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Subject: RE: [smartgrid-discuss] Pricing from the NIST TWIKI


Ben,
 
In amongst the apparent chaos there are sound patterns and predictable behaviours at work.
 
I think key though is what you say here:
 
<Ben>As noted, adoption of new technology must be incremental, but with a very steep positive value to investment curve - front loaded with immediate pay-back AND long term economic benefit to the consumer. And price points are critical: it can't JUST make sense long term, it has to be within reach today. 
</Ben>
 
For example I'm just paying for technology to beam my cable TV signal around my house via WiFi - rather than paying the shyster cable company for additional lines and monthly fees.  The payback is less than 6 months.
 
So I think we CAN begin to quantify what the types of new patterns are that we want to enable.  One such is those that revolve around enabling local power production with community level credits.
 
Right now it appears cost prohibitive to buy local generation capability - say solar panels and a battery system with invertor.  But that's only because of funny economics.  Just like with gas prices - where the REAL cost of gas is somewhere north of $12+ per gallon more than the pump price - because of all the hidden subsidies and costs breaks that society is eating, road maintenance et al, and not the gas companies.
http://www.icta.org/doc/Real%20Price%20of%20Gasoline.pdf
 
I'm sure if you look at the real cost of electrical power generation - its nothing like what they charge per kilowatt either.  BTW - we're not the only ones seeing this: (Google: real cost of electricity)
http://www.millennialliving.com/content/whats-real-cost-electricity-part-3
 
So raising awareness of the need to change the economics is a very important part of moving to alternative solutions.  I'm not sure about that BBC calculator though - some fiddling going on there too - best approach is insulating houses to reduce demand - and putting up lots of wind turbines - and cutting back on coal and nuclear.  Eh, OK - seems like they decided the answer they'd like to see - then massaged the calculator to force you to that conclusion.
 
However - clearly if people can regulate themselves - empowering their own informed and enabled energy choices - expect much better results than a central politbureau style approach.
 
Providing mechanisms that enable those changes - appears to be the obvious first point we need to focus on.  Once we have that minimum in play - the rest will grow from there as people determine creative ways of using what we've enabled as a base minimum.
 
This would be something I think we need to state in our projected TC charter - here's the current problem definition - one paragraph - here's what we're creating standards and mechanisms for - to enable society to move forward - couple of paragraphs.
 
We cannot solve every problem - so instead we have to figure out what v1.0 looks like - that will deliver significant measurable benefits.  Then you have to go out and market and promote.
 
OASIS EML is a point in case here - we have the good standard - getting politicians and citizens to require its use is just starting to get some buy-in after 3 years of lobbying and getting the message across in a way that folks can readily comprehend.
 
Thanks, DW
 

 

-------- Original Message --------
Subject: Re: [smartgrid-discuss] Pricing from the NIST TWIKI
From: "Benjamin A. Rolfe" <ben@blindcreek.com>
Date: Fri, January 02, 2009 12:21 pm
To: <smartgrid-discuss@lists.oasis-open.org>

This is an excellent model to start with.  Take this, and also take into account the comments about the likelihood of significant change in the pricing and business models, too.  We have a profound chicken and egg dilemma here: the need for different pricing models, in deed, new business models, is clear, as is the need for significant regulatory change, and ultimately usage pattern changes. This means many different things to different people, but when considering all the technological ways we might achieve these changes, we see the need for exchanging information between a lot of different elements built by different people. That can't happen without standardized protocols (using the broad meaning of "standardized", i.e. all participants using some common protocols). So we need to define some communication standards so as to enable new technology development, new pricing models, and new everything else.  Which comes first? Sounds impossible to solve with a traditional top down approach - we can't define "how" until we fully understand "what".  Well, again, software and protocol people should be pretty used to this "y'all start working on it, while I go figure out what the heck they want us to do" paradox.

We're used to this in the wireless world.  What we think are key applications are usually eclipsed by something very different: the "killer app" that has driven (or is driving) wide spread adoption is almost never what we thought when the standard was created.   This has allowed innovative applications to create entirely new markets, and transform existing markets. Likewise new biz models emerge, and established models adapt, and pretty soon we can't tell what is which (is eBay a new biz model, an evolution of an old one, or what? Does it matter which?).
 
The consumer electronics biz has adapted to the "if we build it...some folks somewhere will figure out good stuff to do with it" model for technology development. It has become an evolutionary test: adapt to unforeseen new markets or die off. The "caveat emptor" nature of consumer electronics has a lot to do with it - limited regulation, brutally competitive pricing factors, little or now consumer dependence on particular vendors (thanks to standards ;-), and the fact no one dies when their personal media player doesn't work right. 
 
It is my opinion that smart-grid technologies will be a key enabler of new models for both delivery and consumption. I expect changes in nearly every aspect of the grid. In my view, the key decisions will be made locally, by an energy management entity ultimately under the control of the consumer.  As noted, adoption of new technology must be incremental, but with a very steep positive value to investment curve - front loaded with immediate pay-back AND long term economic benefit to the consumer. And price points are critical: it can't JUST make sense long term, it has to be within reach today. 
 
