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Are smart meters worth the cost?

A notice in my mailbox last week told me that smart meters are going to be installed in my neighbourhood. I’ll admit that the geek in me would like to see real-time information about my energy usage, but as an economist I’m interested in costs and benefits of the program. So far we have seen lots of bold claims in their favour — they’re called “smart” so they must be good for us. But just like the promises of the paperless office and more efficient workplaces from computers, the lived reality tends to be different, and may even have unintended consequences.

While the effectiveness of smart metering in BC is yet to be seen, the upfront capital investment for the utility is unquestionably significant. Initial estimates report costs of $660 million for the meters and $270 million for the grid, for a total price tag of just under $1 billion. That does not include a box in your home to give you access to your data — a couple hundred dollars that will come out of your pocket, though BC hydro says it will provide some rebates.

BC Hydro’s “business case” argues that after considering implementation costs, smart meters will provide a net benefit of $3 billion over a two-decade period through to 2033, with 80% of the benefits internally to the utility, and the remainder dependent on uptake of additional in-home tools. The analysis assumes that smart meters will not need to be replaced during this period, and that no other unintended consequences are manifest. The benefits are based on: improvements in safety and reliability, such as real-time information about power outages; enhanced customer service; reductions in electricity theft; and improved operational efficiencies.

About 17% of the “benefit” to BC Hydro of smart meters arises from eliminating jobs for meter readers across the province due to automation. File those 1,200 lost jobs under “BC Jobs Plan”. [Update: COPE 378 informs me that 398 of their members will lose their jobs as meter readers. Another 400 or so are being lost on the admin side via Accenture. And BC Hydro has been ordered to shed another thousand or so.]

The largest source of benefit to BC Hydro (56% of estimated benefits) is reducing the theft of electricity for marijuana grow-ops and other illegal activity. BC Hydro claims theft costs the utility $100 million per year in lost revenue, although it is not obvious that smart meters would convert every kWh of stolen electricity to legitimate revenues. Smart meters may make it easier for criminals to steal electricity by hacking into the smart metering system (Jim Quail makes this case here). This could, in effect, increase the prevalence of power theft as well as give rise to a range of other security concerns.

Beyond eliminating jobs and reducing theft, other gains are small amounts that are difficult to verify, particularly when spread over a two-decade time frame. While I’m inclined to think that there will be some gains, it is not clear whether we can bank on them. I’m betting that there are also costs that are not fully understood right now, and unintended consequences of the move. And some of those benefits hinge on customers buying additional equipment to avail themselves of new information. This will be challenging for many low income households or the 30% of households that are renters.

The other wild card in this has to do with implementing time-of-use (TOU) pricing. While BC Hydro and the government deny that they want to bring in TOU pricing, most experts seem to agree that the whole point of smart meters is to have TOU pricing. So once they are implemented, I’m betting we see TOU within a few years. At any rate, TOU pricing is more of benefit to smoothing and shifting peak load, a benefit in coal or nuclear systems that are hard to ramp up and down; this is less of an issue in BC where we have huge hydro reservoirs that act as batteries for electricity storage.

Overall, smart meters will do little to reduce household energy consumption. So, could almost $1 billion have been better spent to conserve existing power resources? BC Hydro’s 2007 Conservation Potential Review (CPR) was commissioned to identify potential for electricity conservation through demand side measures (DSM) in the residential, commercial and industrial sectors. Over a 20-year study period, the study estimates the total potential electricity savings and peak load reduction from new and emerging energy efficiency technologies, customer-supplied small-scale renewable energy and behavioral change.

The CPR’s estimates of potential savings from conservation are substantial, ranging up to 40% of business-as-usual consumption by 2026. The cost of achieving these reductions is way cheaper than acquiring new expensive electricity, as BC Hydro has been mandated to do by the government. In addition, investment in DSM is more likely to be distributed within the local economy while smart meter installation will likely be contracted out to a single firm. And to add some crony capitalism to the story of smart meters, the announcement the smart meter contract was met with some controversy, as it went to a firm withties to the BC Liberal party.

