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Don’t Tread on My AC

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Propmodo’s weekly perspective on commercial real estate and things interesting to real estate executives. Curated by Franco Faraudo. View Archive

Nearly every major issue in American politics can be boiled down to a battle between individual and collective rights. Currently we are struggling with questions like the right to not get a vaccine or the right to terminate a pregnancy. None of these questions will be easily resolved. Millions of Americans are proudly independent whereas others are fiercely collectivist and which camp you are in likely changes a bit depending on the issue. In the case of vaccines or abortion, there isn’t much middle ground. 

There is another individual versus collective rights dispute that does have a lot of common ground: power conservation. No one wants power outages, especially when the weather gets bad. If faced with the option of lowering their energy consumption temporarily or having prolonged power outages, even the most individualistic person would choose to turn some lights off and power down their AC. But these same people might be less than thrilled to find out that their power company remotely raised the temperature in their houses.  

This is exactly what happened in Texas, a number of the state’s largest power companies admitted to changing customers’ thermostat settings “by a few degrees for a short time, normally less than an hour.” The ire that this move received is not good for the movement to modernize our grid. In order to make grids more resilient, buildings and homes need to be equipped with connected devices and meters. Doing so when people think big brother is going to let them bake in their houses is much harder.

The power company’s defend themselves by saying that their remote temperature adjustments can be opted out of. I think this is the wrong approach. The fact is that few people read the terms and conditions that come with your electricity bill. While automatically opting everyone in is the best path for quick adoption, it can also leave a bad impression for those that were not aware of their options. Instead utility companies need to do what normal businesses do, convince people to buy into their mission with persuasive marketing.

For a good example of persuasive energy conservation marketing one must look no further than Tesla. The popular electric vehicle manufacturer is already sending alerts to owners asking them to charge their cars in non-peak hours. These requests are likely well received because of Tesla’s relationship with their clients and their reputation for sustainability. We will likely see much more of this kind of thing from Tesla, too. They have already secured patents that let their home battery system, the Powerwall, activate when the grid is strained and even sell power back if necessary.

Convincing someone to contribute to a collective good is a lot easier when there are incentives to do so. One way for utility companies to do this would be to increase the cost of electricity exponentially during outages but most power companies pay rates are set by regulators. Maybe instead utilities could offer a discount or reward for people who are able to reduce their electricity consumption during peak times. In order to incentivize people to install solar panels and energy storage systems, utilities should pay better rates when they buy power, especially when the grid is struggling to keep up with demand (if they can charge more during those periods than why can’t home and building owners?).

When it comes to energy mismanagement, there is certainly more blame to be placed on government agencies and energy providers than on the average consumer. For years, wind and solar power producers have claimed that they can provide the cheapest reliable electricity but they have yet to prove that, instead relying on tax incentives to reduce their costs. In addition, deregulation of energy grids and a lack of adequate on-site fuel storage at power plants has contributed to the problem, as was the case in last year’s Texas blackouts.

America is an individualistic country, like it or not. So before we mandate that people participate in a smart grid we need to remember the pushback that we have seen when other mandates have been handed down. Luckily, when it comes to something like keeping the lights on, almost everyone can agree that blackouts should be avoided if possible. With the right message and incentives, hopefully Americans will reduce their own energy use before a power utility or government agency reduces it for us.

Overheard

Resourceful

Texas’s grid operator ERCOT has been under pressure to upgrade its systems to prevent further blackouts. One thing that it has done a good job of is providing a real-time dashboard that shows everything from supply and demand to renewable generation to real-time prices for electricity in every major city. Making this kind of info available is a good way to nudge people to lower their power but it only works if people care enough to check it.

Our best

Brookfield is putting their energy consumption, as the kids say, ‘on chain.’ Their new One Manhattan West development is procuring renewable energy from (who else?) Brookfield Renewable Partners and recording all of the usage data using blockchain technology.

Good reads 

Many of the workers that moved away from their offices during the pandemic are now stuck trying to understand when and if they will be required to return to the office after the pandemic subsides. (BBC)

As more small e-commerce businesses pop up so to has a need for smaller industrial warehouse space with co-working like amenities. (Fast Company)

Memorializing former Japanese president Sinzo Abe means learning from his extensive domestic agenda to combat deflation called Abenomics. (The New Yorker)

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