Colorado Rural Electric Association Energy Innovations Summit

Demand Response: Are Customers Ready to Change Their Ways?

Confidential

October 27, 2014Dr. Stephen George

Senior Vice President

Customer Strategy, Planning and Analysis

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Energy Software

Utilities Services

Energy & Chemical Advisory

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Energy Expertise across the Globe

AtlantaBostonBoulderChandlerChicagoDes MoinesHoustonJacksonvilleLos AngelesMadisonNashville PhiladelphiaPortlandRaleighSacramentoSalt Lake CitySan FranciscoSan MateoWashington D.C.White Plains 

TorontoSan Francisco

LondonUtrechtFrankfurt

BahrainCairo

CotonouAbuja

BeijingKuala LumpurNew DelhiSeoulTokyo

ShanghaiBangkokSingapore

Global Offices

Headquarters

Project Offices

Representative Offices

Planned 2014 Offices

Energy and software specialists,

many recognized as leaders in the industry 600+

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A Diverse Customer Base

UtilitiesEnergy

CompaniesTransmission &

DistributionFinancial &

Private Equity Government

And many more…

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Utility Services

Focused Expertise

Customer Business Strategy

Customer Initiatives

StrategyPlanning

and DesignDelivery and Management

Evaluation, Measurement & Verification

(EM&V)

Nexant helps utilities embrace a

customer-centric model that

aligns demand side programs,

and strategic planning to

reduce costs, manage risk,

improve customer engagement,

and achieve superior results.

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Customer Strategy, Planning and Analysis (CSPA)

We help utilities, regulators and

others understand how markets

work and what customers want and

need

We translate that information into

successful business strategies,

policies and service offerings

Confidential

• EE, DR and behavioral

conservation planning

• Potential analysis

• Portfolio strategy

• Program design

• Pricing strategy

• Design, implementation and

evaluation of experiments and

pilots

• Assessment of new technology

and service offerings

• Impact and process evaluations

• Economic analysis

• Cost effectiveness analysis

• Reliability and resiliency improvement impacts

• Impact of distributed energy resources

• Integrated resource planning

• Validated learning (test and learn)

• Statistical and econometric

analysis

• Market research

CSPA’s Areas of Expertise Include

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Confidential

Pricing Pay for Performance Load Control• Peak time rebate (PTR) programs

pay customers for load reductions but do not charge more for load increases

• No losers, only winners

• Payments are made using estimates of reference loads based on usage in prior days

• Numerous studies show that baselines are inherently inaccurate and when average impacts are small, payment error is a very large share of total cost

• SDG&E, SCE, BGE & Pepco recently implemented default programs but SDG&E and SCE changed to an opt-in program due to high payment error

• With larger impacts from opt-in enrollment and/or enabling technology, average payment error is much less

• Been used since the 1960s

• For A/C load control, there are a growing number of options – switches, PCTs, smart thermostats

• For the right incentive, customers will agree to 100% cycling, but lower cycling is much more common

• Some utilities (PG&E) have enrolled large numbers of customers for a small, one-time incentive but most programs make annual payments

• Customer-purchased smart thermostats (e.g., Nest, EcoBee, etc.) offer the potential for lower cost options in the future

• Requires teaming with third party suppliers for device control

• Potential loss of control by utilities

• An alphabet soup of pricing options – TOU, CPP, VPP, RTP

• 4 decades of pilots and programs show that customers can and will change their usage pattern in response to time-varying price signals

• Peak period reductions of 5% to 20% are possible with no enabling technology – reductions of 15% to 30% or more are possible with technology

• SMUD’s SmartPricing Options pilot showed that

• 60% to 75% of customers on time varying rates said the rates “helped them save money” compared with 33% on the standard rate

• ~95% of customers defaulted onto time-varying rate stayed and complaints were minimal

• Aggregate load reductions were 3 times larger on default rates compared with opt-in rates

Are Customers Ready to Change Their Ways?

Customers do not “do DR” on their own – but decades of experience indicates that many customers will change their ways for the right DR program

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Dr. Stephen GeorgeSenior Vice PresidentSgeorge@nexant.com415 948-2328

Nexant, Inc.101 Montgomery St., 15th FloorSan Francisco, CA 94104

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