Modeling demand response and economic impact of advanced and smart metering

Advanced metering constitutes an essential component of communications between electricity suppliers and consumers. It may be possible to augment demand response by coupling Advanced Metering Infrastructure (AMI) with advanced implementations in homes. In this paper, we quantify the economic impact of such advanced implementations and show that these technologies promise to add value for both major stakeholders—electricity suppliers and the consumers. In particular, we present a comparative study by evaluating the adoption of Basic-AMI versus one that incorporates automation devices enabling communication and control. We present a linear programming modeling framework to capture demand response behavior while reflecting regulatory policies to ensure lower critical peak prices. Based on this framework, we present a case study for the state of Ohio, although the general nature of the analysis is applicable to other states as well. Our results show that dynamic pricing coupled with AMI—in particular, its advanced implementations—provides significant incentives to the utility, regulatory commission and the consumer.