This is actually a very good thing for the future of the grid. It's just off to an awkward start (and a very late one).
This particular awkward start could do this during peak power-demand times, mainly the hottest afternoons when everybody is running their A/C:
- Reduce the duty-cycle on A/C and electric heat to about 50%, which only matters if its duty cycle is over 50%. That would be an issue if the day is very hot/cold, or you program your thermostat to chill/warm the house an hour before you get home. (in that case make it 2 hours). They say 16.5 minutes worst case out of 30, they are allowing for propagation time for the "cycle" signal - transmitting data over power lines is very slow and very narrow-bandwidth.
- You have hot water, but as you use it up, your water heater can't replace it, for up to 5 hours. But who takes long hot showers on hot days? Tanked heaters hold hot water just fine for hours, but when you use it, it'll be gone. It will extend runtime if you use anti-scald faucets and bump your heater temp as high as possible (also helps for legionella). You may be able to exclude this from the program, but you'll make less money if you do.
You can beat the water situation with a gas water heater or with solar collectors (which heat water) - they will be at peak performance right when the cycling happens. If your HVAC is running >50% duty cycle, insulation can fix that.
Let's talk about why.
How the grid dispatches
The power grid was designed as a one-way service: a central authority generates and delivers, and consumers only consume. "Alternative electric companies" like Enron only exist on paper, it's still the same grid run by the same authority.
The grid architecture is currently has "open demand": consumers can draw any load, and the generators must either provide it, shed load (in a gruesome way), or the grid collapses.
Load varies dramatically through the day, so you must add and remove generating plants. Except some plants aren't made to cycle daily - nuke, coal, geothermal, any steam plant. Others make power when they make it (solar, wind). The top of your capacity that you only use 20 days a year for 6 hours, are called peakers.
You also need to cover second-by-second changes in load. This is done with "spinning reserve" - part of your capacity that is spun up and on the line, but doing no useful work. Steam plants hate this, and it's wasteful with "all capital expense" plants like nuke, solar or wind. Back to peakers.
Peakers are traditionally Cat/EMD/GE diesels, or of late, jet engines driving a generator. They are "highly" dispatchable - meaning the central authority which controls the grid can push a button and get them online in a 10-15 minutes. (That doesn't sound very "highly", does it?) This is only good for replacing lost spinning reserve, it can't fill an instant need for load. And because of this, quite a bit of spinning reserve must be kept up. And peakers are ex.pen.sive!
If only they could dispatch instantly.
If only peakers were cheaper.
If only power could be stored somehow.
Electricity does not store, even for 1 second. It regularly drives the spot market price to zero. That's especially a problem if your region is heavy in baseload (coal, nuke, wind) like Ukraine, France or North Carolina.
Pretty much your only storage options are hydro backpumping or batteries.
However, that says nothing about storing the work product of electricity, e.g. You can certainly store hot water for a few hours or a chilled house for a few minutes.
The impossible dream: dispatching load
A 10MW deficit in the grid can be made up either by dispatching 10MW of generators or "dispatching" 10MW of load. The gruesome act of rolling blackouts can hardly be called dispatching, but there was no other way to cut load in a controlled way. Now, with the computer/network revolution, there is.
And load dispatching (or the industry term, demand-side management) dovetails very nicely with that thermal energy storage I mentioned in water heaters, whole house A/C and heat, pools, and other loads you can reasonably afford to pause, like washers, dryers, dishwashing, charging electric cars, etc.
Potentially they could also dispatch your generating capacity. Not your solar; it's already the perfect peaker. I'm talking about having your Tesla PowerWall, EV or home generator backfeed onto the grid, for which you would be decently paid.
From the grid's perspective, demand-side management that is instant greatly reduces the need for spinning reserve. It also reduces the need for peakers generally, at a time when solar is coming on gangbusters, and solar is an inherent peaker. It's possible if demand-side management is widely adopted, peaking plants could cease to exist - a literal breath of fresh air to the minorities in whose neighborhoods most are built.