Note: This piece was developed as part of our recent Energy Poverty publication, but did not make the final cut. So special thanks to my co-authors Eugene Kung and Jason Owen, whose insights are reflected in the post.

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11 Comments to “Are smart meters worth the cost?”

I have been hooked up to the Ottawa hydfro smart meter now for several months here are my initial observations purely from a consumer standdpoint.

TOU has still not been implemented in Ontario, and now that the electin is over here I am sure you will see a push for the unpopular programs. I am not sure what Ontario paid for the infrastructure.

1) it is definitely easy to monitor how much, when and what it costs under the current system and the TOU planned implementation. This is premised on the fact that you have a cpu/ipad/smart phone and an internet connection to connect to the service. The system is updated daily and you can monitor, hourly, daily and monthly usage measured in KWs or dollars.

2) I have to say the the very first thing that hit me was the opportunity costs of energy and how cheap in terms of an hourly basis energy is in Ontario. Here’s the rub. It was a extemely hot day here, so I turned on the central and ran it all day. I wanted to stay cool and I also wanted to cost it. I did not set it at a fridge setting, something just approaching comfortable 23c.

I logged in the next day. I did the math and basically per hour using the TOU scale on high demand period, I would have paid 30 cents more per hour for this comfort. Truly 30 cents does not go far these days, and the opportunity cost of shutting that AC off did not rest upon my dollar savings but for an hour of comfort it all comes down to social awareness and being aware that at peak periods it is best to turn it down.

Now of course is you add all those 30 cents up on a monthly basis it could develop into a bit of a cost, but agan the opportunity cost is just too low to make a person switch.

I had no idea how cheap energy was. Truly not an idea that it would cost me 30 cents to run my average sized AC for an hour in peak demand.

So what has the smart meter done for me- made me realize that what I thought was a bit of money really is a trivial cost for such a personal comfort space. It is kind of the antithesis of what it sets out to do.

Now of course they could hike the rates even higher and potentially influence my decision. But not knowing may have actually done more to me than knowing. So much for the age of information.

3) Thankfully I am try and use my environmental awareness to influence my heating and cooling and not my pocket book. And I am not a millionaire and considering all the work injuries in the household I would not put us in the middle income (my partner a fulltime nurse who suffered a permanent injury at the Ottawa Hospital 3 years ago and still has not recevied a workplace accomdation, or a WSIB decision or long term disability- basically no income for 3 years) Brutal ONA, WSIB and the Ottawa Hospital you should all be ashamed. have yo ever played pass the injured worker hot potato game- it is a game that can easily go on forever and involves HUman resource department with vampire teeth, doctors that are afraid to do an assessment as they are employed by the same place that you work at, a very vicious WSIB and a union that is toothless and for as much as they say they are for workers, you have to drag them to the grievance hearing kicking and screaming and won’t even bother WSIB. Brothers and sisters of ONA and I am sure other uniosn as well, you have got to protect the injured a whole lot better than what I have see, not just my personal case, I have worked with quite a few injured workers, mainly nurses. )

Interesting points. Someone recently mentioned to me that these systems can be de-motivating in that turning off a light may only save a few pennies, so why bother?

Actually, as customers of Ontario hydro, we do already have TOU billing, although Ottawa Hydro may not have implemented it yet. They like to switch the cheap hours around frequently so no one knows exactly when they are. But as to the smart meters , one big unexpected advantage to us (and I know of several others) is that our electricity bill immediately dropped significantly. Seems some old meters were inaccurate and the error was definitely not in our favour. We were paying a lot more than we should have been, for years. If everyone saves even half what we saved, it will cost Ontario Hydro a bundle.

The media have report cases where people’s bill increased dramatically because their old meters where reading too low. The PCs where strongly hinting that the smart meters where a Liberal plot to increase people’s hydro costs because of these problems.

