Benefits

Funding for smart meters and other smart grid technologies was included in the American Recovery and Reinvestment Act (ARRA) to help reduce costs for consumers and communities, create new jobs, and reduce environmental impact. Overall, outfitting communities with smart meters featuring real-time pricing can lead to significant monthly savings for consumers and, ultimately, more control over how and when they use power. Also, these meters receiving price signals create expanded networks in homes and businesses, allowing consumers to easily communicate with and more efficiently use smart electronics and appliances to decrease energy consumption and generate additional energy savings.

Smart meters with time-of-use pricing help consumers use electricity in the most efficient and cost-effective ways. Pilot projects have shown that, when consumers know the actual price of electricity at the time they choose to use it, they will use electricity in the most cost-effective way. For instance, a 2008 Maryland pilot program conducted by Baltimore Gas and Electric Company (BGE) tested how consumers would respond to time-of-use pricing. BGE provided more than 1,000 residents with smart meters, using BGE’s “Smart Energy Pricing” in their homes. Participants reduced their consumption during peak periods by 26 to 37 percent, saving more than an average of $100 on energy bills. In all, 93 percent of the pilot participants indicated they were highly satisfied with the program and would participate again if given the opportunity. Based on these results, BGE is expanding the program and installing 2 million residential and commercial smart meters with smart pricing. The utility predicts that smart meters –and the clear financial incentives that time-of-use pricing offers – will save customers in excess of $2.6 billion over the life of the project.¹

Smart meters with time-of-use pricing are essential building blocks for a smart grid. The Obama administration has identified smart grid technology as a tool for accomplishing several priorities, such as modernizing our aging infrastructure, investing in clean energy technologies, and building an economy based on green technologies. Smart meters not only help the flow of power become more efficient, they also open the doors to derivative products, such as smart appliances and devices for control in homes and in businesses. For instance, smart meters allow consumers to use programmable appliances that can switch on when power is at a certain price. In addition, smart meters help electricity producers better manage peak demand by adjusting electricity prices to reflect real-time market conditions.²