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Utility digitalization: a new strategy to interact with customers

image credit: © Josepalbert13 | Dreamstime.com

This item is part of the Special Issue - 10/2020 - Advances in Utility Digitalization, click here for more

The ongoing rate structure for the residential sector has been based on kWh only for about a century. It made sense. The available technology (meters) was electromechanical, reliable and cost effective. And for customers is a really simple solution.

These days when smart meters are quite cheap it is high time for a change. I mean the way utilities charge their customers. As opposed to the conventional kWh structure, the proposed alternative is the kW. On-peak and off-peak.

Why?

Investments in the electric power value chain are designated in USD/installed kW. What really matters in terms of cost is the amount of kW a customer “draws” from the grid.

One example.

t can be perfectly understood that for the supply side if a customer uses 10 kW for 12 h/day,  it is a completely different “animal” if it is a 5 kW for 24h/day even though we are talking about the same total power consumption of 120kWh/day in both cases.

Simply put the associated capital investments in generation, transmission and distribution are twice the value for the 10 kW for 12 h/day as compared to the 5 kW for 24h/day. In reality it makes a huge difference ... but the ongoing rate structure does not capture that. And accordingly this creates a distortion, which ultimately is paid by all energy users.

The proposed digitalization strategy is going for smart meters and a new rate structure primarily focusing on the on-peak and off-peak demands. This would allow customers to go for cost-effective strategies, such as (1) transferring power consumption to off-peak, (2) programing selected important loads not to operate simultaneously at maximum capacity, and (3) cost arbitrage using other energy sources (natural gas, solar, batteries, etc.).

When renewable energy is becoming the name of the game, and fuel costs are rapidly fading, fixed costs are the name of the game.

There is a huge new opportunity there! That potentially can bring important benefits for the utilities and their customers. Waiting to be discovered and explored.

Rafael Herzberg's picture

Thank Rafael for the Post!

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