Energy Exchange

Demand Response: A Key Component In Texas’ Electricity Market. Why Isn’t The State Taking Advantage Of It?

By / Published: January 12, 2012

On Monday, the Texas Senate Business and Commerce Committee took up the critical issue of the impact of extreme drought conditions on electric generation capacity and state officials’ plans to respond to those risks. A number of important issues and policy solutions were raised, from on-bill financing of energy efficiency to renewable energy to send the right ‘market signals’ to incentivize the construction of new power plants. Public Utility Commission (PUC) Chair Donna Nelson singled out, in particular, the state’s energy efficiency and renewable energy goals. These policies have helped reduce pollution, saved customers money and have the added benefit of reducing our dependence on water for electricity production.

Another important part of the solution discussed was raised by a number of panelists: demand response (aka load management). The ability of end-use customers to reduce their use of electricity in response to power grid needs or economic signals has helped the Electric Reliability Council of Texas (ERCOT) avoid rolling blackouts and, in other regions of the country, it has helped markets avoid the need for new capacity. As ERCOT CEO Trip Doggett and PUC Chair Nelson pointed out in their testimony, demand response is a market competitive resource that uses no water and, as such, it may prove to be a valuable resource in view of the state’s record drought.

The Texas Capacity Crunch – Obstacles and Opportunities
The historic drought of 2010-2011 has put Texas’ conventional power plants at risk, threatening a return of the rolling blackouts caused by extreme winter conditions just a year ago. State Climatologist, Perry appointee John Nielsen-Gammon says, “Statistically we are more likely to see a third year of drought.”

At the same time, ERCOT faces a challenging capacity crunch caused largely by “low natural gas prices, an influx of low marginal cost wind power, increased wholesale market efficiencies, low wholesale power prices, tight credit markets” and other issues according to TXU Energy. With limited ability to invest new capital given the current market conditions, and over 11,000 MW of power dependent on water sources at historically low levels, Texas needs to tap into resources that can be deployed rapidly and require less capital and much less water.

Demand Response – Low Cost, Zero Water Resource
Fortunately Texas has ample resources to meet these needs with demand response. If allowed to participate fully in Texas’ energy markets as it does in other regions, demand response can benefit customers and increase grid reliability. Unfortunately Texas continues to lag behind other states and regions, which have seen market-competitive demand response grow rapidly as market barriers have been removed.

The definition of “demand response” is “end-use customers reducing their use of electricity in response to power grid needs or economic signals from a competitive wholesale market.”
The potential for cost competitive demand response is tremendous – according to the Federal Energy Regulatory Commission (FERC) Texas could add as much as 19 GW in capacity by 2019 if we open up our electric market to allow customers to compete alongside generators.

Texas currently is among the lowest states in terms of load management, despite having the highest potential by far according to FERC and the Brattle Group.

Source: FERC

Why Does Texas Lag the Nation in Demand Response?

In 2011, demand response amounted to 9% of the PJM’s (a grid operator in the Mid-Atlantic/Midwest) system peak demand, greatly benefitting customers and improving reliability.
At ERCOT, despite great potential, demand response only amounted to just over 2% of peak demand, limited by unnecessary market barriers.
Texas leads the nation in smart meter deployment, intended by the legislature to “facilitate demand response initiatives.” Why is ERCOT so far behind?

Market Barriers Prevent Customers from Competing in ERCOT

ERCOT’s legacy demand response program is capped at 1150 MW and is effectively limited to large industrials within ancillary services markets.
ERCOT’s Emergency Reliability Service is the only program in the market that allows any customer to participate if they qualify. The program is limited in scope (it can only be called on twice per year) and to date has been unable to reach the original goal of 500 MW. Despite these limitations, the program helped avoid rolling blackouts last summer.

Source: NERC

Regulators are Focused on Building New Power Plants

Instead of looking to all possible solutions, regulators seem focused only on how to get new power plants built.
Other grid operators have successfully created programs for smaller commercial and residential customers to compete through aggregation. In Texas, residential and small commercial customers have been put on the back burner.
Despite the PUC’s reluctance to act on other clean energy opportunities, such as the 500 MW non-wind RPS or increasing the energy efficiency standards, it is clear that these programs have been successful in creating clean, “water-proof” power.
In the midst of a capacity crunch caused by extreme drought and market structure problems, demand response provides an opportunity to address both by enabling cheaper, water-free capacity by simply opening markets to customers.

ERCOT Reliability: “It’s Complicated”

By / Published: December 20, 2011

This commentary was originally posted on the EDF Texas Clean Air Matters Blog.

