Utilities From New York to Tokyo Offer Prizes to Cut Power Use

(Bloomberg) -- Faced with risks of crippling blackouts amid brutal heat waves, global utilities are starting to reward people for using less energy, offering prizes such as Peloton bikes in Brooklyn and Amazon gift cards in Tokyo. 

As the war in Ukraine has triggered a surge in global fuel prices, increasing costs of running power plants, utilities are struggling to keep grids balanced as air-conditioning use soars along with temperatures across the globe. Power companies which normally profit from higher electricity use are now trying to encourage residential users to cut back during peak hours.  

In the US, as elsewhere, utilities have raised prices to cope, but companies say it’s not enough. Power bills in California have already increased 25% in the last year and are set for another 25% rise this summer after charges on peak hours. Yet, power grids in the state and others such as Texas are still under pressure as temperatures climb. Utilities have traditionally stabilized their grids by ramping up or down generation from their power plants, but that’s getting harder to do as fuel costs rise and because aging coal operations are proving less reliable. Also, there’s not yet widespread adoption of storage assets that could harness wind and solar power around-the-clock.So, some are starting to turn to consumers for more help by using what are called demand response programs. While it’s common for frugal consumers to try cutting back on their energy bill, these programs offer additional rewards to use less power during peak hours.

“Grid operators across the country are sounding alarm bells about potential blackouts during this summer’s heat waves,” said Cisco DeVries, chief executive officer, of OhmConnect Inc., an Oakland, California-based startup which offers power-saving rewards. Engaging residential homes to participate in power conservation, he said, is “the cleanest, most cost-effective way to keep the lights on.” 

Because consumers, unlike large industrial power users, have difficulty monitoring their energy use in real time, utilities have paired up with software providers such as OhmConnect. The company helps households curb power usage by installing devices which enable real-time monitoring of energy use, allowing them to remotely adjust thermostats and appliances during peak hours. 

The company, which controls over 200,000 devices across California, Texas and New York, hands out prizes including Peloton bikes, $3,500 Costco gift cards, and invitations to Major League Baseball games. 

Duke Energy Corp., which operates utilities in six states including North Carolina and Florida, has enrolled around a million customers for its various demand response programs. 

“We also use demand response during high price events where we can potentially save our customers money, but really the main reason is to ensure that we have adequate supply,” said Jay Oliver, a general manager at Duke Energy. 

Demand response programs not only help to prevent blackouts but are critical for countries to cut back on carbon emissions, industry experts say. About 500 gigawatts worth of energy savings, more than the entire power capacity of India, should be made globally through demand response to achieve the International Energy Agency’s goal of net zero emissions in the global energy sector by 2050, according to the agency.

Read more: The Future of Energy Will Require Bigger Sacrifice From Citizens

In Japan, where high temperatures in the capital have recently triggered power supply warnings, utilities are starting to offer rewards for demand response programs. Efforts to reduce power use — known as “setsuden” — intensified after the 2011 Fukushima nuclear disaster.

Tokyo Gas Co., one of the country’s top power retailers, has launched a program that allows consumers to collect points for energy savings. Users are informed in advance of upcoming peak hours, during which they’re encouraged to use less power. If they can lower their energy consumption during those hours compared with their recent average usage, they are given points, which can later be redeemed for Amazon gift cards.  

Kyushu Electric Power Co. will give its clients gift cards for using an app to track their energy use, allowing users to better conserve energy, particularly during peak demand times. 

The Japanese government is also encouraging such efforts, not just this summer but in the upcoming winter months when electricity supply is expected to be tight. It plans to reward around 2,000 yen ($14.80) to energy saving households, according to local reports, although it’s unclear how this will be handed out. 

With consumers now exposed to heavy media coverage on the country’s power supply issues, utility providers believe it’s the perfect opportunity to launch such programs.

“It would have been more difficult to introduce plans like this three years ago,” said Sho Ouchi at Tokyo Gas’ residential market strategy department. “But it’s necessary now to engage households.”

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