Energy Exchange

Shut Down The Texas Government (Power)!

Source: Jon Rogers

These days it seems “shutting down” the government is a popular rallying cry in Texas. So, why not do it…er…or at least shut down the electricity when it’s not being used!?

As many of us enjoy the shortened work week due to the Labor Day holiday on Monday, I thought it would be a good time to look into what kind of demand response (DR) government buildings can participate in during holiday and seasonal closings.

We have discussed the benefits of both residential and commercial DR and governments can represent large or small entities depending on their size. The Texas Facilities Commission (TFC), responsible for “planning, providing and managing facilities for more than one hundred state agencies in over 290 cities throughout Texas,” has a current inventory totaling “24 million square feet of leased and state-owned properties.” Of that, offices make up about 6 million square feet across eight different cities.

These state agencies annually “consume over $200 million in electricity, which is procured and billed on thousands of separate accounts through various providers. In an effort to reduce these expenditures, the Office of Energy Management (OEM) is looking at ways to aggregate the State’s electrical load into fewer accounts, perhaps into just one. This strategic initiative could take advantage of negotiation opportunities, economies of scale, consolidation of facility loads and load scheduling resulting in the TFC saving thousands of dollars a year on electricity alone.”

Furthermore, the “OEM is taking a more expansive look at its resources, including purchasing, producing and distributing, and actual consumption. For example, it recently proposed aggregating the States electrical load to benefit from economies of scale, wholesale rates, reduced peak demand charges, and to acquire a more sophisticated rate structure and is currently studying the possibility of incorporating combined heat and power in its production.”

The TFC is also working with the General Land Office (GLO) to aggregate smaller state agency accounts to provide volume discounts for these accounts. Currently, smaller state agencies procure gas supplies from the local gas companies or in amounts from the GLO that do not render the economies of scale capable with the aggregate consumption with the TFC. By aggregating these smaller amounts, the TFC gets a better deal for the buildings under the TFC’s control and the other agencies. Read More »

Also posted in Demand Response / Comments are closed

Why We Must Extend The Production Tax Credit For Wind Energy

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

Prior to the August recess, the U.S. Senate Finance Committee passed a 55-item tax extender package known as the Family and Business Tax Cut Certainty Act of 2012.  The bill is now up for consideration in the House Ways and Means Committee. Included in this package is a one-year extension of the Production Tax Credit (PTC) for wind energy. The PTC is sound economic, energy and environmental policy, and our congressional leaders would do well to support the package and the PTC extension when it comes up for a final vote.

Texas’ current success in wind energy development has been assisted by the PTC. The PTC provides a 2.2 percent tax credit per kilowatt hour of energy generated to private wind investors if their wind farms are developed, constructed and are producing. This program has increased private investment and development of wind energy, and has lead to an expansion of jobs throughout our country, but particularly in rural Texas.

With Texas being the national leader in wind installations and a manufacturing hub for the wind industry, wind farms have appeared throughout our state, and related jobs are in high demand. The wind industry provides quality and high-paying jobs, gives our state an economic boost and provides environmental benefits. Texas is the first state to reach 10,000 megawatts of wind energy installations, which power the equivalent of 2.7 million homes. The wind industry also provides land lease payments to local landowners in Texas to the tune of $31 million annually.  

Nationally, the wind energy industry supports 75,000 direct and indirect jobs, more than 400 manufacturing facilities, and is responsible for 35 percent of all new energy generation since 2007 – more than coal or nuclear energy combined.

The PTC and the tax extender package are not guaranteed to pass either the House or Senate. As uncertainty in this industry continues, developments and projects in Texas and around the country are at risk if Congress does not act quickly. EDF is asking Congress to support a tax credit that continues to help the wind energy industry grow into self-sufficiency.

Please contact your member of Congress today and ask for their support of the Production Tax Credit and the Family and Business Tax Cut Certainty Act.

Posted in Texas / Read 1 Response

Demand Response Means Big Money for Big Users

After a full week of triple digit temperatures in central Texas, the forecast this weekend for highs in the mid-90’s seems like a blessing both for our thermostat and for the unending topic of this blog series: our electric grid.  Officials from the Public Utility Commission (PUC) and the Electric Reliability Council of Texas (ERCOT) have been worried about the strain on our electric grid all summer long, but they aren’t just worried about this summer.  The energy crunch is an issue that we know will be with us until we deal with it; we can’t rely on dancing cats to ease the crunch. We need real solutions to avoid real problems in the future. 

