Energy Analysis Department Electricity Markets and Policy Group DOE Smart Grid Investment Grant Program: Dynamic Pricing & Consumer Behavior Studies Chuck Goldman Lawrence Berkeley National Laboratory National Town Meeting on Demand Response and Smart Grid June 24, 2010 Washington DC 1

Energy Analysis Department Electricity Markets and Policy Group Dynamic 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 2

Energy Analysis Department Electricity Markets and Policy Group Deeper questions remain unanswered about 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 Pricing Customer acceptance Market segmentation Character of response Rate design Technology Customer acceptance Market segmentation Character of response Information Feedback Market segmentation Delivery mechanisms Persistence 3

Energy Analysis Department Electricity Markets and Policy Group SGIG: Advancing our understanding of customer response & 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 4

Energy Analysis Department Electricity Markets and Policy Group Role of dynamic pricing in retail service offerings 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 Opt-In Voluntary Service Opt-Out Default Service (Also Voluntary) Mandatory Default Service 5

Energy Analysis Department Electricity Markets and Policy Group SGIG Dynamic Pricing Projects: Role of 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) 6

Energy Analysis Department Electricity Markets and Policy Group SGIG Dynamic Pricing Projects: Data 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 months prior to commencement of study Benefits and Metrics Data -Customer-level (or customer-cohort level) impact metrics -Customer (or customer-cohort) characteristics 7

Energy Analysis Department Electricity Markets and Policy Group SGIG Dynamic Pricing Projects: Evaluation 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 8

Energy Analysis Department Electricity Markets and Policy Group SGIG Dynamic Pricing Projects: Likely timeframe for Evaluation Studies Most utility dynamic pricing projects have proposed to: -Get into the field by or during 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 9