Energy efficiency paradigm shift

Energy efficiency looks like restructuring

investCompanies invest to increase their revenues, to grow. Sometimes they invest to reduce production costs, into more modern machine tools for instance. Generally, such investments aim to increase production capacity at the same time, in order to get more revenues.

Energy efficiency does not match this business model. It corresponds to investment to reduce overhead costs in particular. It can also reduce production costs, when energy consumption is a main cost factor.

Reducing overhead costs… does it remind you of something? Yes! Restructuring a company, thanks to eliminating and scaling back production, employee layoffs, and salary and benefit reductions, for instance.

Wrong message to investors

reduce_billTherefore, on the balance-sheet, energy efficiency does not show a good image of the company. Communication efforts from management have to be deployed to explain to shareholders the interest of energy efficiency and its advantages over other possible investments. But, as shareholders want more, not less, they generally prefer growth. Energy efficiency then competes with difficulty against other type of investments.

The word to spread to shareholders

Spread_wordOnce an investment in Energy Efficiency is done, energy costs directly decrease without harming incomes and results, thus enabling more financial resources to be made available every year, for many years to come. Energy Efficiency is a mark of confidence in the future, providing a good basis for sustainable growth.

Return on investment is higher for the companies which are the worst in energy efficiency. With high specific consumption, it is easy to significantly reduce energy consumption with simple and cheap solutions. Oddly, it is then economically less interesting to invest in Energy Efficiency in environmentally conscious companies than in energy guzzler ones. It is then normally easier to convince the later. Then, just do it!

Gauthier Dupont
Dupont Energy Consulting GmbH

Smart advices for smart meter users

Some stats

As explained in a previous post, I have acquired a Smart Meter and promised to keep you informed. Now that 2013 begins, it’s time to take a closer look at the stats of my electricity consumption available through my smart meter.

I spare you the explanation how to import data in Excel and how to perform the calculations. The website interface proposed by my utility Mainova is not really user friendly and a lot of manual handling is necessary to import data for each day individually.

Average daily consumption

The previous figure shows my average daily consumption curve. Quite a typical one for households without electric heating (my family enjoys district heating). It also shows that Mainova’s tariff policy makes sense: lower tariff during low load and higher during peak load. The tariff structure to incite clients to pay attention to their load curve is well defined.

Still bad news

Now, as explained in a previous post, Mainova’s rates for the use of a smart meter are not appropriate for consumers (economically speaking). The Time of Use (ToU) tariff does not compensate the rental fee for the smart meter. For the 8 months since the smart meter is installed, I have effectively paid 3% more than the standard tariff without smart meter.

Modifying behaviour to shift consumption from peak to low hours could reduce the losses to 1%, but no wins. So I stay on my position not to bother my family with drastic changes (for instance, to eat before 6 PM or after 9 PM to avoid peak hours), unless Mainova modifies its tariff policy.

What utilities might change

Bulb

I believe in smart meters. They are useful. But I think consumers should have the right to get access to this technology at a more decent price. Let’s recommend a new tariff structure that can foster the installation of smart meters amongst Mainova’s clients:

Current prices (€) Proposed prices (€)
Peak (orange slot) 0.2348 Middle + 20% = 0.2697
Middle (blue slot) 0.2248 Unchanged = 0.2248
Low (green slot) 0.2148 Middle – 30% = 0.1574

In this case, the yearly bill is the same with or without smart meters (in my case). But with drastic behaviour change, my family could spare 13%, which is quite interesting. With limited and less annoying change, few percents of savings can be easily achieved. This is clearly a win-win situation:

  • If consumption habits remain the same, the client pays the same price (with or without smart meter).
  • If the client pays attention to his load curve and shifts some loads from peak to low hours, he pays less and utility’s peak load is accordingly reduced.
  • If the client consumes less (for instance by investing in energy efficiency devices), he pays less and utility’s production is accordingly reduced (like for any tariff structure).

What to do now?

@Mainova’s customers: do not accept a smart meter unless you are ready to pay more or to drastically change your habits.

@Mainova: please, improve your tariff structure to share the wins of smart meters deployment. As explained previously, utilities benefits are known: smart meters help you to cope with deregulation and market-driven pricing, to adapt to higher renewable energy penetration rate, real-time load data, etc.

@All of us: be critical when talking about smart grid, look at the pictures and make decision based on information, not on advertisement.

Our prediction

Customers will be more and more reluctant to accept a smart meter in their home, unless utilities communicate on their smart meters strategy and objectives, share the benefits with their clients, guarantee privacy and take into account stakeholders interests.

Flavien Port / Gauthier Dupont

Dupont Energy Consulting GmbH

Smart consumer vs. smart meter

Bad news confirmed
Three months after the installation of Mainova’s smart meter at home, the rise of my electricity bill is definitively confirmed. Extrapolated on one year, the smart meter increases my bill by 31.5 €/year.