It doesn’t have to be that way though, and it doesn’t need to cost as much as some worry it will, but that’s assuming that the PUC and ERCOT are able to move quickly and decisively to encourage demand response.  In our blog post last week we focused on the benefits of demand response for residential customers and small businesses, and that’s probably where the greatest overall potential lies.  But the quickest return – and the most financially savvy electric customers – might lie in the commercial and industrial markets today.  Fortunately two great examples in other parts of the country show how we could be doing more for those markets in demand response as well.

 “Making the Most of Your Energy” in NYC

Large commercial buildings typically face a number of hurdles when trying to upgrade their energy systems – particularly those with multiple tenants.  In New York City, the Rockefeller Group Development Corporation saw these hurdles as an opportunity for a new approach to energy management.  By selling their demand reductions to the grid, in the manner we’ve proposed for ERCOT, they managed to reduce energy usage by 60,000 kWh per month and reduced peak demand by 1.4 MW.  McGraw Hill now receives a net income (after payments for the financed upgrade) of $500,000 annually.

Rules in ERCOT might allow for this kind of savings already in some small ancillary services markets, so long as their metering system complies with ERCOT protocols.  Those ERCOT demand response markets are capped and already oversubscribed; leaving developers who want to build smart buildings or upgrade older ones are looking to other markets for their business.

Meanwhile, in the heartland….

We mean Warrick County, Indiana specifically. Alcoa, one of the world’s leading aluminum producers has worked with their grid operator Midwest ISO (MISO) to develop a completely new approach to industrial demand response that has blown the doors off of the possibilities for Texas’ industrial sector.  The market for aluminum is ruthless, and Before Alcoa anything that gives Alcoa a leg up helps them preserve critical jobs and tax income in their communities around the country. 

With this new market, Alcoa has managed to maintain international competitiveness for their Warrick County plant and is looking to expand demand response to their aluminum smelters in other parts of the country.  In Texas, where Alcoa’s Rockdale smelters are were not able already struggling to maintain international competitiveness and have been idled as a result, , new markets like the pilot project announced by ERCOT on Monday could mean the difference for other industries between staying profitable and shutting down operations.

Whether it’s in the city or the country, a big user or a small mom and pop store, demand response markets offer a new benefit to customers if the market rules allow customers to compete with other resources.  As we discussed earlier this week, the potential for these resources in Texas would help us meet 15 percent of our peak demand needs according to ERCOT’s Brattle Report.  That potential stretches across all types of customers, and must be part of the solution to the energy crunch in Texas if we want to keep rates down and maintain reliability.

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13:15

Source: “ERCOT Investment Incentives and Resource Adequacy.” Brattle Group. June 1, 2012.

In January, we discussed the benefits of demand response (DR) and how Texas is not taking full advantage of it. Not only is DR a low cost, zero water source for providing capacity through conservation, but it can also actually directly benefit consumers financially. Furthermore, since residential and small customers account for “more than 70 percent of peak load” it is paramount that we tap into this resource.

The 13 Percent Reserve Margin

Fast forward to this summer, where a few factors have encouraged the situation as Texas’ energy crunch comes to light. In May, the 13.75 percent reserve margin became the center of discussion about how to proceed. Set in 2010 by the Electric Reliability Council of Texas (ERCOT) board, the 13.75 percent target planning reserve margin is to ensure enough power is available for contingencies such as extreme weather and unplanned power plant outages. However, a newly revised Capacity, Demand and Reserves (CDR) report shows that in 2014 we may be only at 9.8 percent and by 2015 this could drop to 6.9 percent, numbers that are very far away from the original goal.  A failure to meet this reserve creates instability, not only for the ERCOT market as a whole, but that uncertainty ripples through the state for all businesses and households.

In June, the peak energy forecast for this summer was surpassed. ERCOT had predicted a 66,195 megawatt (MW) peak demand for the whole summer, but we surpassed that with 66,583 MW in June, well before the string of 100+ degree days we have seen recently. 