It seems like only yesterday that ERCOT was issuing dire warnings of rolling blackouts as a direct result of regulations required by the court system to ensure cleaner, healthy air for Texans and our neighboring states. Well, maybe not yesterday, but at least as recently as this month. Buried deep within the report was ERCOT’s tacit acknowledgement that they have allowed companies to idle more than 1,000 MW of power plants because those plants are not economic in today’s hyper-competitive market.

Source: Texas Tribune

Of course, no announcement made as much news as Luminant’s claim that they were shutting down two of their Monticello lignite power plant units in response to EPA regulations. Those claims have been pretty well debunked over the last few months as people began to realize that market economics and poor planning were responsible for Luminant’s decision. As we discussed in September, it was as convenient for Luminant to blame the EPA as it was reflexive of Texas politicians and regulators to threaten rolling blackouts as a result of Luminant’s decision. ERCOT’s decision to let other power plants shut down for economic reasons calls those claims into serious question, and their recent decision (password required) that idling the Monticello units at the heart of this debate does not threaten system reliability will hopefully end this cycle of unfounded recrimination and backtracking.

As ERCOT has made clear, the real threats to system reliability are of our own making: market failures have lead to a lack of proper signals to encourage the building of new power capacity; and this year’s record breaking drought, made more extreme by climate change, has threatened to shut down more than 11,000 MW of power plants. What all of this means is that ERCOT’s reliability issues are far more complicated than a political slogan, and getting rid of sensible regulations that protect our children, elderly and general population from real health risks will do nothing to solve our problems.

Instead of focusing on the easy political score, our leaders should be looking for real solutions that don’t pose risks to human health or to our water supply. The solutions are out there: dry-cooled power plants, energy efficiency programs like demand response, as well as wind, solar and other non-water consuming renewable energy.

The most recent decision by ERCOT that idling Luminant’s power plants poses no threat to grid reliability should end the cycle of unfounded accusations for political gain. It should focus our state leadership on solutions that will work instead of distractions that only delay solving the problem. It should also serve as a signal to those who are all too ready to accept unfounded claims for the sake of a good story or a convenient target. When it comes to ERCOT and reliability, the issues are complicated, but the solutions are out there and it will take real focus and effort to prevent Texas from experiencing the same rolling blackouts we had last winter. It’s winter again (even if it’s just barely starting to feel like it), and next summer looks to be another scorcher. We don’t have a lot of time, so let’s get to work.

Also posted in Texas / Tagged Energy Crunch | Comments are closed

Pecan Street Named #1 Electric Vehicle Initiative Of The Year

By Marita Mirzatuny / Published: December 13, 2011

Since this blog post was published, Pecan Street was also named one of Smart Grid News’ Smart Grid Winners of 2011.

Source: Pecan Street

As the Christmas season revs up and a New Year fast approaches, you may have noticed the sentimental commercials of couples giving each other new cars amidst snowy scenes and jolly music or well-choreographed salespeople urging you to shop the dealership as eager car companies showcase their new model year offerings. This happens every year around this time, some obviously more ridiculous than others. But with each year as more hybrid and electric vehicles join the marketplace, these companies are touting their environmental acumen as much as their sleek body styles and luxurious interiors. While there are still hurdles to overcome, the age of electric vehicles (EV) is beginning.

2012 will see the 100% gas-free Ford Focus, now taking reservations, Mitsubishi’s MiEV’s as the cheapest offering in the EV market, and the all electric Honda Fit, released initially as lease only until 2013. With a limited supply of Fits coming to the US, Engadget even suggests “you may want to add your local Honda dealer to the holiday card list — it certainly can’t hurt your chances of getting Fit next summer.” One analyst believes by “model year 2015, the new car market will have 108 electric-drive models.” And a University of California at Berkeley study predicts that by 2030, 64% of light vehicle sales in the US will be EV. Read More »

Also posted in Texas / Comments are closed

Smart Grid Jobs Booming In Bay Area

By Jamie Fine / Published: October 31, 2011

Source: Silicon Valley Smart Grid Task Force

This commentary was originally posted on the California Dream 2.0 Blog.

There’s something happening here. What it is, is perfectly clear: the smart grid is creating jobs in Silicon Valley and across the San Francisco Bay Area, according to a report just released by the Silicon Valley Smart Grid Task Force, which EDF oversaw as an advisory council member.

