Smart Meters: Cheap in the South, but Coasts Will Cost

Your average Southern utility could net benefits of up to $287 million over 20 years by installing smart meters, and they don’t even have to hook them up to home energy systems. But a typical East Coast utility would see only $97 million in benefits from their meters, and will need to start using variable pricing and load control programs to get there.

So says a Brattle Group study (PDF) released Wednesday that shows distinct regional differences in the cost-benefit calculations of smart meter deployments. The report broke down the cost analysis along different utility functions, like employing meter readers to providing variable pricing, and used regional-specific figures like power prices in different states, carbon emission stats for specific utility footprints, and geographic and labor force-related operational costs to come up with 20-year cost-benefit test cases for different utility regions.

The report, prepared for the Edison Foundation’s Institute for Electric Efficiency, comes at a time when regulators are increasingly questioning the benefits — specifically, the consumer benefits — of smart meters. Some public utilities commissions have asked utilities to rethink the way they will pay for smart meter installations.

Southern utilities were able to save enough money via deferred meter reading, outage detection, and remote connects/disconnects — the basic operational benefits of smart meters — to break even. Adding web portals to show homeowners their historical energy use added enough efficiency value to push it into the black, and in a best-case scenario involving variable pricing and automated in-home controls, Southern utilities saw net benefits rising to $287 million, or a 1.8 benefit-cost ratio.

Central utilities didn’t quite break even on operational benefits, and needed web portals to get there, the study found. But when Central utilities added the full range of benefits, the test case netted out at $252 million, and at an even better benefit-cost ratio of 1.9.

The East and West test cases, however, had to turn on more consumer-side functions to get their smart meters to pay off, the study found. A big reason is that those utilities were assumed to already have one-way automatic meter reading (AMR) technology in place, given many utilities on the coasts have moved faster to digitize their meter deployments.

Eastern utilities could squeeze out $97 million in benefits over 20 years, for a 1.4 benefit-cost ratio, if they turned on the more advanced smart meter capabilities. As for Western utilities, they got the lowest operational benefits out of smart meters, but also had more upside in turning on advanced meter-to-home functions, with a 20-year benefit of $141 million possible, a ratio of 1.5.

What about the millions of smart meters being installed today? Well, none are really being used (outside pilot projects) for two-way communications and control in homes. Variable pricing plans are still rare for residential customers, and while states like California have mandated them, that move is coming under a lot of political pressure. The state’s biggest utilities are all rolling out smart meters in the millions, but just when they’ll turn on their (mostly) ZigBee radios, or hook them up to interfaces like Google’s PowerMeter (s goog), remains to be seen.

To make variable pricing palatable to utility regulators, utilities will have to give all their customers some kind of view into real-time electricity use, or sign them up for programs that let the utility turn down their power automatically in an emergency. Regulators in Maryland, Hawaii, Michigan, Indiana, Colorado and Virginia have asked utilities to shoulder more of the costs of deployment and put less burden on customers’ rates, but haven’t largely put utility installation plans on hold. How they might react to variable pricing schemes is yet to play out.

I’m also curious to see how real Southern smart meter deployments might compare to the Brattle Group’s utility test cases. Southern Co. (s SO), the region’s largest utility, has taken a different route from most other utilities, using millions of meters from Sensus that are connected in a tower-based, private-spectrum network, compared to the public spectrum wireless mesh technologies used by Itron (s ITRI), Landis+Gyr, General Electric (s GE) and Elster (s ELT). Southern Co. has shied away from in-home energy management pilots so far — perhaps because their hefty operational benefits have taken some of the pressure off?

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Image courtesy of Tom Raftery via Creative Commons license.