The 15 Percent Potential From Demand Response

In June the Brattle Report came out reiterating FERC’s studies, which demonstrated that the potential for achievable participation in DR is 15 percent of capacity in Texas.  This means that “dynamic pricing and load control technologies are deployed on an opt-out basis, with roughly 75 percent of customers participating.”

So if Texas met this DR goal of 15 percent it would be enough to cover our reserve margin of 13.75 percent and then some. Without new power plants. Without any new generation capacity at all. While in actuality we would rely on other demand side resources as well – such as distributed generation and storage – it is very important to point out the link between the 13/15 ratio, and how much potential demand response provides us.

Even better is that unlike other mechanisms that do not benefit consumers financially such as the price cap increase, DR and other demand side resources can provide large gains for consumers. Not only do they encourage reductions in energy consumption and thus energy bills, but because there is an added value in providing that “negawatt” capacity back into the system, customers are compensated. As we noted in an earlier blog, in the PJM market, $20 million of the payments went to residential customers!”

While there are still only a few of these initiatives around the country, the momentum is alive. Last year, FERC Rule 745 was established that “requires wholesale energy market operators to pay DR participants the market price for energy when those resources are able to balance supply and demand as an alternative to additional generation, and when DR dispatch is cost-effective.” This lays the foundation for how consumers will be compensated. FERC Chairman Jon Wellinghoff put it well, “[this] final rule is about bringing benefits to consumers. The approach to compensating demand response resources as we require here will help to provide more resource options for efficient and reliable system operation, encourage new entry and innovation in energy markets, and spur the deployment of new technologies. All of this contributes to just and reasonable rates.”

On June 26, ERCOT moved in the right direction by approving a DR pilot project that “will allow eligible participants a half hour to respond to ERCOT requests to reduce their electric use. The program is open to electric users — either as individual customers or as part of an aggregated group of consumers — who can reduce demand on the ERCOT grid by at least 100 kilowatts, which is the amount 20 homes use during peak demand.”

This follows a rule change adopted by the PUC in May that “authorizes ERCOT to conduct pilot projects to ‘evaluate resources, technologies, services, and processes that demonstrate the potential to advance the operational and market functions of the ERCOT system.’ This is the first pilot project approved under the new rule.” EDF commented on these rule changes and we are pleased to see ERCOT moving forward with these pilots. While many more deployments need to begin, we are headed down the right path and finally waking up the innovations needed in the energy market.

Also posted in Demand Response / Read 1 Response

Envision Charlotte Meets Pecan Street

Last week, I, along with several other Envision Charlotte Board Members travelled to visit the Pecan Street smart grid project in Austin, Texas.   We hope this will be the start of a recurring “exchange program” between the two cities for sharing of information and best practices related to smart grid deployment.  There are significant differences between the two projects.  Pecan Street is focused on the residential sector; Envision Charlotte on commercial office buildings.  Envision Charlotte is deploying innovative behavior change, social networking and employee training to reduce energy use, while Pecan Street is heavily focused on technology solutions. 

But, there is also a lot in common.  Both organizations desire to reduce energy use and find alternatives to our outdated energy system.  Both believe that smart grids and energy efficiency can be cost effective and drive economic development.  Finally, both groups are rigorously measuring the impacts of their actions. 

What we saw in Austin was very cool.  We started by visiting a home in the Mueller neighborhood, a playground for testing the latest in home energy management and appliances.  In one house’s garage was a wireless energy monitor that connects to the home’s circuit breaker box and allows homeowners to view real time energy use from different appliances and lighting systems in the home.  Residents now know exactly how much it is costing them to make coffee each morning – or power up their flat screen TV. 

Also in the garage was a Chevy Volt, along with four charging stations from different manufacturers (according to Pecan Street staff, they all perform roughly the same).  Up on the roof was a series of solar panels, whose every watt is being recorded to learn important things about installation location, potential for offsetting peak generation, and storage solutions.  Although each of these technologies are impressive on their own, only when operating together do they represent the next generation of home energy management where consumers have complete knowledge and control over their energy choices.  It’s pretty empowering.

