Follow up on Smart Grid Analysis

I want to take a few minutes to address one of several excellent questions posed in response to the Smart Grid posting: How much does the nation need to even the peak demand curve? If we ever get to evening the demand curve, we can run our nukes without having to call up the expensive, price setting natural gas burners. But is this effective? Let me start with the subsidiary issue, that of nuclear power plants. The speakers seemed to believe (in agreement with most reasonable analysis I have seen) that more nuclear is not in our future. A cost benefit analysis of this issue could make an appearance on this page in the future, but for now, additional capacity from nuclear is just not a feasible, so let's take it off the table. Now to the evening of the demand curve....It seems to me to be an elasticity of demand situation with current high inelasticity that could be dramtically impacted by a better developed and advertised variable pricing scheme. What I mean is this; there is no change in energy consumption by individual consumers, or industry, during peak usage hours because it does not impact them if they do not conserve. Therefore, there is no elasticity in regards to time of day....However, if there were a clearly articulated and understood variable pricing scheme where sticks existed against usage during peak times (higher prices) and/or carrots were used to stimulate the same effect, demand would even out through the day. What would this look like? Well, people could set their air conditioning units to run during the day to cool temperatures down, with an automatic shut down from 5 to 7 p.m. Businesses could run meal breaks or shifts changes around peak times. Technologies could be updated to reduce overall usage, such as flourescent bulbs. With the technology being discussed, individuals who are producing energy could even sell windmill or solar panel energy back into the grid at variable prices, incentivizing this type of scheme even further. How is this all facilitated? Well, the smart meters, which are scheduled for a dramatic rollout in the next 5-7 years, will allow details analysis both by energy providers and users, so that each can determine what types of behaviors do or should occur during what times of day. For example, if you know your dishwasher uses more power than your vacuum cleaner, you may change when you clean your plates or your floors. I believe that this would dramatically alter the demand curve for energy, with hourly usage evening out. This was actually discussed by one of the execs at the presentation, who stated that test homes reduced consumption in the neighborhood of 30% during peak hours when better informed and when variable rates were used. Incidentally, this would allow for better management of when to turn on certain types of power plants, hopefully reducing the need to turn on nat gas plants. This would also go some way toward better management of excess energy production, and may make prices cheaper overall if consumers no longer face the all-day premium that utilities now charge to compensate for peak usage.


  1. Thanks Josh!
    Three points:
    1. Nuclear is not off the table, the NRC is currently fielding licensing applications for over 100 new reactors.

    2. Utilities have different pricing mechanisms for different customers -- some have the average daily price rate and some are set to have variable rates. Does this post suggest that with the advent of SmartGrid, more customers will negotiate for variable rates?

    3. The idea of selling wind and solar back to grid to offset prices is attractive. But there is no storage mechanism to effectuate this plan. The wind blows at night when we have saturated electricity markets -- and we can't store the wind power made during the night.

  2. I didn't mean to suggest that nuclear will never be an option...just that the speakers didn't seem to have much hope that it is a viable one in the short to medium term. The NRC reviewing applications and action are two different things. This article does a good job of summarizing the glass half empty view of nuclear... http://www.newsweek.com/id/170348 Despite other countries embracing nuclear, it always has been, and likely always will be a classic case of a 'not in my backyard' economic issue, if not with the plants themselves (though they can be controversial) then certainly with the waste. France is a great example of a nuclear-centric electricity regime, and we are a VERY long way from becoming as dependent on nuclear as they are. Therefore, I just wouldn't count on it as part of the solution soon, especially if the Obama administration remains cool on the topic.

    As to the second point, I believe the viewpoint shared by most experts is not necessarily that negotiation for variable rates will become more prevalent (though with the technology, I don't see why this wouldn't be possible) but more the idea that variable rate schemes will be more prevalent. And, with better-informed consumers and an understanding of when that variable rate is higher or lower, people will be more efficient.

    On the third point, I would mention again that the electric car as a storage facility idea is viewed by many experts to be a viable idea. With electric cars charging in the middle of the night when the wind is blowing, the grid would not become saturated. This could even potentially lead to the ability of car (storage units) owners to sell back that excess capacity at peak hours for a premium. Apparently the technology will be good enough that a truly open market place with producers and consumers both acting as buyers and sellers will be possible.

  3. Here is a link to the Dep. of Energy website about some new nuclear apps coming online as well...


  4. I would be interested to see any info you have on that many applications coming through as well, because the numbers are quite a bit lower here:


  5. Another major challenge with wind power is that American infrastructure is not set up for this power source. We do not have major transmission lines in the "wind belt" where using wind would be the most efficient. Do you have any suggestions for how (and if!) the current administration should incentivize infrastructure development for wind?