Smart meter penetration in the United States (USA) is gaining momentum at a significant pace, with leading electric utilities leading the smart metering race. As per reports, close to 115 million smart meters are expected to be deployed by the end of 2021. This is an overall increase of 8 million units that were deployed by the end of 2020.
Smart meters on cloud provide insightful information about different facets of power consumption; thereby providing consumers an opportunity to take corrective actions to save power.
The major influencers of smart metering adoption are rapid industrialization and a surge of electrical demands from the commercial, industrial, agricultural, and residential sectors. The evolution of smart metering systems is a clear indicator of the growing adoption of smart meters at a global level.
In the residential sector, consumers are able to save money on electricity bills by taking timely decisions that help them leverage advantages offered by Time-Of-Day (TOD) tariff. TOD tariff can also be termed as Time-Of-Use (TOU) tariff.
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In this blog, I deep dive into how my team at TekGeminus helped consumers of a US-based utility major make the most out of Time-of-Day (TOD) tariff.
What Is Time of Day (TOD) Tariff?
The graph of energy consumption for any given region/country or sector will never be the same. To put it in simple terms, there will be a lot of variations in the electricity consumption patterns, be it residential customers or industrial customers or commercial customers.
Since the power consumption across the day/night is never uniform, customers (agnostic of the sector) have an opportunity to reduce their consumption during non-peak hours. What if a differential pricing strategy is applied based on when the power was consumed? This is where Time of Day (TOD) or Time of Use (TOU) comes into account!
Time of Day tariff is a rate structure where differential pricing is applied by the utility company depending on the duration of consumption. Consumers have to pay more for electricity consumption during peak hours and pay less during off-peak hours.
As per US Energy Information Administration, here is the gist of the time duration as far as peak and off-peak hours are concerned:
- Peak Hours : 7:00 a.m. until 11:00 p.m (weekdays)
- Off-peak hours : 11:00 p.m. and 7:00 a.m. (weekdays) and entire day on Saturdays, Sundays, and holidays.
However, the time slots mentioned above might vary depending on the city, season, and sector. As the demand for electricity increases, residential customers (or consumers) not only need information about the consumption but also want tiger control to help them manage their energy usage & costs.
TOD tariff is one of the best ways to save energy in home(s), as the differential pricing-based tariff structure gives residential customers choice by providing price signals encouraging them to shift energy usage from high demand peak times to lower-cost hours of the day.
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Why Time Of Day (TOD) Tariff?
Now that I have touched upon the essentials of TOD tariff, let me walk you through the most critical question “Why TOD Tariff”? I will dig deep into the ‘Why’ part by donning a customer’s hat 🙂
Electric Grids can be loosely compared to road highways, where a higher vehicle jam can be expected during peak hours. On similar lines, electricity consumption in residential spaces is expected to be significantly higher during peak hours.
There is a widening gap between demand and supply of electricity. Though renewable energy is growing its production is still far behind the overall demand for global energy. As production is not able to keep up pace with consumption, consumers have to take relevant steps to manage their consumption.
During peak times, utility companies have to bear the brunt of purchasing power at high costs. Rather than reducing the power demand during peak hours, utility companies encourage consumers to consume less electricity during that time frame.
When followed diligently, the TOD tariff will result in significant savings in the residential consumer’s electricity bills! The TOD tariff introduced by utilities results in an energy-savings behavior.
Many utilities further reduce the electricity rates during off-peak hours as an incentive. This habituates the residential consumers to consume more power when peak load is lesser, thereby further helping them save more on electricity bills!
In a nutshell, benefits offered by TOD tariff (or TOU tariff) and behavioral science can result in boosting household energy efficiency.
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Advantages of Time Of Day (TOD) Tariff
Now that I have solved the jigsaw puzzle involving the ‘What’ and ‘Why’ of TOD tariff (from a consumer’s lens), let’s see the overall benefits of TOD structure from the lens of a utility company.
TOD Tariff Benefits for Utilities
Here are the major benefits that TOD or TOU offers to utilities:
- Better alignment of energy usage with capacity constraints reduces the need for construction of new power plants.
- Since residential customers are expected to save big on their energy bills, the new energy rate is revenue neutral for the utility company.
- TOD tariff is a big step in creating a greener energy system because it encourages customers to use more energy outside high-demand hours. This shaves off the peak load, thereby improving the overall grid reliability and reducing the need to build additional power plants.
- TOD tariff adds a huge value from customer satisfaction and demand response perspectives. This is particularly relevant when TOD structure is coupled with other products (e.g. Smart Thermostats, EV Charging, and Peak Time Rebates).
Time Of Day (TOD) Implementation by TekGeminus
TekGemius has close to 25 years of hands-on experience in the utility and telecom industry. We have worked with a number of global utility companies and each technology roll-out has helped build my domain expertise 🙂
Our team at TekGeminus worked on building a number of notable feature enhancements for TOD of a large US-based utility company. We designed a new TOD tariff card taking the following points into consideration:
- Revenue neutrality based on 5-year residential load profile
- Mid-peak price variations compared to the standard pricing
Based on the findings, our team successfully automated the enrollment to TOD for the customer using Oracle CC&B. Our team led the integration efforts with the web portal (or client’s application) for enabling real-time eligibility.
Our team also automated the setup of a new Service Agreement with the application that took into account the new (or updated) TOD tariff. Residential customers would get exclusive notifications on enrollment (or unenrollment) of TOD along with their overall contribution in making the world a better place (by embracing lower electricity consumption during peak loads).
Win-Win For Utility and Residential Customers
The end results of our project implementation and rollout were super amazing!
By leveraging the TOD tariff, consumers were able to save around 1 percent on bills (without any change in their usage patterns) and around 10 percent with minor peak hour reductions.
The rollout of the TOD tariff turned out to be a win-win situation for our utility client who could better serve the industrial & commercial customers during the peak load times.
Along the same lines, residential customers could save a minimum of 10 percent on energy consumption and also be torch-bearers for a greener tomorrow!
Are you a Utility Company looking to leverage the potential of Smart Metering Infrastructure? TekGeminus utility domain and technology experts will help you in implementing and integrating the TOD tariff logic into your application using a powerful technology like Oracle CC&B.
Have a look at our technology expertise in the Utility Domain at https://www.tekgeminus.com/technology-stack/.
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Designation: Sr. Software Developer
Priyal is a Utility sales enthusiast disguised as a Techie. An avid reader of the latest research in the Utility space and a CIS tech background enables him to be creative in his solution design. He targets AI apps, RPAs, and analytics to approach a utility problem and fit it best into the technical constraints of the existing systems.