A Counting School - Hardcore Chartered Accountancy

Saving the world with smart meters

I once alluded to instances of ignorant rants being granted precious space in newspapers. The most recent guilty party was written by a Toronto Sun columnist who misunderstands what "smart meters" are supposed to accomplish.

Before you ask why I bothered with the Sun, I must explain that I'm willing to read pretty much any newspaper if you give it to me for free. It's in some ways a bad habit, although I've learned to fight it by skimming over the worst whiners.

I'm exposed to enough poorly thought out thought processes as it stands when I travel by air.

Closer to home, an angry letter writer lauded this column, blasting the provincial government of Ontario for having the audacity to try and get people to conserve energy for all the right reasons. The angry protests about forthcoming doom caused by power prices going up by a fraction of a penny was simply too much to take.

Let's not talk about whether we're under-paying for our electricity in Ontario, though, I have a more important point to make: we're often overpaying for power, and smart meters are here to help.

Columnist Lorrie Goldstein should instead have realized that the "smart meters", by charging you different amounts of money depending on the time of day you are using electricity, shine a spotlight on a simple fact: many of us are paying too much for our electricity.

His false condemnations, and the collapse of his argument, stems from his failure to understand the basic principles of how our electricity system works. Try to avoid reading the comments to his post, where people feel free to prance along on his merry dance of ignorance, because it's depressing.

We all pay for power plants that are not used at their full capacity for the majority of the year.

The following links provide the real life facts, from a couple of the many websites that track, manage and operate our power grids.

• First, the New York's ISO - kind people running New York State's power grid presents information in the bottom right corner with the current price of NY's power, plus how much power is being used. Late at night when people are already asleep, New York State uses around 14,000 MW - megawatts. This shoots up to over 20,000 MW later in the day. If you have friends who study or work in this field, you can easily learn to interpret the technical data that's publicly shared on the site.
  
• Ontario has its own equivalent of the NYISO, the IESO (Independent Electricity System Operator) which provides an even more elegant graph which presents the same kind of stats on power demand. You may note that, interestingly enough, that Ontario's load happens to be similar to that of New York State. The IESO page also shows a demand graph for the entire day - both the forecasts, and the actual demand. Dig a little and you'll find many more graphs, showing trends in pricing too.
  

When you're done digging through those stats, remember that you've learned something very important: there is a very obvious "peak" period when most, if not all power plants in a given region have to run to keep up with our demand.

But, it represents only a short period out of the entire day.

And this is where Goldstein fell on his face: he neglected to address the fact that there is a difference of sometimes double the amount of power being used between the low and high use periods.

As you can imagine, we keep a giant reserve of spare power plants that are idle during low demand periods, which then fire up during the "peak" demand period when everyone's lighting up their lamps and computers, or working in factories.

Does that "spare capacity" cost us? Naturally, yes it does.

If we got more people to use power earlier in the day - and therefore reduce the size of that "peak" - would it mean we would need less power plants?

Yes, exactly.

So how do you save money? By building fewer new plants, not having as many people staffing them, and not having to sell off so much of your power at "discount" prices because you're using it more consistently throughout the day.

With "smart" appliances the near future promises us devices which will work harder when power is cheaper and cut back on their compressors, motors and chargers when costs are high. Having your air conditioner work at a lower speed or simply shut off while power prices are at a "high point" would go a long way towards helping power producers manage their supplies more effectively. This being a free society, no one's going to stop you from running your A/C at full blast if you really insist, but you'll be charged a fair price for putting a strain on the system when it can least handle it.

Would this create a "new" peak period? Not likely: although you would see a "smoother" demand curve, there will always be plenty of activities which we'll all tend to perform during peak periods - like firing up stoves to cook dinner and running those aforementioned air conditioners - which simply can't be "shifted" to low demand periods.

Will it take time for those savings to percolate through?

Yes - but you're old enough to know that there wouldn't be an automatic magic change in everything, right?

All those fantastic concepts will take time to take effect: we don't blow up a hundred power plants overnight, nor do we replace all our appliances in a a few days simply because we have a great new idea.

The changes take time, and there will be growing pains as people shift and adapt their power consumption habits.

Before anyone at the Sun starts yelping that this is in some way "unfair," tell me this: how is it fair that people who use power late at night - when the price of power is as cheap as a penny or less - have to still pay the full 5 or 8 cent price for their power?

It's not.

It's shameful that people chose to score cheap political points over trying to help the planet - and local economies - by instead making intellectually bankrupt arguments such as the following quote from his column: "In a sane world, we’d be paying less for electricity now because the recession has blunted demand and when demand goes down and supply goes up, prices should fall."

By this point you realize why that shallow sentence makes no sense: anyone with a basic knowledge of economics - or common sense - knows that power plants have "fixed costs." Yes, you're burning less coal when the power plants are not running at 100% or even if they're off, but you still have employees who keep that building operational. You still have repairs and maintenance bills even if it's turned off! And nuclear reactors simply don't get turned on and off like a light switch. Starting those generators up is a messy, complicated and expensive process which operators avoid as much as possible.

The power mix in Ontario, which the IESO website displays on its main page as well as in handy chart form, is composed of different types of generators that are easier and harder to "control". So the neat and tidy "sane" world which Goldstein calls for is indeed on the way - but it'll take time to get there: the province has long term plans to introduce more 'fleixible' power plants which can switch on and of at lower costs, but our desire to control costs and deficits also means construction will not take place overnight either.

Now you inadvertently know the basics about smart meters - so if a question on this topic appears on the UFE, and this being a popular topic in the news, it very well could! - don't get bogged down in these details.

You'll just need to explain the accounting issues. Which'll be simple since they all started to pop up in the back of your mind as your read through this, right?