Efficiently Powe ring Smart Cities: A Case for Price Transparency

1. Efficiently Powering Smart Cities:A Case for Price Transparency Paul Centolella, Vice President National Town Meeting on Demand Response and Smart Grid July 11, 2013 Beijing Boston Chicago Dallas Denver Los Angeles Menlo Park Montreal New York San Francisco Washington

2. Challenge 1: Improve Asset Utilization 100% - • Average Airline Seat Utilization = 85% • Average Capacity Utilization in Capital Intensive Industries >75% • Average Generation Capacity Factor <50% • Average Utilization of Transmission and Distribution Assets: Often Lower 75% - 50% - 25% -

3. Challenge 2: Integrate Variable Renewable Resources • Solar & wind variability can require large shifts in generator output • Flexibility – Not just reductions in peak demand matter • With clusters of renewable generation there can be large local impacts BPA Wind: >3,000 MW Shift in < 1 Hr. CA 14,000 MW Shifts in Net Load by 2020

4. Challenge 3: Enhancing Reliability & Resilience • Regulators rarely consider the value of uninterrupted service & billions in outage costs are externalized to consumers • Intelligent devices could produce beneficial feedback response precisely when and where needed following an event • Networked distribution could use local price transparency to: • Enable local clusters of load and generation to position usage and optimize generation based on grid conditions • Account for congestion within distribution networks • Support the evolution of distribution architecture toward becoming a set of reconfigurable, interconnecting microgrids

5. Make Prices Transparent to the Devices that Use Electricity • Energy’s “Holy Grail” – Storage Capabilities of End Use Devices • Most uses have thermal inertia (heating, cooling, water heating, & refrigeration) and/or flexibility (pumping loads, industrial batch processes, pool pumps, dishwashers, clothes driers, & charging of vehicles & battery powered devices) • Many of these devices are already intelligent and could shift power usage without materially impacting the services delivered to consumers • Broadcasting in standard formats cuts the cost of engaging devices • Unit cost to enable a device to receive, decrypt, authenticate, & identify a specific signal for its unique grid location may be less than $1 per device • Underused FM data channels can reach virtually any location in under 2 seconds • Relative Prices = Useful Information: A few hours of indicative look-ahead interval prices could efficiently position demand for the grid • Just as KAYAK can find low air fares or Pandora can match musical preferences, millions of electricity consuming devices could automatically find low cost power consistent with customer preferences for heat, cooling, hot water, & other services

6. Transparency Enables Automation & Is a Foundation for Rate Reform • Smart pricing stalled by the limited availability of customers to respond • Can be changed by cheap, standard automation • Can build with existing tools • ISOs / RTOs calculate day-ahead prices and most can or are working to forecast look-ahead price • Exiting FERC Authority for Price Transparency: Smart Rates $ Smart Homes 16 USC 824t directs FERC to “facilitate price transparency” and “provide for the dissemination, on a timely basis of information about [wholesale] prices … to … the public.” If needed, FERC can “establish an electronic information system” to do so. • Available data formats permit utilities to add information on local distribution • Tools that empower customers are a key first step in enabling efficient retail pricing OR ?

7. Paul Centolella Vice President 111 Huntington Ave. 10th Floor Boston, MA 02199 (617) 425-8182 pcentolella@analysisgroup.com