power, depending on how much is used, under the regulated price plan.

With a wide gap between regulated prices and fixed prices, salespeople find it hard to sell contracts at the door unless they can incite fears of smart meters.

Don't believe it. Sign only if the contract allows you to convert to a time-of-use price plan at no extra charge once it becomes available.

Interesting in that with smart metering still not complete, only 16% of Canadian consumers have fixed price contracts, where the UK figure in domestic is 100%. And the costs of being on the wrong side of "energy risk" that UK TPIs convince customers to obsess about are far higher in a Canadian winter.

Someone is wrong.But with Ontario prices being double UK prices, it may not be them.