I’d love to hear more from the Ontario experience. Seems to me that there are two things going on: one is the smart meters and time of use pricing; second is higher rates overall. It is important to disentangle these effects, as smart meters may be getting blamed unfairly.

I’d also be interested in any stories/studies about smart meters and time-of-use pricing as they relate to low-income households. Could be barriers, as I mentioned, but also disconnections from afar.

SMART METER PRIVACY VIOLATIONS.

1. Must-See 4-minute youtube video on Smart meters

http://www.youtube.com/watch?feature=player_embedded&v=8JNFr_j6kdI

SMART METER HEALTH PROBLEMS AND CANCER.

2. The WORLD HEALTH ORGANIZATION on May 31 2011 placed the Non-ionizing radiation coming from Wireless smart meters (and some other wireless devices) on the Class 2-B Carcinogen List.
http://www.iarc.fr/en/media-centre/pr/2011/pdfs/pr208_E.pdf

3. The NATIONAL INSTITUTE OF HEALTH Feb 2011 found biological changes in the brain after only minutes of exposure to non-ionizing radiation.
http://jama.ama-assn.org/content/305/8/808.abstract

4. LABORATORY SCIENTISTS have observed
 (1) Human Cell Damage
 (2) DNA Chain Breaks 
(3) Breaches in the Blood-Brain Barrier
 from levels of non-ionizing radiation lower than emitted by WIRELESS Smart meters.
http://electromagnetichealth.org/electromagnetic-health-blog/cc-video/

5. INSURANCE COMPANIES Hired Independent Laboratory Scientists and these scientists also observed Cell Damage and DNA Chain Breaks and now the Insurance Companies will NOT Insure Liability damage from Wireless Smart meters and other wireless devices.
 TV Video (3 minutes)
http://eon3emfblog.net/?p=382


Cell Phone use and other devices are Voluntary and can be shut off at the user’s discretion, but Smart meters mounted on homes are emitting radiation 24/7 and can not be shut off.

6. WIRELESS SMART METERS – 100 TIMES MORE RADIATION THAN CELL PHONES.
 Video Interview: Nuclear Scientist, Daniel Hirsch, (5 minutes)
http://stopsmartmeters.org/2011/04/20/daniel-hirsch-on-ccsts-fuzzy-math/


7. WIRELESS SMART METERS – CANCER, NERVOUS SYSTEM DAMAGE, ADVERSE REPRODUCTION AFFECTS. 
Video Interview: Dr. Carpenter, New York Public Health Department, Dean of Public Health, (2 minutes)

http://emfsafetynetwork.org/?p=3946

8. THE KAROLINSKA INSTITUTE IN STOCKHOLM (the University that gives the Nobel Prizes) ISSUES GLOBAL HEALTH WARNING AGAINST WIRELESS SMART METERS.
 2-page Press Release

http://www.scribd.com/doc/48148346/Karolinska-Institute-Press-Release

9. RADIATION MEASURED FROM SMART METER MOUNTED ON A HOME (once active in the utility system) SHOWS RADIATION TRANSMISSION PULSES APPROXIMATELY ONCE EVERY FOUR SECONDS 24 HOURS PER DAY traveling through the bodies and brains of the inhabitants of that home. 
Youtube Video (6 minutes, 1st minute is sufficient)

http://www.youtube.com/watch?v=uRejDxBE6OE

NOTE: many of the tests on non-ionizing radiation (the type of radiation emitted by smart meters) have been done using instruments other than smart meters because smart meters have only been in people’s homes for a very short time.

But as a Wireless smart meter emits 100 times more radiation than a cell phone, it is not difficult to project. If a machine gun (smart meter) fires 100 bullets in the same time that a pistol (cell phone) fires one bullet, it is not difficult to project the harm that the machine gun can inflict, even if the tests were done with the pistol.

I have to say I’m curious about the hacking thing. I know some computer people . . . maybe this won’t be such a bad deal after all. ;-)

I have an update for you, Marc. The recent Report from the provincial government’s whirlwind BC Hydro Review (an exercise in delaying the planned rate increases, without addressing any of the underlying causes) pushes Hydro to abandon subsidizing customers’ in-home display units, so rebates are unlikely.

