Energy Exchange

ERCOT Protocols Debated In Business And Commerce Committee Hearing

By Marita Mirzatuny / Published: July 13, 2012

On Tuesday, the Business and Commerce Committee in the Texas Senate held an interim charge hearing on the Electric Reliability Council of Texas (ERCOT) protocols, including a look at the impact on system reliability, a topic that EDF is following closely.  The charge as given directs the Texas Senate Business and Commerce Committee to:

Review current and pending ERCOT protocols as they apply to all generation technology, and identify those protocols that may provide operational, administrative, or competitive advantages to any specific generation by fuel type. Consider the impact any revisions to the protocols may have on grid reliability and electricity rates. Make recommendations for revisions or statutory changes to limit distortions in the Texas electrical market.”

Leaders from all parts of the Texas electric system discussed the process of creating protocols and concerns about the impact of protocols on system reliability: Public Utility Commission (PUC) Commissioner Ken Anderson gave an update on activities at PUC and ERCOT this year, many of which we’ve discussed previously.  Anderson was followed by a panel including ERCOT CEO Trip Doggett.

Mr. Doggett told lawmakers that the “electric supply will be tight this summer and warned that the agency will likely declare Energy Emergency Alerts asking consumers to cut back on use. ERCOT may also implement emergency procedures, including taking industrial users offline. But blackouts would happen only if there was an extraordinary drop in generation or the state experienced record high temperatures.”  Senator Leticia Van de Putte asked about the Brattle report’s suggestion of a capacity market that would allow demand response (DR) and whether the 13 percent reserve margin should be treated as a target or a minimum requirement. This was not fully addressed beyond saying the Brattle report will be discussed at a Commission workshop on July 27.

The Director of ERCOT’s Independent Market Monitor, Dan Jones, keeps an eye on the system to make sure the market is functioning efficiently and no one is exerting undue influence over the Texas market.  Concerns of market manipulation have been raised by outside observers and committee members were clearly concerned about those allegations, which Mr. Jones is in the process of studying.  Jones also discussed the Brattle report recommendations, including one to further increase price caps in ERCOT.  Senator Kirk Watson asked how the recent cap increase, approved by the PUC to encourage more generation, could affect volatility, another issue that will be addressed along at the upcoming PUC workshop.

John Fainter, representing the Association of Electric companies of Texas (AECT), an electric industry  group, stated that the industry “supports the flexibility in the process with the current protocols”  and that “we will continue to have emerging technologies and that demand management should be part of the solution.”

We agree that it is important for the protocol development process to remain flexible and stakeholder driven, but the problem lies in the inertia with which these new emerging technologies and demand resources are brought into the market. The current stakeholder process tends to favor the status quo and, if that process is not successful in implementing the desired solution, consider further action through other means.

According to Brattle, “competitive DR resources can reduce our peak demand needs by 15 percent, greatly improving system reliability and playing a critical role in addressing future resource adequacy concerns.”   Large commercial and industrial customers, who are already “quite engaged” in various DR programs, only represent 14 percent of the total DR potential in ERCOT.  In contrast, during the summer of 2011 residential and small commercial customers accounted for 72 percent of peak load and “currently provide little DR.”

While EDF did not testify at the hearing, we submitted written testimony. Despite the current flexibility, the mechanisms by which new demand side resources expand do not necessarily allow for all stakeholders to be evenly weighed and can stymie the flexibility needed.  Texas is currently among the lowest states in terms of load management, despite having the highest potential according to FERC and the Brattle Group.  As ERCOT works to address resource adequacy issues, and this committee considers whether some protocols provide operational or competitive advantages to any specific generation, we believe it is important to note that ERCOT protocols generally provide operational and competitive advantages to generation resources over most demand side resources.