Everything else we think we know about the technology and consumer habits is up for grabs.  I envision technology enabling solutions to the problems that today prevent consumer control of acquisition of power as well as consumption. Current thinking is that all we masses can control is when we use power and how much: that is a single dimensional view in an no-dimensional universe. Sure, today local generation is rare and economically unfeasible for most consumers, but that's a problem that technology developers (and their sales and marketing teams ;-) are already working to change. There are a LOT more possibilities than what you have seen on Discovery channel ;-). 
 
Gee, it sounds like a simple challenge: we need information exchange standards to enable new business models, which we can't yet predict, and which can be adapted and extended to evolve with the markets. 

Shucks, if it was easy, what would be the fun?
 
-Ben
================================
Benjamin A. Rolfe
Principle Technologist, Blind Creek Associates
Strategic Technology Consulting
Skype: benjamin.rolfe
----- Original Message -----
From: David Hirst .com
To: smartgrid-discuss@lists.oasis-open.org
Sent: Wednesday, December 31, 2008 11:18 AM
Subject: RE: [smartgrid-discuss] Pricing from the NIST TWIKI

 

Electricity systems will be most efficient if consumers, and their appliances, can be induced to consume when there is available generation. An electricity retailer is at the front line for achieving this, as they will be aware of their contracts and or the plant available to them, and will also be aware of forecasts of what will be available from ambient sources. As “real time” approaches their knowledge will increase, and they will wish to influence their customers to fine tune their balance.

Like a supermarket, they can influence consumption by setting the prices. Supermarkets have the luxury of having storage, so do not face the need to keep the balance right at all times. Low cost airlines face a more difficult problem, as they sell their product, the seat, or they lose the revenue from it. If they oversell, then, when it is time to fly, there is grief. For electricity retailers there is only one product, electricity, and the variable is the price at different times in the future. In effect, each period ahead is a different product, and so should have the potential for a different price. Overselling results in somebody (and potentially everybody) losing out in a blackout.

So the question is, how short should be that period? In electricity, I think it should be about 10 seconds. That is the timescale in which circumstances in an electricity grid can change dramatically. If a line breaks, or a generator trips, then the price should start changing very quickly. And soon.

Most of the time, of course, the prices difference between adjacent periods will be small, so there is a gradual transition between price levels. This serves to ensure that there are no sudden tariff breaks, which might serve to encourage sudden changes in load – a great nuisance to electricity grids.

The need to have future prices is to allow devices, such as dishwashers and laundry machines, and battery cars, to plan their consumption, and reveal to their owners how much it is going to cost if they are to need deadline chosen by their users. In running a programme, most appliances have critical activities that it is not sensible to interrupt – it may even be dangerous. This is a problem if they have access only to current prices, but is easy if they are able to see expected future prices. Like generators, they are most efficient if they can run to a schedule.

Of course, these plans can be sent awry by sudden changes in prices, but this is a hazard of operating in the real world. Things happen, and appliances can do little about it. However, they may be able to hedge this risk financially, by doing a deal with their retailer at the expected fixed price. To do this, they will no doubt pay a premium, but will also have to share their expected consumption plan for all the periods ahead. Undoubtedly, this will consume most at times when prices are lowest. They have done a fixed price deal, and so can, in principle, sell their low cost electricity (ie not consume) if the price gets very high. The electricity retailer accepts the risk (for the premium), but is presumably in a much better position to do something about it than an appliance or user.

I think this means that the future price is best expressed as a continuous curve, encoded in some way that allows agreed interpolation between points. It would often be convenient for the curve to have repeating elements, such as daily or weekly, so that it can be extrapolated into the future (and a sensible price can be assumed even if communications break down). There are many ways of doing this, and many systems for interpolation between points that are defined as numbers.

To whom should this price curve be communicated? There are two key answers: to the meter, as this will then be able to do the calculation of consumption in a (short period) times the cost in that period, and so accumulate the consumption element of the invoice. So it is not (just) electricity consumption that is measured, but the total cost – making it a flowcost meter.

The other device that needs to receive the price is appliances, as this allows them to optimise their (perhaps complex) consumption programme. If the price curve changes, they can reoptimise.

If there is to be a fixed price deal, the appliance needs to communicate its consumption plan to the meter. Again, this can be expressed as a curve, but the need for smooth transitions is much less, (and the transitions will often be abrupt anyway) so it can be expressed more simply.

There is no need for the consumption, or the consumption plan, to be communicated back to the retailer. Supermarkets are pretty good as adjusting their product flow without us declaring how many of what things we will buy each trip. Electricity retailers will also be able to use empirical experience to assess what impact a change of price will have on overall consumption, and will not really be able to make much good use of the individual consumption plans sent to them. They will generally have a pretty good indication of what is happening from the gross consumption from meters higher up the electricity network.

This capacity to communicate prices is a critical feature of any metering standard, and also vital from communication between the meter and an appliance. But it is a broadcast signal, not needing 2 way communication. If this is done, it can subsume all sorts of other “derivative” products, like CPP, or TOU, or interruptible tariffs.

But it is a pricing signal, even if it used also by the meter for accounting.

Regards

David

 
 


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