Air conditioning can feel like the only source of salvation during a sweltering Texas summer.
But retail electricity provider Reliant is posing an intriguing question to customers: For a fee, would you be willing to give up some control of your thermostat?
That may seem like heresy in a state where the summer thermometer often reads triple digits. But Reliant hopes residents will consider the proposal, and is willing to pay if they say yes.
“Our objective is to have more and more customers participate so we can make a material difference in an event when the state needs us to make a difference,” said Elizabeth Killinger, senior vice president and retail regional president for Texas at NRG, Reliant’s parent company.
The program, which Reliant calls Degrees of Difference, is geared toward customers who use Nest, the Google-owned thermostat that can be controlled remotely over a wireless Internet connection.
Under the voluntary program, when electricity demand gets especially high, Reliant — through Nest — could remotely turn off customers’ air conditioning for around 30 minutes or less in an effort to reduce electricity consumption.
Reliant would then pay customers 80 cents for every kilowatt-hour of electricity they’ve avoided using, based on comparisons to their historic usage.
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Officials at Reliant and Nest stress that the program is purely voluntary, and participants don’t lose much control, since they can easily override the adjustment and turn the air back on. But they doubt that will be necessary.
“Most folks aren’t really going to notice when their air conditioner pops off for a short time like this,” said Ben Bixby, general manager at Nest Energy Services.
The payments are possible due to the recent proliferation in Texas of smart meters, which record residential electricity usage in 15-minute intervals and send the data to electric companies so they know when customers are using power.
The plan may seem counterintuitive. Reliant, after all, makes money when customers use electricity. But during periods of peak demand — generally, late afternoon in the summer — companies like Reliant can face extraordinary wholesale costs from power generators, which can charge up to $5,000 per megawatt-hour of power.
That figure is poised to increase to $7,000 in June and $9,000 next year. During normal conditions, wholesale prices from generators are generally below $100 per megawatt-hour.
“If we run into a circumstance where there’s not enough generation, and prices are rising, customer participation will help us reduce our costs,” Killinger said. The upside for Reliant is that the money it saves exceeds the value of the credits it would dole out to customers.
Reliant also has a low-tech version of the program for customers who don’t have Nest thermostats. Reliant will text or email customers, asking them to reduce their electricity use the following day. Killinger won’t say how many customers are enrolled in the programs, only putting the number in the thousands. Other power companies have similar programs.
The program comes at time when the state’s power grid is bumping against self-imposed guidelines on how much spare capacity it must maintain during periods of peak demand. Newly released forecasts from the Electric Reliability Council of Texas, the state’s grid operator, show that spare capacity falls below self-imposed targets by summer 2018.
Nest partners with a handful of other residential electricity providers in Texas but Reliant — the second-largest residential electricity provider in Texas — is the largest.
A spokesman for TXU said since 2009 the electricity provider has had a similar program through a different type of Internet-enabled thermostat. That voluntary program allows TXU to turn off customers’ cooling units during periods of high-demand, but it doesn’t give any credits to customers as an incentive for participating.
Reliant officials say if the program gains wider adoption, it could have a big impact on the grid.
According to Reliant, if 10 percent of residential customers covered under the state’s deregulated electricity market participate in the program, it could reduce peak demand on the grid by 3 to 4 percent.
On the hottest days, residential power consumption can quadruple and comprise more than half of the state’s electricity use, said Paul Wattles, senior market design analyst at ERCOT.
Capacity on the grid
When the grid starts to reach its capacity, companies in the ERCOT market can make deals relatively easily in which big industrial and commercial customers get paid to reduce their electricity use, he said. But it’s tough to do the same with residential customers, since individually, each one has such a small effect on the grid.
When the grid gets stressed, ERCOT asks residential customers to reduce their electricity use, and in extreme cases, it can implement rolling blackouts. But the new program might offer another option.
ERCOT and state regulators can’t force residential electric providers to adopt programs designed to curb residential power demand. So for now, they’re relying on the market to develop systems that incentivize the practice.
“The beauty of this is it’s voluntary,” said Robbie Searcy, an ERCOT spokeswoman. “This is the kind of thing that was only available for big industrial users.”
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