This commentary originally appeared on EDF's Energy Exchange blog.
Earlier this month, I had the opportunity to speak on a panel entitled, Resource Adequacy & Demand Response: Ensuring Texas’ Future Reliability at the 7th Annual Platts Texas Energy Markets Conference in Houston, TX. Following fellow panelists, “Trip” Doggett, CEO of ERCOT; Milton L. Holloway, President and COO of the Center for the Commercialization of Electric Technologies; and John W. Fainter, Jr. President and CEO of the Association of Electric Companies of Texas, I spoke about EDF’s work with the Pecan Street Research Institute (Pecan Street) to test and deploy various smart grid consumer products.
One of the many cutting-edge research projects being conducted by Pecan Street is an examination of consumer behavior with regards to energy usage. Trends in the data show that giving people the ability to control their energy use, and their energy generation, generally results in cost-effective, environmentally-conscious decisions. These shrewd decisions are becoming increasingly important as Texas faces a lack of energy resources to meet the state’s increasing need for more electricity.
With July just around the corner, the summer heat is ramping up in Texas, and the Electric Reliability Council of Texas (ERCOT) is preparing for extreme temperatures to push the electric grid to its limits. State regulators and ERCOT stakeholders are urgently seeking a solution to the looming Texas Energy Crunch. The Public Utility Commission of Texas (PUC) has already raised the maximum price in the electricity market a number of times, but this is a band-aid for the problem, not a long-term solution.
Texas Energy Crunch
The answer to keeping the lights on in Texas this summer: Demand response (any change a customer makes in normal electric usage patterns in response to market signals). Demand response rewards those who reduce electricity during peak times, resulting in more money in peoples’ pockets, a more stable and reliable electric grid and less harmful pollution for fossil fuel-fired power plants. As we have discussed in previous blog posts, demand response is immensely beneficial for customers, because it not only pays participants for reducing their energy use, but also keeps electric rates low for everyone by delaying large investments in new fossil-fueled power plants.
In addition, Texas has the greatest potential for demand response in the nation. In fact, a Brattle Group report, commissioned by ERCOT, suggests that demand response could meet 15% of Texas’ peak energy needs – which is enough to secure Texas’ growing energy needs and offset the need for new power plants. However, today, demand response only meets 3-4% of peak energy in ERCOT. Industry experts argue that ERCOT could easily grow demand response programs to cover 8-15% of high energy demand by mirroring similar successful approaches used in other U.S. electricity markets.
Texas leads the nation in smart meter deployment and the benefits of the smart grid are being realized for utilities and commercial and industrial entities that engage in demand response in the state. But fulfilling the 15% potential will require the other half of the smart grid to manifest: adopting customer-facing technologies at scale. As we have previously highlighted, residential and small customers account for “more than 70 percent of peak energy load,” making up the largest untapped source of demand response. Without the ability to control and automate appliances and thermostats with sophisticated information technology, smart meter benefits essentially stop at the resident’s front door.
Two companies are leading the charge to empower Texans with the necessary technologies to take energy matters into their own hands (and extend the smart grid benefits beyond the front door):
In San Antonio, Consert and CPS Energy (San Antonio’s municipal utility), are offering customers a fully-integrated energy management solution, known as the “Home Manager.” This solution is beneficial for both utilities and customers by combining Advanced Metering Infrastructure (AMI), a secure two-way communications network (using smart meters), and a Virtual Peak Plant (VPP) that seamlessly reduces energy waste.
Consert began deploying the systems back in 2012, with the goal of installing VPPs in 140,000 homes and small businesses. This will provide CPS Energy with approximately 250 megawatts (MW) of responsive reserves during critical, high energy demand times. CPS Energy participants will benefit from Home Manager by taking control of their major energy-intensive devices, including heating and cooling systems, water heaters and pool pumps.
Another company, EnerNOC, believes that it can triple demand response resources in Texas with its DemandSMART technology. This model allows participants to receive payments from ERCOT in exchange for reducing electricity use during high-stress times, such as 5:30 pm on a 115 degree day in August. EnerNOC works with participants to design an energy reduction plan, so that participants get paid for using less energy without affecting their daily routine. The best part: there is no cost to sign up, so participants quickly begin seeing both economic and environmental gains as a result of their energy saving decisions.
It’s time to bring the power to the people. Demand response empowers consumers to make informed decisions about their energy use, so they can use electricity in a way that cuts costs and improves their lives. At the same time, it gives consumers a bigger stake in the electricity market, helping to ensure fairness and secure Texas’ electric grid into the future. Let’s continue our tradition of innovation in the energy sector, and unlock the vast potential for ordinary Texans to participate in the energy market and make the grid stronger, cleaner and more efficient than ever.