The power grid has one crucial shortcoming: It can’t store electricity. So as electric demand crescendos, especially in the late afternoon, more power plants have to be turned on.
This graphic, from the Energy Information Agency, illustrates how a typical utility company might ramp up energy production in response to demand from the grid. Nuclear and coal plants tend stay on all the time, as do solar and wind. (You don’t save money disconnecting solar panels.) The system is built so that these facilities, which provide what is called “baseload power,” can satisfy the minimum amount of electricity needed at any point during the year.
As demand increases, intermediate plants are brought online. And when everybody starts to fire up their gadgets and appliances, that’s when the peaking plants are called to service.
These peaking plants — the ones at the right side of this graph — typically burn natural gas or, relatively rarely, petroleum. They’re expensive to operate and they consume fuel inefficiently, but they can turn on or off quickly. They exist solely to make sure there are no brownouts when everyone comes home on a hot summer day and switches on their air conditioners all at once. Peaking plants are a crucial part of the electric grid, though they might only run for 5 to 15 percent of the year. They’re a big part of your electric bill too.
(Watch this video, which shows how power usage varies hour by hour, day by day, in New England.)
So it’s impossible to talk about energy efficiency in the electricity market without looking at the patterns of electricity usage. It would of course be great if everybody switched to more efficient appliances and got rid of their incandescent light bulbs. That would decrease electricity usage across the board.
But if there was some way to smooth out electricity demand, we wouldn’t have to rely on as many peaking power plants. Even if we used the same amount of electricity, the system would still be cheaper and cleaner overall.
This is where smart meters come in. About a quarter of American households have upgraded equipment that records how much electricity they’re using on an hourly or minute-to-minute basis. Getting precise information on when a household uses electricity is important because it lets utilities figure out who uses the most power during peak periods. Then the question becomes how to convince these people to ease off when the system is overloaded.
One way is through people’s pocketbooks. Many utilities have started to offer real-time pricing, which charges more when demand is high. Higher afternoon prices should convince people to, say, run their dryers late at night. Economist Hunt Alcott studied one program in Chicago, where he estimates that households benefited about $10 over the course of a year, or about 1 to 2 percent of their electricity bill.
Today, Jim Tankersley wrote about another way to reduce peak electricity demand: by asking customers directly. One concern about real-time pricing is that it takes a lot of effort to keep track of the fluctuating prices. Who has the attention span for that? Instead of expecting customers to keep abreast of power prices on their own, one company sought to remind them with e-mails, giving them immediate feedback when they did save money.
The company, Opower, estimates that peak power usage was reduced by around 3 percent on each day they sent e-mails. With some back-of-the-envelope calculations, they say that translates to nearly 50 peaking power plants that could be taken offline nationwide if every household with a smart meter participated in the program. But there’s a lesson here for everybody, too. It’s not just how much electricity you consume. It also matters when you consume it.