Energy Analysis Department Electricity Markets and Policy Group

DOE Smart Grid Investment Grant Program: Dynamic Pricing & Consumer Behavior Studies

Lisa Schwartz, Regulatory Assistance Project

Consultant to Lawrence Berkeley National Laboratory

Pacific Northwest Demand Response Project Meeting

July 15, 2010

Energy Analysis Department Electricity Markets and Policy Group

This presentation was prepared by Chuck Goldman,

Lawrence Berkeley National Laboratory, and

originally presented at the National Town Meeting

on Demand Response and Smart Grid in

Washington, D.C., on June 24, 2010.

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Energy Analysis Department Electricity Markets and Policy Group

Dynamic pricing pilots & AMI deployment

Dynamic Pricing pilots: Past experience

- Experimental designs of varying quality and with differing

objectives (e.g., technology trials, customer acceptance)

- Small sample size for some/many pilots

- Focused on answering a limited set of questions• How much peak demand savings occurs? Net energy savings?

• What role does enabling technology play in increasing peak

demand savings?

• How satisfied are customers with particular rate designs?

“Business case” for AMI may depend on benefits from

dynamic pricing; yet results from prior studies are often

viewed skeptically by PUCs & stakeholders

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Energy Analysis Department Electricity Markets and Policy Group

Deeper questions remain unanswered about

the transforming capabilities of AMI

New studies should investigate the power of AMI in

seamlessly integrating pricing, technology, and

information feedback to induce a change in behavior

Pricing

• Customer acceptance

• Market segmentation

• Character of response

• Rate design

Technology

• Customer acceptance

• Market segmentation

• Character of response

Information Feedback

• Market segmentation

• Delivery mechanisms

• Persistence

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Energy Analysis Department Electricity Markets and Policy Group

SGIG: Advancing our understanding of customer

response & acceptance of dynamic pricing

June 2009: DOE issued Funding Opportunity Announcement

(FOA) for Smart Grid Investment Grant (SGIG) program

DOE interested in advanced metering projects that involve

dynamic pricing within the framework of a controlled

experiment

- Focus on dynamic pricing tariffs that come closest to aligning

customer incentives with true costs of providing power (i.e., RTP,

CPP)

- Emphasize the need for randomized control trial in the

experimental design

- Provide highly granular customer-level consumption and

demographic data to DOE at end of project

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Energy Analysis Department Electricity Markets and Policy Group

Role of dynamic pricing in retail service

offerings

Changes in retail pricing required to capture full value of AMI

DOE SGIG FOA clearly states preference for making dynamic pricing

the required default service offering

- Not all jurisdictions will immediately embrace this strategy

- DOE expects the results of these studies will help make the case for

transitioning there over time

- Approaches to rate offerings such as “opt-out” or “opt-in” are viable

alternatives that will require a different experimental design than those

prescribed in the FOA

Opt-

In Voluntary Service

Opt-

Out

Default Service(Also Voluntary)

Manda

tory Default

Service

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Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects: Role of

Technical Advisory Group (TAG)

DOE selected ~10 projects where utilities proposed

dynamic pricing with consumer behavior study

DOE (LBNL) established TAG to work with each utility:

- Review and provide feedback on proposed Consumer Behavior

Study Plan

- Work collaboratively with utilities to ensure well-designed,

methodologically sound studies consistent with FOA guidelines

- Review interim and final evaluation studies

TAGs comprised of industry experts

- National Lab: LBNL

- Consultants: FSC Group, The Brattle Group, KEMA, Regulatory

Assistance Project, Theresa Flaim, Roger Levy, Karen Herter

- Academics: UC Berkeley Energy Institute at Haas, Dr. Ben Hobbs

(John Hopkins), Dr. Richard Feinberg (Purdue University)7

Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects:

Data Collection and Reporting

Utilities conducting consumer behavior studies on their

dynamic pricing projects will collect & provide:

Project Data

- Customer-level hourly interval consumption data

- Customer characteristics

Historical Data

- Hourly (or monthly) customer-level data

- Ideally covers period 12-18 months prior to commencement

of study

Benefits and Metrics Data

- Customer-level (or customer-cohort level) impact metrics

- Customer (or customer-cohort) characteristics

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Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects:

Evaluation Studies

Each participating utility will produce consumer behavior

study of their dynamic pricing project

DOE will also prepare Report that provides meta-analysis

of all projects

- Goal is to provide policymakers and regulators with set of studies

that are methodologically sound and rigorously evaluated

- Better understand what may drive common results across

projects, regions, customers (e.g., low-income, seniors)

- Better explain unique results of individual projects

DOE intent is to create publicly accessible database (with

appropriate controls for masking customer identity)

- Allow academics, consultants & industry stakeholders to

access this rich data set to analyze issues/questions

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Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects:

Likely timeframe for Evaluation Studies

Most utility dynamic pricing projects have proposed to:

- Get into the field by or during 2011

- Run for two summers (i.e., summer 2011 & 2012)

- Provide DOE with interim report & final evaluation study (by early

2013)

DOE Reports on SGIG dynamic pricing projects

- Meta-analysis of results from SGIG Dynamic pricing projects:

Interim report (2012) and Final Report (Late 2013)

- Targeted studies (e.g. role of enabling technologies and

information feedback, customer acceptance by targeted

populations)

- Customer-level data will be made publicly available

commensurate with the release of DOE Evaluation studies

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