As explained in a previous post, the main advantage is to be able to monitor the consumption of my family.  If I want my money back, the only option is to modify our consumption behavior. We have to shift a part of our consumption from costly slots to cheaper ones. Before I start bothering my family with changes regarding our consumption behaviour, it seems astute to carry out an analysis. Thanks to the monitoring, I can retrieve enough data to make likely calculations.

The following graphic illustrates how peak consumptions may be shifted in order to reach for maximum savings.

The black horizontal line represents my household’s minimum base consumption, or base load, (fridge, heater, appliances on standby, etc.), that can be neither reduced nor shifted.

Considering all the peaks above the base load since my smart meter is installed, the savings would reach about 14.4 €/year, which doesn’t compensate for the additional monthly charges for the use of the smart meter (50.32 €/year). The tariff difference between off-peak and peak periods is too small (8.5% discount).

As a conclusion, it is not necessary to bother my family for a few euros a month. Unfortunately I was right about the fact that installing a Mainova smart meter is not profitable. It doesn’t mean you shouldn’t accept a smart meter in your home. It depends on the tariffs proposed by your utility and on your consumption behaviour.

Think smart before installing a smart meter

The political circumstances are such that sooner or later, you will have to make that change (see the EU recommendations on smart metering systems and the EU directive for electricity, Annex I-2). I hope at least that through this article, you will take good care at checking the tariff conditions.

Concerning consumption behaviour, it is obvious that my family is not a standard household. As a professional in energy efficiency, I am aware of available technologies and good habits to limit our consumption as much as possible. I don’t need a smart meter to monitor our consumption to know what to do to be a model family in energy efficiency. My kids turn off the light when leaving a room. Simple, but efficient. I’ve installed LED. Also efficient, but expensive.

If it is not your case, a smart meter could help you to identify savings you could implement. You could show to your children the consequence of not acting like energy efficiency recommends. You could analyse your consumption measurement and make a small analysis to estimate potential savings, to select the best tariffs scheme that is proposed by the utilities in your region, etc. Be smarter than your utility.

Flavien Port / Gauthier Dupont
Dupont Energy Consulting GmbH

Smart meter : a smart but expensive gadget

My new smart meter

In a previous post, I wrote I doubted that smart meter is a good investment for a private consumer. Now, I will prove it!

Many remain sceptical in front of theoretical arguments, even when based on figures, experience, knowledge and deep analysis. They need to see it, to believe it. I will then show them. To do so, I’ve recently acquired a smart meter. If my analysis is correct, my electricity bill shall increase. But I am ready to sacrifice a few euros a month on the altar of truth.

I’ve first checked which utilities are proposing smart meters in my area. Two only. The first one is Yello Strom, which charges 23.98 ct/kWh and 71.28 €/year (Inc.VAT). More than my current tariff by Mainova, the historical utilities: 23.48 ct/kWh and 57.98 €/year. The second one is Mainova, which proposes the following time-of-use (ToU) tariff:

  • Additional monthly charges: 50,32 €/year
  • From 8am to 3pm and from 6pm to 9pm: 23.48 ct/kWh (thereafter called “Peak”)
  • From 3pm to 6pm.: 22.48 ct/kWh (thereafter called “Mid”)
  • From 9pm. to 8am.: 21.48 ct/kWh (thereafter called “Low”)

So on the one hand, the monthly charges increase by 87%. On the other hand, there is a 4% and 9% discount on kWh tariffs in the Mid and the Low slots respectively.

The device provided by Mainova is from Landis&Gyr, reference E350 ZMF120. The linked communication module is an E35C which is based on the mobile data service GPRS/GSM.

My new bill

As my genuine consumption can be retrieved, there is supporting evidence that I would like to share with you. Let’s do it.

Here is an excerpt of my bill from May 15th to May 31st 2012, the first 17 days since the smart meter was implemented.

I would have paid 41.72€ with my former rate, which means I have lost 1.31€, in only 17 days. Considering the full period until today, I have calculated that I have already lost 4.21€, i.e. about 25-30€/year. The kWh tariff discount is too low to compensate the additional flat rate for renting the smart meter.

Benefits ! Where are you ?

Let’s take a look at Mainova advertisement, speaking highly of benefits and advantages of smart meter:

  • “Total control of your electricity bills, due to the clear analysis possibilities you have access to on your Mainova online account.”

In fact I don’t control my bill at all, the only thing I can do is watching online (with a delay of two hours) how much I consumed.

  • “Possibility to save money by shifting your peak consumptions to the cheapest slots.”

Sure it is possible to save money, but not especially thanks to the smart meter. I don’t need a tool to determine when to shift some of my Peak or Mid consumption to cheaper time slots, provided that I am capable to identify which appliance(s) caused the consumption in the Peak or Mid time slots.

