For years, utilities have been offering discounts and rebates on smart thermostats to customers willing to turn them over to air conditioning load-shifting programs that reduce peak loads on hot summer afternoons.
But there’s a big difference between discounts and straight-up free thermostat giveaways. At least that’s what Michigan utility Consumers Energy is hoping.
On Tuesday, Consumers announced it has started giving away up to 100,000 Google Nest E thermostats to customers in a bid to boost energy efficiency as part of its goal of reaching 50 percent clean energy by 2030. In exchange, customers must agree to let energy services provider Uplight remotely control their thermostats to reduce air conditioner loads up to four hours per day during no more than 14 of the hottest days per year.
Consumers Energy is relying on this load reduction to yield as much as 14 megawatts of peak capacity to bid into the markets of Midwestern grid operator MISO. That’s a conservative estimate; the final tally could end up being significantly higher, Lauren Youngdahl Snyder, vice president of customer experience, said in an interview.
It’s not as much as the roughly 500 megawatts enrolled in Consumers’ current commercial and industrial demand response programs, or the roughly 30 megawatts available from its existing residential direct air conditioner load control program.
But with Uplight and Nest able to precool homes by cranking up the AC before peak hours, the new program should be a much more sustainable and customer-friendly version of demand response than simply switching off air conditioners. And Consumers' 1.6 million residential electrical customers are a far larger prospective customer base than its roughly 215,000 commercial and 1,500 industrial customers.
That’s where the free offering comes in. Consumers is discounting the cost of a Nest E, which retails at $169, with a $50 rebate and a $75 demand response payment. The remainder of the costs are being absorbed by Google and Uplight, which want to prove they can deliver reliable load reduction and lower customers' bills amid the COVID-19 pandemic, Youngdahl Snyder said.
Participants can expect to save nearly 20 percent on their summer utility bills, she added.
Like other utilities, Consumers has seen an increase in residential energy consumption since Michigan put its stay-at-home orders in place in March, while commercial and industrial loads have dropped.
Residential demand response and energy efficiency are one way to mitigate these impacts, giving utilities and technology vendors an incentive to find ways to expand their scope and effectiveness before summer arrives to stress power grids and customer utility bills alike.
Avoiding the AC "snapback effect"
Uplight, the company formed by the acquisition of Tendril and Simple Energy by private equity firm Rubicon Technology Partners and investor AES Corp., is providing the online marketplace, customer web portals, home energy reports and behind-the-scenes analytics for the Consumers offering.
Consumers tested Uplight’s offering in a 2,400-customer pilot project last year. By analyzing how homes retain cooling throughout the day and adjusting settings to maximize energy reduction without letting homes get too warm, the program achieved an average load reduction of 1.2 kilowatts per customer over a four-hour period, said Justin Segall, Uplight’s chief strategy officer.
That’s important, given that MISO’s capacity market requires a consistent load drop for the entirety of that time, Segall said. Well-orchestrated precooling also limits the “snapback effect” of homeowners cranking up air conditioning and causing new energy spikes after events.
This method of precooling homes to limit how hot they get during demand-reduction periods differentiates Consumers' new program from its existing direct load control (DLC) programs, which simply turn AC systems on and off. Utilities often struggle to retain DLC customers, since demand response events can leave them sweltering on the hottest days of the year, said Fei Wang, senior analyst with Wood Mackenzie Power & Renewables. DLC programs also rely on utilities installing specialized equipment and paying customers for participating, as opposed to using thermostats already installed in homes, she said.
Wang noted that Consumers’ goal of enrolling 100,000 customers is an “extremely ambitious” one. Still, being able to offer the devices for free “really removes a barrier,” she said.
Youngdahl Snyder said Consumers is “going all-out with customer communications” to boost adoption, via email, direct mail, radio ads and other marketing channels, and has set a “conservative” goal of enrolling about 60,000 customers this summer.
Consumers wants to double energy efficiency from 10 percent to 20 percent of peak capacity by 2030 to allow it to retire coal plants and reduce its reliance on natural-gas peaker plants. That will require major changes to how customers use energy, including a shift to summer time-of-use rates that were supposed to start this year but have been delayed to 2021 to avoid harming customers under COVID-19 lockdowns.
Eventually, Consumers intends to expand Uplight’s control platform to a “bring your own thermostat” program that can interact with thermostats from vendors such as ecobee, Honeywell, Emerson and others, she said. But in the meantime, “we’re eliminating the first hurdle” to getting thermostats in customers’ homes.
Utilities have offered free thermostats in pilot projects, or at larger scale via federal stimulus grants, as with Oklahoma Gas & Electric’s 2012 rollout of more than 40,000 free smart thermostats to provide megawatts' worth of peak load reduction. But the Consumers project is different both in scale and in offering a well-known brand instead of a lower-cost “white-labeled” thermostat, said Emilie Tullis, Uplight’s head of demand management solutions.
“That gives us confidence that we can reach these adoption numbers," Tullis said.