I see any subsidies of that nature as throwing good money after bad. There is very little energy conservation potential in BC from smart meters and Time of Use rate structures. Spending tens of millions on rebates for display units would be a waste of money, and a subsidy of affluent customers who can spare the two hundred-odd bucks, by low-income ones who can’t, but have to pay for the program through their bills like everyone else.

Unless they buy a display unit, the only feedback customers will get from smart meters (other than the usual bimonthly bills) will be on-line access to their account information, but that source will be one day old in its data. Astonishingly, Hydro officially estimates that _14%_ of its customers (sic) will regularly log on to see what they consumed yesterday.

People will see the installation crew replacing their meter, knowing that it will boost their electricity rates (though not until after the next election), but nothing perceptible will change. Nothing.

The smart meter installation blitz (compressed into an absurdly short time-frame, which is a story in itself) will continue through December 2012. Each time a smart meter gets installed in communities across BC, from now until 4 months before the next election, it will be like a small political bomb going off. Smart meters are the BC Liberals’ “Fast Ferries.” They had a chance to abandon them a year ago when Campbell announced he was stepping down, but instead they ordered Hydro to accelerate the program.

Marc-

Having lived with a smart meter for over two years now, I thought I would share my experience–as well as correct some of the misinformation out there about time-of-use pricing as it pertains to Ontario:

(1) Ontario currently maintains two pricing structures for electricity usage: those with smart meters are on, or shortly will be on, TOU pricing, which covers peak, mid-peak and off-peak hours, respectively 10.7 cents, 8.9 cents and 5.9 cents per kw/h; those without pay a flat rate for the first 1000 kw/h of usage (about 6.5 cents per kw/h), and then a slightly higher rate for anything above (roughly 7.5 cents).
(2) The TOU rates apply five days a week, but users pay only the off-peak rate on the weekend. Additionally, the schedule changes twice a year–once in the spring and once in the fall. The idea, I assume, is to make sure the peak rate captures the hours of heaviest usage, while the off-peak rate captures the period of least usage.
(3) The rates, of course, go up every year–and are sometimes adjusted every six months.
(4) The smart meter data is not provided in real time, but has a lag of at least a day. Currently, the only way to view one’s usage is to go to the website of the local electricity provider.
(5) The point of the smart meter is not conservation, but load shifting–i.e., ensuring that activities that are not time-sensitive, like running the dishwasher, the washing machine or the dryer, are performed during off-peak hours. Some things, of course, simply can’t be, or can’t easily be, shifted–like running the furnace, the air conditioner, the fridge or the stove.
(6) The government initially claimed that the smart meter was a conservation tool, but it backed off this claim and began selling it as a way to save people money on their hydro bills. The larger purpose, I think, was to shift usage to off-peak or mid-peak hours, thereby obviating the need for new–and expensive–power generation. It’s unclear whether this goal has been achieved, because the subsequent recession cut Ontario’s power usage by at least a third.
(7) My electricity bills are very, very low–usually in the neighbourhood of $50 a month, for an 1,800 square foot house. Much of this is due to load-shifting–I run the dishwasher overnight as well as the washing machine, and I kept abreast of the mid-peak and off-peak hours during the summer to make sure that my air-conditioner only ran during those times.
(8) The smart meter data is helpful, if one can remember what one was doing a day or two before. For instance, I discovered that a dehumidifier that I was running constantly used almost as much energy as an air conditioner–so I now only run it during the night. My usage–as opposed to my final bill, which includes taxes and other charges–runs anywhere from 75 cents to $1 a day, and can be as low as 50 or 60 cents on the weekend. If I’m out of the house, I’m paying as little as 30 cents a day…

Hope this helps!

-Anthony

Could the smart meters be used as nodes in a future public wifi system? That unintended benefit might be worthwhile…