A well-respected research firm, Collaborative Economics, asked local businesses about their jobs in the smart grid sector. The results are early since the smart grid is still mostly in the planning stage but indications suggest it’s a job-engine that California can rely on.

The report divides the industry into four sectors:

power management and energy efficiency,
energy storage,
local clean energy (distributed generation such as rooftop solar, small wind turbines, plus equipment manufacturing and installation), and the
delivery of electricity (transmission and distribution).

During the depths of the recession from 2008 to 2009 when national unemployment doubled from 5% to nearly 10%, smart grid employment in Silicon Valley actually grew.

Manufacturing jobs in the industry are shining brightly against the dark cloud of declining blue-collar employment in the state. Today, more than half of the 12,500 smart grid jobs in the Silicon Valley are in manufacturing.

Investment activity across the diverse smart grid sectors has been robust since 2005 and with strong venture capital (VC) investments. California accounted for 69 percent of total US VC investment in 2010 and total amounts increased 66 percent from 2009 to $2.8 billion.

Investor interest in smart grid is no surprise, since the potential benefits of smart grid are significant and potentially very lucrative:

cleaner air,
reliable electricity supply,
low-cost electric vehicle charging, and
energy independence by way of local clean energy.

At the press conference where the report was released, San Jose Mayor Chuck Reed captured the importance of the smart grid when he said that many of the city’s Green Vision Goals for jobs, electric vehicles and renewable energy will only be reachable with a smart grid.

Another reason the Bay Area is creating smart grid jobs is that many of the companies at the heart of the region’s economy – information technology giants such as Oracle, Cisco, and Google, energy companies such as PG&E and Calpine, and technology leaders such as GE and Honeywell – are all at the smart grid frontier.

Consumers have rightly asked, ‘what can smart grid do for me?’ In addition to the many environmental benefits, smart grid means empowerment, both in the traditional electrical sense and now in terms of controlling one’s energy use and costs. Now we have another answer: your next job might be helping to build the smart grid.

Also posted in California, Jobs / Read 3 Responses

The Great Lakes Symposium: Bringing The Smart Grid To The Nation’s Center

By Kristen Coracini / Published: October 24, 2011

Source: Medill Reports

View Miriam Horn, director of EDF’s smart grid initiative, speaking with Medill Reports about exciting highlights from the event here.

The first annual Great Lakes Symposium for Smart Grid and the New Energy Economy kicked off last Tuesday, as leaders gathered from across the Midwest and the country to share information on what benefits and challenges a smart grid can deliver to the region. The event was kicked off by Chicago Mayor Rahm Emanuel, promoting energy conservation as the “fifth fuel” (I’d put it first myself). The opening included a moving tribute to Bob Galvin, the pioneer and innovator who created the Galvin Electricity Initiative, one of EDF’s symposium partners.

While the weather didn’t cooperate – it was cold, rainy and, true to Chicago’s nickname, very windy – the panels and events were excellent and informative. The opening keynote, moderated by Joyce Foundation president Ellen Alberding, included representatives from GE and Silver Springs Network discussing how to place the Midwest in a leadership position in the new energy economy. This question is fundamental to why EDF and our partners chose the Midwest for this conference: the region has just the right mix of manufacturing and high tech industries and a strong agricultural base. Perhaps even more importantly, the Midwest needs a smarter, greener grid to transition from its heavy reliance on coal for electricity, to cleaner resources, such as energy efficiency and renewables – and to accommodate the emerging electric vehicle market. And while electricity prices are relatively cheap in this part of the country, they are steadily rising. In his answer to the question, GE’s Luke Clemente noted that a smart grid will enable more renewable energy to be generated in the Midwest, keeping more money in the communities in which the power is generated and contributing to their economic development.

After the keynote, the symposium split into three separate tracks: a Midwest Policy Summit, a Consumer track and an Innovation and Economic Opportunity track. While this allowed attendees to choose the panels that best addressed their particulars interests, it created a bit of a Sophie’s Choice for me, having to decide which panels to attend and which I would have to miss. Fortunately, four of my EDF colleagues were also in attendance, so we were able to cover all the bases. In fact, three of my colleagues, Miriam Horn, Mark Brownstein and Lauren Navarro, each participated on panels, making it clear that EDF is the leading environmental organization working on these important issues to ensure that the smart grid’s promised environmental benefits are in fact delivered.

