“Smart” Smart Grids Improve Energy Efficiency

by Stephanie Oehler

As climate change progresses, concerned parties have turned to the electricity grid as a critical target for making large improvements in efficiency and reductions in greenhouse gas emissions. Engineers are scrambling to construct a more efficient electricity production and distribution system as the global population continues to increase and society becomes increasingly reliant on energy to fulfill its needs; this new system is referred to as the smart grid. As a hybrid between smart grid and demand-side management program efficiency strategies, information systems provide a link between the demand and supply sides of the grid and are being implemented with varying degrees of success throughout the United States. While a variety of smart grid technologies exist, Corbett (2013) evaluated the efficiency improvement abilities of three specific types of information systems; AMR (automatic meter readers) that provide the utility companies with usage information from customers, smart metering that allows for the transmission of information back and forth between the utility company and the consumers, and net metering which involves two-way communication and allows the consumer to sell power back to the grid.

Corbett, J., 2013. Using information systems to improve energy efficiency: Do smart meters make a difference? Information Systems Frontiers 15, 747-760.  http://goo.gl/FiktO3

Corbett explained the significant potential of information systems in making energy distribution more sustainable, then proceeded to outline her two hypotheses: the first being that new smart grid technologies such as advanced metering infrastructure (AMI) would improve the information processing abilities of utilities and consequently their effectiveness in demand-side management; and the second countering the first by positing that extensive information processing improvements in utilities could reduce efficiency in demand-side management due to an inability to properly manage additional quantities of data. Using a hierarchical regression to evaluate data collected from electric utilities across the nation, the author surprisingly discovered that both hypotheses, although conflicting, proved accurate. While there was significant consensus that demand-side management information technology programs improved energy efficiency, the data also pointed to the fact that increased data collection reduced effectiveness of utilities when utilized improperly.

While most research evaluating smart grid technology and demand side management program implementation focuses on the consumers of energy, Jacqueline Corbett examined the role of utility companies and the degrees to which they have successfully utilized smart grid technologies to increase energy efficiency by gathering, interpreting, and reacting to usage information of customers. Corbett began by analyzing the organizational information processing theory (OIPT) to derive the significance of new technologies in the performance of utility companies. OIPT suggests that a company’s effectiveness is shaped by its ability to connect its processing requirements to its capacity, or, in other words, its ability to accommodate and react to its informational demand.

The hypotheses were tested against data submitted by utilities serving residential consumers throughout the U.S. in the “Annual Electric Power Industry Report” from 2009. Corbett observed the impact of a control group and three types of AMI technology, automated meter reading devices (AMR), smart meters, and net meters, on effectiveness of demand-side management programs. The author controlled for variation between the data due to size of utilities, location, season, type of ownership, and other factors that could have impacted effectiveness besides the technologies themselves. The model concluded that 73.2% of the variation in effectiveness between utilities was attributable to the demand-side management programs. The results for the AMR technology showed a negative correlation, providing support for the second hypothesis, meaning that implementation of automated meter readers actually had a negative impact on effectiveness in demand side management efficiency efforts. The smart meters and net meters supported the first hypothesis and confirmed that the more advanced technologies were generally successful in improving utility effectiveness.

Corbett’s exploration of demand-side management efforts in smart grids from the point of view of utility companies and their effectiveness in implementing efficiency improving methods demonstrated the ability of information systems technologies to have an impact on effectiveness, though the nature of the impact varies depending on the technology. While more advanced technologies were observed to have predominantly positive impacts, the one-way communication provided by AMR metering devices had a negative impact on effectivess. The author speculated that this was a result of the utilities’ inabilities to properly process the additional data they collected. While smart meter technologies are intended to provide information that will help both utilities and consumers, that cannot occur unless processes are in place to interpret and apply the data. Thus, less advanced technologies were believed not to support this efficiency enhancing process, and in fact, resulted in the opposite effect. The author suggests that future studies observe the impacts of continually improving technologies on effectiveness and utilize data from more progressive countries, such as many European countries, where more smart grid technology is implemented.

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