Leapfrogging Smart Meters: Permissionless Innovation, Electricity, and Consumers

In 2009, Congress introduced the Smart Grid Investment Grant (SGIG) as part of the American Reinvestment and Recovery Act, a stimulus package intended to help revert the effects of the recession. The SGIG was the largest program in the stimulus package, providing $3.4 billion of federal funding for building out a smart grid. Most of the projects that received funding through that grant program were centered around expanding the use of smart meters — a new electricity meter technology that reads energy use and relays that data back to the electricity provider. Smart meters were promised as a means of reducing electricity costs, improving user knowledge about their electricity use, and contributing to better environmental outcomes through lower electricity use at peak production hours. However, recent innovations in smart thermostat technology are proving to be much more effective at achieving those results without the implementation of a substantial federal program. Utilities such as Portland General Electric and Southern California Edison have reported that smart thermostats have proven to be more effective at reducing energy use than smart meters, in some instances reducing peak demand by 40 – 50 percent. In this policy paper author Todd Myers examines why smart thermostats have been more effective at reducing energy use than smart meters rolled out under SGIG. He concludes that rather than forcing specific technologies on consumers, policymakers should opt for approaches that engage consumer preferences and embrace innovative solutions.