I opted for a panel on “Leading Practices for Ensuring Consumer Empowerment,” moderated by Pecan Street’s executive director Brewster McCracken. Pecan treet is an innovative smart grid test bed in Austin, Texas, and there’s a lot to be learned from what they’ve done and continue to do there. Brewster shared some fascinating information on “disruptive innovation” as the necessary catalyst for advancing technology. Silver Springs Networks’ Eric Dresselhuys built on this theory by discussing the smart grid movement as one born from disruptive forces and opportunities: first out of the need for reliability, more recently as a reaction to environmental policies and consumer interest and finally to enable emerging resources, such as distributed renewable energy.

I won’t detail every panel I attended, but I’m grateful that staff at the Illinois Institute of Technology were on hand to video all of the events for future reference, which will be housed on the Symposium’s website. Immediately after the symposium, I attended the first ever Perfect Power Seal of Approval^TM Academy, a program created by the Galvin Electric Initiative to evaluate power system performance. The program is based on a series of well-defined metrics, including reliability, cost, consumer empowerment and efficiency and environmental performance. EDF helped develop the environmental metrics, which assess a broad range of issues, from emissions to land impacts to waste. Roughly thirty grid operators attended the academy, and will receive a certificate for their participation. The Seal of Approval is based on similar principles of perfection as the Six Sigma certification, which was developed by Bob Galvin. It’s a tool that will no doubt prove invaluable.

As a native North Carolinian, I’ve been thrilled to spend some time in Chicago and the Midwest over the past year, working with great partners to bring a smarter, greener grid to the region. The Great Lakes Symposium was an excellent coming out party for EDF, and is only the start of bigger things to come. My heartfelt gratitude goes out to our partners at the Joyce Foundation, the Illinois Institute of Technology, the Citizens Utility Board, the Illinois Science and Technology Coalition, and everyone else who made this event a great success.

Posted in Grid Modernization / Read 2 Responses

Great Lakes Symposium On Smart Grid And The New Energy Economy

By Kristen Coracini / Published: October 13, 2011

With its rich tradition of manufacturing, agriculture and innovation, the Midwest provides a fertile landscape for the development of the smart grid. And in return, the smart grid can bring new jobs, economic development opportunities and environmental benefits to the region. That’s why EDF, along with the Citizens Utility Board, the Illinois Science and Technology Coalition and the Illinois Institute of Technology, is pleased to be part of a smart grid symposium in Chicago next week.

The first annual “Great Lakes Symposium on Smart Grid and the New Energy Economy” will bring together key players involved in advancing and implementing smart grid technology and innovative energy practices throughout the Great Lakes region.

The two-day symposium will showcase smart grid best practices from around the country, along with inventive technologies and ideas that are spurring innovation, growing state economies, reducing harmful emissions and empowering consumers to conserve and save. Attendees will have the opportunity to engage thought leaders on key policy questions, identify investment and job creation opportunities, explore the potential for environmental and economic impact and learn about projects already underway.

Highlights of the symposium will include a Midwest Policy Summit, which will focus on identifying the necessary policy and economic drivers to ensure strong smart grid deployment that will maximize consumer and environmental benefits. The summit speakers include Philip Moeller, commissioner with the Federal Energy Regulatory Commission; Paul Centolella, commissioner with the Ohio Public Utilities Commission; and EDF’s own Mark Brownstein, chief counsel of the national energy program.

The agenda also includes The Path to Perfect Power, a demonstration of microgrid and other consumer-centric approaches that are improving reliability and environmental performance, featuring Mark Curran, director of public utilities with the City of Naperville, Illinois; Terence Donnelly, executive vice president of operations for Commonwealth Edison; and moderator Mike Edmonds, vice president of strategic solutions for S&C Electric Company.

Two other EDF smart grid and energy experts are also on the agenda: Miriam Horn, director of EDF’s smart grid initiative, will focus on developing great Midwest smart grid strategies, and Lauren Navarro, an attorney in our Sacramento office, will share her experience developing smart grid legislation, regulatory frameworks and a scorecard to assess utility smart grid deployment plans in California.

I’m also looking forward to participating in the first-ever Perfect Power Seal of Approval^TM Academy, hosted by UL, the Galvin Electricity Initiative and S&C Electric Company. This two-day interactive workshop will demonstrate how to ensure that electricity systems are more consumer responsive, cost-effective, reliable, environmentally sustainable and energy efficient.

The symposium will take place at Illinois Institute of Technology in Chicago on October 18 and 19, and is sponsored by ComEd, Eaton, GE, Silver Spring Networks and The Joyce Foundation. For a full agenda of the symposium and other information, please visit http://greatlakessymposium.com/. Stay tuned for my next post on highlights from the event!

Posted in Grid Modernization / Comments are closed