Energy Analysis Department Electricity Markets and Policy Group

DOE Smart Grid Investment Grant Program: DOE Smart Grid Investment Grant Program:

Dynamic Pricing & Consumer Behavior StudiesDynamic 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.

22

Energy Analysis Department Electricity Markets and Policy Group

Dynamic pricing pilots & AMI deploymentDynamic 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

33

Energy Analysis Department Electricity Markets and Policy Group

Deeper questions remain unanswered about Deeper questions remain unanswered about the transforming capabilities of AMI 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

44

Energy Analysis Department Electricity Markets and Policy Group

SGIG: Advancing our understanding of customer SGIG: Advancing our understanding of customer response & acceptance of dynamic pricingresponse & 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

55

Energy Analysis Department Electricity Markets and Policy Group

Role of dynamic pricing in retail service Role of dynamic pricing in retail service offeringsofferings

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

66

Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects: Role of SGIG Dynamic Pricing Projects: Role of Technical Advisory Group (TAG)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)77

Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects:SGIG Dynamic Pricing Projects:Data Collection and ReportingData 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

88

Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects: SGIG Dynamic Pricing Projects: Evaluation StudiesEvaluation 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

99

Energy Analysis Department Electricity Markets and Policy Group

SGIG Dynamic Pricing Projects:SGIG Dynamic Pricing Projects:Likely timeframe for Evaluation StudiesLikely 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

1010