  • Take advantage of many extra functions and optimize your electricity consumption depending on your needs.”

The smart meter itself is just a meter with a digital screen. The functions are in fact the ones proposed by the internet user interface. They are (for the moment) not that sophisticated. I hope Mainova will develop its tool. I had the opportunity to see the one of Yello Strom. This one is good. Once again, the smart meter doesn’t optimize your consumption, it just makes it more visible, so that you can optimize it, if you have time.

At the end of the day

We can see that the direct benefits for the end consumers are limited. Main advantage is to be able to monitor his consumption. Thanks to smart meter, customers have the opportunity to pay more for the same service.

The smart meter is an initial cost wich doesn’t seem obvious to recapture, except if one is ready for drastic change in his consumption behavior. Now that I have one at home, I will carry through experiments to find a way how smart meter can be profitable, if possible. I will keep you informed in upcoming posts.

Flavien Port / Gauthier Dupont
Dupont Energy Consulting GmbH

Smarter smart meters from Belgium

Belgium innovates

On 1st of March the Belgian utilities Electrabel launched in collaboration with fifthplay a new kind of smart meters. The basic idea is simple, but great and innovative. The proposed system enables end consumers to individually monitor, visualize, analyze and control the consumption of their electrical devices. Compared to common smart meters, which measure the total household consumption, it creates real added value.It is not strictly speaking a smart meter because it does not

replace the existing meter (analog or digital); it does not meter total household consumption and measures cannot be used for invoices. Functionally it is a domotic installation. But its use is smart grid and energy efficiency oriented. As it smartly meters consumer’s consumption, it deserves the title.

Electrabel is the historical utilities in Belgium, now part of the french holding GDF Suez.

Fifthplay is a tech co fully owned by Niko Group, a Belgian holding owned by the family De Backer. The original company Niko founded in 1919 and led today by the third generation is specialized in domotic solutions.

A new kind of smart meter

The design is nice and actual. Inspired by Apple? Anyway, it’s a good reference.

Gateway

The system includes:

  • Smart energy plugs
  • An internet gateway
  • A web application (for computer, tablet and smartphone).

This video clearly explains the concept, in French, sorry. Or check this one, in Flemish, if you prefer. Some info in English can be found here. More videos in French and Flemish here.

Smart Energy Plug

Smart energy plugs placed between the wall socket and the plug measure the consumption of individual electrical devices. Measurements are wirelessly sent to the internet gateway, which stores info and send it periodically to a remote server via internet (every 15 min). Through a web application or App, the end consumer can then:

  • Remotely monitor real-time consumption (15 min)
  • Program smart energy plugs (timer)
  • Remotely switch on and off smart energy plugs
  • Receive a warning via sms or e-mail in case of a sudden, unforeseen change in consumption.

An expensive gadget

Nice new tech, isn’t it? Now let’s look at economics of energy efficiency devices: investment and savings.

Investments. Electrabel is offering the Smart Energy Box at €139. Throughout the launch month of March 2012, customers will benefit from an introductory discount of €30. Add €3.50 for monthly subscription, i.e. €42 per year. Given a 3 years amortization of the initial capital investment, with the discount, and an average tariff of €0.18, one should save 435 kWh per year to cover the investment, plus the own consumption of the system, i.e. 10 to 20% of the yearly consumption of a benchmark family in Belgium. That’s quite a lot.

Savings. Marketers pretend that thanks to the tool end consumer can control and manage his own energy consumption. We all already do it without tools: we switch on and off when needed. One should neither be a genius nor being advised by a computer to know that consumption is reduced by switching off the light in an unoccupied room. I have no idea neither how much savings one can achieve thanks to the new tool, nor how to estimate them. do you? But I can tell it is peanut compared to the investment.

Market opportunity

The tools look great and functionalities are attractive. But fifthplay is not alone on the market. For instance Ijenko is proposing a similar solution, even broader as it includes also heating systems and security (smoke, motion and doors/windows opening/closing detectors).

Fifthplay’s long-term agreement with Electrabel is of course a good move to secure a big share of the Belgian market, to gather experience and a strong reference. But the international market is open and moving. Necessary technologies are not new and competitors would encounter no issue to develop similar devices. it will be a tough competitive market.

Not to mention there are cheaper solutions that can help you to optimize your electricity consumption (but without internet remote control): standby savers combined with power consumption data loggers offer a cheaper solution, without monthly subscription.

Prediction

Many similar solutions will shortly appear on the market (this prediction is an easy one: it is already the case). Marketers will pretend this is the new tool you need, that you will save money on your consumption bill. Journalists will be enthusiastic.