This innovative project didn’t happen accidentally.  It came about through lots of perspiration from their Executive Director and former Austin Council Member Brewster McCracken; design recommendations from hundreds of folks in the private sector, local community and NGOs (including EDF); prodigious fundraising; and hard work from staff, board members, and participating companies.  Some of my key takeaways from the trip are as follows:

Residential Technology Still a Wild West – Unlike the commercial building automation universe, where users have more experience integrating energy management and building systems to speak the same code and talk to one another, residential systems are still in their infancy and competing languages make it extremely difficult to get different pieces of hardware to talk to one another.  Pecan Street will often need to write new code or develop other workarounds to get vendor equipment to work as described.  This is one of the reasons why EDF has joined the OPEN network, to help ensure that smart grid investments in different states maximize interoperability.

The Incredible Power of Data – Pecan Street collects a data point from each home circuit every 15 seconds.  With dozens of circuits per home and hundreds of participating homes in the Mueller development, the Pecan Street project has rapidly approached billions of discrete pieces of data that can be captured, sorted and analyzed.  Although a challenge to work with data sets this large, once properly harnessed, they provide incredible insights to consumers, utilities, researchers and policymakers on energy use.  Pecan Street can see exactly what happens to the grid when someone opens their refrigerator or micro-waves dinner, and use that information to develop strategies for homeowners that will reduce energy use and improve reliability.   

Test Technology, Scale, Inform Policy – Pecan Street is unique in its approach in several ways, but one of the most significant is that it enables a technology to policy pathway.  Pecan Street’s test labs experiment with the latest in home energy management technologies, present those solutions to homeowners in the Mueller neighborhood for adoption and enable EDF to identify regulatory or policy mechanisms that can further accelerate smart grid investment.  As an example, last year EDF was able to help secure provisions in a Texas energy bill that enable demand response programs and payments for utility customers.  This technology to policy approach is something that Envision Charlotte will need to reach our ambitious 5-year, 20% energy reduction goal.

All in all, it was an incredible trip.  Over the coming years, as Envision Charlotte develops more programs and scales its impact, we hope to repay the warm hospitality of Pecan Street by hosting their team in Charlotte and sharing what we have learned.  We’ll promise good conversation, great BBQ and a continued devotion to collaboration.

Also posted in Grid Modernization, North Carolina / Tagged , | Comments are closed

PUC Resource Adequacy Workshop on Friday, July 27

Source: Brattle Group. “ERCOT Investment Incentives and Resource Adequacy.” June 1, 2012

This Friday, the Public Utility Commission (PUC) will host a workshop to discuss the Brattle Group’s recommendations for Texas’ resource adequacy predicament and how to move towards sustained reliability. This workshop is timely, since the Texas energy crunch continues to be in the spotlight. Just last week, the New York Times reported that Texas ranks last in electrical reliability among all states in the U.S. Texas won’t stay open for business if that remains the case and year after year it seems our state energy policy is based on a hope and a prayer

Table 1 of the Brattle report outlines the five policy options to solve the long-term problems.

The report specifically states that “reliance on scarcity prices is unlikely to achieve current reliability objectives.” Therefore raising the price cap is, alone, not going to solve the problem. As mentioned at the Senate Business & Commerce committee earlier this month, this issue was plagued by accusations that the market was being manipulated because of violent price fluctuations on June 25 and 26. It turns out the market is not being manipulated, which is good, but that it is really just dysfunctional in design, which is not so good. Colin Meehan’s blog last week highlights this issue and makes the point that while the PUC is willing to potentially pass the costs of a price cap increase onto ratepayers, it should also consider demand-side resources suggested by Brattle which could positively affect ratepayers. For example, in the PJM market demand-side resources are allowed to participate in energy and capacity markets and over $20 million of the payments went to residential customers.

EDF submitted comments for this workshop and will be in attendance. Other public comments were made from a variety of stakeholder’s including demand response advocacy groups, cities, MOUs, and power companies.

EDF believes that “such reforms must include a substantially increased role for demand response (DR) and other demand-side resources in ERCOT’s markets; the report provides ample supporting evidence for this need. EDF requests detail on the level of DR needed to maintain reliability in each scenario [in chart above], what would be required in each scenario to attain those levels, as well as the role of other demand-side resources in meeting future resource needs.”

Also posted in Demand Response, General / Comments are closed