The dullards at Litos Strategic Communications who prepared a 50-page marketing slick for the DOE to explain how cool smart grids are, came up with a wonderful new consumer “mantra” that we’re all supposed to adopt:
“Ask not what the grid can do for you. Ask what you can do for the grid – and prepare to get paid for it.”
JFK is turning in his grave!
It’s fascinating to learn how these people think about their green religion. In an article about using game theory for arriving at electricity market price, the authors held an assumption that people feel a “patriotic” duty to the Earth. It seems almost everyone is against littering and pollution, but let’s be real: it hardly ever rises to the level of feeling love and devotion to the planet.
Here’s how they think it’s going to work. The utility is going to slap a new “smart meter” on your home which will give them the ability to break down what you pay into different price categories based on when you use your power. Electricity costs more to produce during high usage periods (like July 15th at 2 p.m.) than it does during normal or low usage periods. This is because to meet peak demand, utilities must bring online more inefficient generators. Once the peak is over, those generators go back to being idle. The electricity price you pay now is an average price that considers all the cost peaks and valleys throughout the year. (Remember cell phone minutes and when you could use those?)
Their misguided assumption is that once we see how expensive it is to run our air conditioner during the hottest part of the day, we’ll voluntarily choose to raise the temperature on our thermostat. Implied is that we are currently using electricity that we don’t really need. Or, that we can easily shift around the time of day we use it.
What kind of business encourages their customers to use less of their product? Or sells a product with restrictions on when you can choose to use it? Answer: A business run by communists. Many models discussed in business school follow the theory of economies of scale. That is, the more of something that is sold and delivered, the better the price the customer can expect to pay for it.
While the idea of being paid to sweat out summer afternoons may sound good to Global Warmingism adherents, if you really think about the math, you’ll understand it’s not going to fly with many consumers. In one example, if electricity costs $0.67/kWH during 2 peak hours a day, and you’re able to shift 10% of your usage during peak hours to other times of the day, we estimate you’d save a whopping $0.85 for your adjustment.[i]
Less than a dollar per day is not the kind of money that really motivates a lot of people to change their habits. An informal survey leads us to believe there isn’t anywhere near as much elasticity in electricity demand as these charlatans claim. Energy is essential. Like gasoline, when prices go up, we suck it up and pay more. A commute to work or the grocery store is not optional. Electricity demand is like toilet paper. You use as much of it as you need, no more. And you use it when you need it and at no other time.
On the contrary, it seems more likely the inelastic nature of electricity demand is well-understood by smart grid proponents, and this is more of a plan to throw off regulatory pricing shackles disguised as a chance for customers to save money.