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Benefits Of Smart Meters Could Range From $96 To $287 Million Over 20 Years, According to The Brattle Group
February 16, 2011
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A study led by economists at The Brattle Group and
prepared for the Edison Foundation's Institute for Electric Efficiency (IEE) finds that the net
benefits of smart meters could range from $96 to $287 million over a 20-year time period for a
U.S. utility with one million residential customers. Key findings from the study were presented
today during a breakfast session hosted by IEE that was held in conjunction with the National
Association of Regulatory Utility Commissioners (NARUC) Winter Committee Meetings in
Washington, DC.
The study, led by Brattle principal Ahmad Faruqui, estimates the costs and benefits of smart
meters between 2011 and 2030 using four prototypical utilities (South, Central, East, and West).
Each utility has a million customers and features different generation resources, load forecasts,
capacity costs, and smart meter costs. The study estimates the operational benefits that each
utility would accrue as it replaces its existing metering infrastructure with smart meters, which
allow for two-way communication between the consumer and the utility. In one case, the
operational benefits virtually covered the installation investment. However, in all cases,
additional benefits would accrue as customers participate in specific smart meter-enabled
program offerings, including household energy use information delivered to customers in real
time via in-home devices and web portals; dynamic pricing with and without technology options
such as programmable thermostats with display information; direct load control with
measurement and verification; and electric vehicles with a time-varying rate.
The study concludes that in each of the four utilities, the benefits of smart meters exceed the
costs. The net benefits range from $96 million for a utility in the East to $287 million for a
utility in the South. The range of benefits is due to the variation in smart meter costs, operational
benefits of meter replacement, and the mix of customer-side programs across utilities.
Commenting on the study, Dr. Faruqui noted, "We all know that smart meters provide
operational benefits by eliminating or avoiding the cost of reading meters. However, what we
have demonstrated is that they also open a gateway to benefits on the customer side of the meter.
Even without dynamic pricing, smart meters allow utilities to offer customers a variety of
programs that would lower their energy costs and reduce greenhouse gas emissions. With
dynamic pricing, these benefits rise considerably."
The results of the study were presented today by Dr. Faruqui and Dr. Lisa Wood, Executive
Director of IEE. The session was moderated by Mr. David Owens, Executive Vice President of
Business Operations at the Edison Electric Institute. A draft of the study, "The Benefits of Smart
Meters," was distributed at the briefing and is available for download at www.brattle.com.
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