Some electricity suppliers have begun to implement demand response programs, which are yet another opportunity for you to save money on electricity. In one sense, demand response or demand side management programs have a self-serving purpose for utilities: they are designed to provide customers with incentives to save electricity at times of peak demand, so they don’t need to build expensive new power plants or transmission lines to serve that demand. However, if your electricity use is flexible enough to be turned down during peak demand periods, you can take advantage of these programs to decrease your electricity costs.
As an example, Southern California Edison (SCE) has a number of demand response programs:
- Agricultural and Pumping Interruptible Program: For business customers with demand of at least 35 kW or a pumping motor of at least 50 horsepower; provides a year-round monthly bill credit to customers willing to interrupt power usage at SCE’s request.
- Automated Demand Response: For customers with at least 200 kW of energy demand and an Energy Management System (EMS); provides up to $300/kW of verified load reduction, controlled automatically by an EMS.
- Capacity Bidding Program: For business customers not participating in any other demand response program; provides both capacity (per kW) and energy (per kWh) credits for the amount of load reduction bid each month, with no penalties but varying payments depending on the percentage of the commitment met each month, and day-ahead or day-of notification of events.
- Critical Peak Pricing: For business customers with demands over 200 kW; provides lower off-peak electricity rates in exchange for very high electricity rates during critical peak events called a day ahead by SCE, which produce savings if demand can be reduced during these events.
- Demand Bidding Program: For business customers with demands over 200 kW; provides bill credits of $0.60/kWh during day-of events and $0.50/kWh during day-ahead events for energy reductions within 50% to 200% of the power reduction bid for that event, with no penalties for not fulfilling on the bid.
- Optional Binding Mandatory Curtailment Program: For customers who can independently or in aggregate reduce their entire circuit’s load by up to 15%, in increments of 5%, during every rotating outage; exempts participating customers from having power cut off during rotating outages in exchange for this partial reduction during all rotating outages.
- Real-Time Pricing: For customers with demands over 500 kW; provides electricity prices that vary based on the time of day, season, and temperature, which produce savings if demand can be reduced when prices are high.
- Scheduled Load Reduction Program: For customers with energy demand of at least 100 kW, willing to commit to reducing at least 15% of their maximum demand (and at least 100 kW) for each hour during pre-scheduled days and times; provides a bill credit per kWh of qualified load drop.
- Summer Discount Plan: For business or residential customers who allow SCE to install a remote-controlled device that enables SCE to turn off or cycle off and on their air conditioner’s compressor during an energy emergency; provides an electric bill credit during summer months that depends on the plan chosen and the size of the air conditioner.
- Time of Use Base Interruptible Program: For customers with energy demand greater than 200 kW, willing to commit to reducing at least 15% of their demand (and at least 100 kW) with 15 or 30 minutes advance notification; provides a monthly credit based on the difference between their average peak period demand and the demand they commit to reduce to during events, with penalties for not meeting this commitment.
Typically, business electricity suppliers provide more options for participating in demand response programs, but some programs are open to residential electricity customers as well. Contact your electricity supplier to find out if you are eligible to participate in programs that could help you in your quest for cheap electricity.
Lately, there has been a lot of talk about the smart grid. What is it? What is so smart about it, anyway? And what does it have to do with cheap electricity? We’ll take a look at those questions in this post.
First of all, one of the things that the smart grid is designed to do is to make it easier for information to flow between utilities and customers. That can help the utility by giving them warnings about possible problems on the power grid before they occur, so they don’t need to wait for customers to call them to find out about outages, and so on. More relevant for those of you interested in cheap electricity, it will also allow the utility to send information to customers about changes in electricity prices, so that you can choose to use electricity when it is cheap and not so much when it is expensive, and thus reduce your electricity bill.
Now, you might ask, why would electricity prices change? Aren’t they usually the same all of the time? Yes, that is true for most customers today, but it turns out that the value of electricity is different depending on the time of day, and also depending on the season. This is mostly due to changes in demand; both residential and business electricity customers tend to use more electricity during the day, particularly during the summer when they are running their air conditioners, and less during the night and on winter days. These changes in the value of electricity can be seen in changes in electricity prices in wholesale markets, where electricity is traded between electricity generators and electricity suppliers who then sell the electricity to end users. Today, without the smart grid, end users don’t see these variations in electricity prices, but someday we will be able to use this information about varying electricity prices to make smart choices about when we use electricity. This will tend to ease the strain on electricity supplies at times of peak electricity demand, because people will have incentive to turn down their electricity use as the price goes up. And, as a cheap electricity afficionado, having the opportunity to save money on electricity by choosing to use it when it is cheaper probably sounds pretty good!
At the moment, the smart grid is just in the process of being created, because a lot of infrastructure needs to be put in place before all of this communication between electric companies and consumers can occur. However, the federal government has recently invested $3.4 billion to spur development of the smart grid in the United States, and we should start to see it go live, at least in some places, over the next few years. Already, some big players in the information technology space (and some not-so-large players) are beginning to introduce tools that will be useful once pieces of the smart grid start to fall into place. These include electricity usage monitoring tools like Google Power Meter and Microsoft Hohm. These generally require a partnership with your current utility, and mostly are not functional yet, but you can keep an eye on these links to see when they might go live for you.
If you’re interested in saving money on electricity, please also take a look at our guide to finding the cheapest electricity supplier!