Few people like me will explain that it is too expensive and it doesn’t worth the investment. We will be criticized, for sure. Here, I hope. I would like to read your opinion. Do not hesitate to comment.

But at the end, it will end like smart meters today: far away from the foreseen success. Not so many end consumers will acquire the system. Enough to officially mention it is not a failure, but not enough to revolutionize the way we live. Criticisms will be voiced. For instance, that it inundates our house with even more wireless com, raising real or fanciful health issues. Until then, first movers companies will gain enough earning not to lose everything (pioneer advantage). Some will even make good money. But followers will lose, except the cheapest ones who will supply the tail of the life-cycle pattern (Growth-Slump-Maturity Pattern, see for instance chapter 14 of the book Marketing Management).

Finally, such tools will gently survive on the market thanks to tech fans not looking at economics. And tech companies will come with a new tool you and me cannot live without. The same story again…

Gauthier Dupont
Dupont Energy Consulting GmbH

A dumb business model for smart meters

Smart meters? Why?

Utilities and suppliers hammer home the message that smart meter is useful. I do agree. They try also to convince private customers that it fits their personal needs and that it’s a good investment for them. I doubt it.

Let’s take an example. Given a household consumption of 4000 kWh/year at 0,23 EUR/kWh in Germany, 5% invoice decrease thanks to time-of-use (ToU) tariff, an additional monthly subscription of 2,50 EUR, and optimistic 10% of consumption savings, one can save up to about 100 EUR/year. But don’t forget that rates in Germany are amongst the highest in Europe. Average tariff in France is 0,13 EUR/kWh. Given a dual hourly rate resulting also in 5% invoice decrease, a customers information program to explain how to save the 10%, and an additional yearly subscription of 25 EUR, one saves more or less the same.

Does it justify an investment of several hundreds euros (smart meter price + installation costs)? No. The real justification is somewhere else.

As a consequence, the business model proposed by many utilities fails to convince customers in many countries. Customers are not dumb enough to pay for something they don’t really need. It is not the first time one try to sell useless devices. Sometimes with success, I have to admit. Many of us do not really need a smartphones, but at least it is a nice device that one can show to his friends. Invite a friend: “come with me in the cellar, I will show you my new smart meter, it’s fun”.

Private customers do not need smart meters

Utilities propound also non financial arguments (see for instance PG&E):

  • More reliable service: reliability is already high. In the last 10 years, I had only one supply interruption. It was planned and we get a post a few days before from the utility to warn us. How can be it be better? Utilities already do an excellent job.
  • See your daily energy use: who would do it daily? Ok, the first days it’s fun and somehow informative. But then. Why should we look at it every day? TV is much more exciting. Customers just want electricity when they need it. Switch on, light on. Not more.
  • Get Alerts About Your Usage: Same argument as above. Customers know when they need current. They don’t want a software telling them that their consumption habits are wrong.
  • More Choices in Pricing Plans: Being billed at different prices during different times of the day, is what utilities want, not customers. How would it be possible to compare utilities offers without knowing the price in advance? They will certainly sell us software to make the calculation for us. What is important for the customers is the yearly bill. The average cost of energy (EUR/kWh) shall be the smallest. This is the right financial objective.
  • Smart Devices and Smart Homes: Not only customers have to pay more for a smart meter, but they also have to invest in new appliances. The final bill could be difficult to digest.

There are more simple solutions to achieve the same goals. One can inform customers about good consumption habits. Thanks to dual hourly rate, many families turn on their washing machine in the evening since decades. When leaving a room, turn off the light. Etc. It is common sense. Smart customers do not need a smart meter for better managing their energy use. it can help, but it is not a must.

But utilities do

Smart meter is a good thing… for utilities.

  • Deregulation with market-driven pricing: Because of the deregulation of electricity generation sector, tariff paid by the utilities to the generation companies varies continuously. They would like to impact it to their customers. It would be easier.
  • Better Usage of Renewable Power: it is indeed a positive application of smart meters. But it is the responsibility of the government to encourage investment in renewable energies and of utilities to make the most of it. Not the customers.
  • Real-time load data: knowing the loads helps utilities to optimally operate their assets. Without the info, it would be difficult to supply millions of Electric Vehicles (EV), to smooth the load curve, to go beyond 20% of renewables, and to do it 24/24h 7/7 days without interruption. This is the major issue of smart meters.

What to do then?

My message to the utilities and their advisers: don’t lie to customers. Tell them that we, together, as a community, need smart meters. Our electrical appliances evolved and require better and safer supply (computers and electronics), new heavy loads are coming (EV), challenging the capacity and reliability of our aging infrastructure, mentality evolved (who is ready now to kindly accept interruptions lasting for hours). Smart meters are a piece of the puzzle of the grid of the future we need to build together to cope with our needs of the 21st century.

Gauthier Dupont
Dupont Energy Consulting GmbH