Assignment 3 Discussion Forum

In this thread we discuss the topic of Opt-In Participation and analyze some of its advantages and
disadvantages. The forum discussions for this week will be related to participation policies in Smart Grid
Initiatives, for example smart Meter installations, Pricing, Demand Response Participation etc.

In smart grid context opt in participation is refer to a standard recruitment procedure where the
consumer is asked to participate in the smart grid initiative, or customers elect to enroll in a new rate
plan, such as dynamic pricing or time-of-use pricing in term of pricing scheme.
Disadvantages [1]
1. Easy for people to avoid making a decision about these consequences, and they will easily
procrastinate. Its really obvious when people is face with something that they dont really
prioritize due to many reason such us
2. Participation is much lower than under an alternative procedure where people were told that
that everybody will get Smart Grid equipment installed in their household. The other key issue
of opt-in that most of the consumer thinks that being a part of smart grid will create a risk of
comfort loss and invasion to their privacy and security.
3. Need a Customer decision-support tools [2]
4. Not really present the consumer true preference.
Advantages
1. Educate the consumer rather than force the consumer without giving any choice and adequate
information.
2. Educate the consumer to implement the best plan to do smart saving and energy efficiency.
3. Costumer really comprehend of choose that they make, hence the smart grid initiative become more
optimal.
4. Democratic and voluntary base involvement, where motivated active consumer to be an active
participant [2, 3].

References

[1] B. Bremdal, "The Impact of Prosumers in a Smart Grid based Energy Market," August 2013.
[2] (Jan. 2012, Understanding the Potential of Smart Grid Data Analytics. Available:
http://www.emeter.com/documents/anylst-papers/Understanding-the-Potential-of-Smart-Grid-
Data-Analytics.pdf
[3] G. P. J. Verbong, S. Beemsterboer, F. Sengers, G. P. J. Verbong, S. Beemsterboer, and F. Sengers,
"Smart grids or smart users? Involving users in developing a low carbon electricity economy,"
Energy Policy, vol. 52, pp. 117-125, 2012.
[4] J. E. Cochell, P. M. Schwarz, T. N. Taylor, J. E. Cochell, P. M. Schwarz, and T. N. Taylor, "Using real-
time electricity data to estimate response to time-of-use and flat rates: an application to
emissions," J. Regul. Econ., vol. 42, pp. 135-158, 2012.



Flat rate pricing in electricity is a pricing scheme where the consumer is being charged by utility at
the same amount of money per kWh all the time throughout or month or the year, no matter when
demand and utilitys cost are high. This type of pricing is the most common pricing scheme especially in
the country that only has one utility company that monopoly all the electricity industry. However,
typically the price is different for residential, commercial, business, public services, governmental office,
and etc. In each type of consumer the price also varied based on the predefined kVA or volume of energy
used or known as the block tariff. For example, the utility charged different rate to different kVA level as
shown in table 1. Table 1 depicts the electricity tariff structure in Indonesia for residential group.
Historically, all flat pricing schemes is brought by the utility and with the government (market
operator) approval offer the flat-price product, while the consumer are completely passive. The utilities
gain the revenue by fine-tuning the flat rate price covering both fixed and variable cost [1].

Table 1 Residential Group based on Electricity tariff applied
No Residential Electricity Price ($/kWH)
1 450 VA 0.41
2 450 VA - 900 VA 0.589
3 900 VA - 1,300 VA 0.979
4 1900 VA - 2,200 VA 1.004
5 3500-5500 VA 1.145
6 6,600 VA Above 1.352

Disadvantages
1. Flat rate form low awareness to the consumer about their electricity consumption
2. High total electricity consumption due to the low awareness and passive consumer. Study in [4]
shows that flat rate pricing makes the consumer consume more electricity.


3. High-risk premium to compensate the utility for bearing the risk associated in making flat price
commitment or supplier but low risk to the consumer.
4. High peak demand, due to there are no incentive to the consumer to reduce their energy
consumption.
5. Hence, it requires high investment to meet the peak demand.
6. The consumer will not get any benefit from any fall in energy price




7. Not the cheapest option, because consumer lost opportunity to get incentive to manage the
demand, and gain the price reduction when the energy price reduced and must pay the cost that
associated with the risk premium for the security.



Advantages


Increased customer satisfaction
Greater dispatch flexibility
Improved invoice accuracy
Quicker price quotations
Reduced billing cycle