New study results released today by Jackson Associates indicate that many utilities and state agencies are struggling to evaluate the cost effectiveness of smart grid initiatives with unreliable elasticity-based models and that much of the uncertainty surrounding estimated financial benefits can be removed by applying agent-based models.

"Most analyses apply elasticity- or percentage-change models that are notoriously unreliable when the underlying economic/technology structure is in a period of flux. The fact that total smart grid investments may exceed $1 trillion while elasticities are being used to estimate customer impacts for the next twenty years is disturbing. An agent-based modeling approach is required for reliable analysis," says Dr. Jerry Jackson, president of Jackson Associates and author of the study.

Agent-based models provide a more accurate and insightful analysis of smart grid impacts because they reflect electricity use of individual utility customers or agents. The models simultaneously recognize and account for all important factors that determine electricity use of individual customers including income, demographics and other factors. Agent-based models are widely used in modeling applications outside the utility industry.

Jackson Associate's MAISY agent-based end-use model was applied to analyze peak hour electricity savings for a Duke Energy Indiana smart grid implementation. MAISY Utility Customer Databases are the source of the utility customer hourly load and other information applied in the independent study. Duke Energy did not fund or participate in the study.

Study results show that Duke Indiana smart grid programs can expect to achieve between 4 and 8 percent reductions in residential summer peak loads over a 15-year period.

The study illustrates MAISY's unique capabilities including:

  • Simultaneous evaluation of smart grid programs, electricity price increases, utility efficiency programs, and so on
  • Detailed program development and analysis
  • Customer-detailed information for marketing strategy and analysis
  • A customer-detailed platform that can integrate information from pilot program results, AMI and smart grid implementations.

The study is available at http://www.maisy.com/smartgrd.htm.

"Utility customer load reductions reflect half or more of the benefits of smart grid programs with much of these benefits coming in future years; consequently, more reliable medium and long term analysis is critical," says Dr. Jackson, who is also a professor at Texas A&M University. "The lag in analysis capabilities is typical with new technology evaluations; however, given the increased level of investment, a more detailed approach is clearly needed now."