Your duties as a citizen in a great society
I don't believe America should be a nation of leeches greedily grabbing what they can, in a national-scale "tragedy of the commons". I think each of us owes something to the social contract that gives us our freedom and prosperity.
Provided, of course, they pay us. Part of our social contract is capitalism: wealth should go to its creator. Fair enough.
These technologies stand to make a much stronger, more robust electrical grid, with less pollution and much lower costs. Which should come back to the consumer, preferably in proportion to their participation.
Another part is independency. It is an affront to individualism to depend mouth-to-teat on the power grid. While load dispatching/demand-side management does nothing for this, the enabling technology will enable other stuff that help individuals achieve energy independency, or at least choose the terms of their relationship with the grid.
Consumer demand-side management, version 1.0
Obviously from their literature, the implementation is rather cheesy... grafted on and hacked. They aim to operate heavy contactors on your water heater or pool, and interrupt your thermostat wiring to regulate your A/C or aux heat.
Of course since all this stuff moves at the speed of government regulatory authorities, it's only now reaching the consumer. And it's a rough-hewn and awkward shadow of what the technology and business practices could and should be.
Others have gone through the plan in the most critical light possible, with an aim to reject it out of hand. So I'll say that the power company is being conservative (in their favor) because this has never been done before, and nobody has any earthly idea how the economics will end up working out, and they don't want to lose their shirt. There's another factor: "I don't have to outrun the bear". For a limited rollout, they don't need everyone - suckers will suffice. So it's no surprise their initial offerings will be... lowball.
Consumer demand-side management, version 2.0
As it proves itself and matures, I'm confident the value of demand-side management and backfed home power dispatching will become more appreciated, and become priced correctly. Remember most delivering power companies are profit-regulated, excessive profits can't go anywhere else but back to the ratepayer.
The real beauty of this tech will arrive when it becomes integrated with the appliances. Now your water heater knows exactly what to do when it hears Code Orange groups 1-9 on the power line signaling: let itself cool off from 160 (legionella temp) to 120 (still usable temp) which will take hours. And when you use enough that the whole tank drops to 110, fire back up anyway. Now you're not impacted at all, and really, neither is the grid, since draining a tank during outage time is rare enough not to matter.
Your furnace haggles with the grid: "the house is worryingly cold, I need power." and the grid goes "run in heat pump mode if able, otherwise aux heat authorized to 50%".
Your washer, dryer and EV charger have an "urgent" button you can push for when the job can't wait.
It empowers off-grid living too. The tech can be easily extended so appliances know how to behave on generator or solar/battery. For instance the generator manager goes "Dryer, suspend because heat pump needs to run". The solar controller knows batteries are topped up and it's about to start wasting power, so it says "dishwasher GO" or "air conditioner please overcool" etc. No one would ever build this tech just for solar, but it's an easy add-on to demand-side management tech.
Now it becomes easier to build a more robust off-grid solar home, and cut the big cord entirely.
Some people are really, really worried about the Gub'Mint knowing they have a clothes dryer.
Okay, maybe you don't want them knowing you did a marathon washer-dryer run an hour after the coroner's time-of-death :)
Seriously though, smart meters are a big ooga-booga privacy-scare issue, especially in light of just how much data can be divined by home power monitors like Curb. You have to be politically active to deal with that, both with your legislators and with your utility regulators.
I can tell you this: The utility doesn't care. They need load dispatching for the reasons I describe, period. It will suffice for them to clump you anonymously into a large group at random, say group 7, so they can command everyone in group 7 to go to reduction level Yellow. Other than that, they only need to know if you signed up and are cheating. But there can be ways to figure that out without invading your privacy.
And as I said, the power company simply lacks the bandwidth to spy on you. Their communication network is the power line and it can't handle Big Data. As mentioned, it takes 90 seconds to broadcast a simple demand-side management SCADA control. It is adequate to remotely read and shut off meters and broadcast demand-side dispatching signals, but that's about it. If they wanted to spy, they would put cell phone modules/antennas on smart meters. Watch for that.