Therefore, we advocate the following changes to ERCOT’s market structure, including protocol revisions as proposed by Brattle:

  1. Enabling DR to directly participate in energy markets so it can set prices directly;
  2. Enabling all emergency DR to set prices at their individual strike prices during reserve shortage conditions, as in PJM;
  3. The adoptions of  provisions by ERCOT that allow demand resources to submit other operational data in lieu of  telemetered data in order to substantially expand participation;  and
  4. If supply offers clear, they should be paid a market price, such as the economically efficient price as determined by ERCOT’s Demand Side Working Group.

As this committee, ERCOT, and the PUC consider resource adequacy and inequities within current protocols, EDF recommends paying special attention to expanding DR options for residential customers and small business.  The four-market structure changes recommended above are critical to those efforts, but more work is needed to ensure that as other changes begin to impact retail rates, customers have recourse through DR programs that compensate them based on a fair market price.

Posted in Demand Response, Texas / Comments are closed

Big Data – Launch Pad For Big Ideas

By Andy Darrell / Published: July 13, 2012

Source: TechCrunch

When the internet came along, it transformed our relationship to big data – unleashing innovation, markets and, yes, funny dog videos at a global scale.  “Big data” is all the rage these days in the energy sector, as investors, utilities and consumers wake up to what smart use of data can do for them.

A few weeks ago, I posted about Clean Heat – a project in which organizing data about buildings attracted nearly $100 million to finance upgrades to cleaner heating systems.  If we can cut soot pollution from heating oil in New York City 50% by 2013 with the power of open data  … what opportunities might be out there at even bigger scales?

This week, EDF teamed up with the White House, Google and HonestBuildings to pull together a “data jam” at Google’s New York City headquarters in the impossibly hip meatpacking district of Manhattan.  Todd Park, U.S. Chief Technology Officer, kicked of a brainstorm among  tech entrepreneurs, energy experts, finance whizzes, web designers and government agencies, to answer this question:  if government makes its energy data open and computer-friendly, what could entrepreneurs invent to “improve energy outcomes for families and businesses?”

For six hours, we divided up into teams and jammed on this question, inspired by the extraordinary public data sets squirreled away in federal, state and city agencies on topics from energy efficiency to power plant pollution, electricity markets, transportation and health.   The jam session generated at least ten great ideas, ranging from consumer energy apps to ways to save money on your commute.  Teams are coalescing around these ideas – and similar ideas developed earlier this year at a similar data jam at Stanford.   The goal is to turn the most promising ones into prototypes over the next 90 days. 

Whether any of these ideas make it to market, it’s too early to tell.  But if this group can generate so many prototype-worthy ideas in one afternoon, imagine what could happen if consumers, students, entrepreneurs, businesses and families across the country were empowered to harness “big data” to find the best ways to save money, cut pollution and improve quality of life?   

It worked for the internet.  It worked for smart phones.  Now let’s see if it can work for energy and pollution.  I’m hoping to be back in 90 days to tell you about the great idea the folks in my sub-group are developing to increase investor confidence in energy efficiency.  Stay tuned.

Posted in Grid Modernization, New York / Read 3 Responses

European Power From U.S. Forests: Two New Reports Offer Pathways To Sustainability

By Will McDow / Published: July 12, 2012

European utilities are using trees grown in the United States to make electricity. Well, not the whole tree. But lots of the tree is used to make the little wood pellets that are then shipped across the ocean, mostly to the Netherlands, United Kingdom, Denmark and Belgium. It is these wood pellets that are burned with coal or in stand alone biomass boilers to produce energy. This video explains the journey from forestlands to power plants.

Why is Europe able to make electricity from U.S. trees when domestic utilities are cancelling wood biomass projects? Answer: Europe has a strong renewable energy policy.

The EU Renewable Energy Directive passed in 2009 sets a target for EU member countries to collectively achieve 20% of energy from renewable sources by 2020. Many utilities are increasing the use of biomass as a low-cost means of producing renewable energy. But Europe doesn’t have enough forest or agricultural land to meet the increasing demand. To fill that gap, European utilities are importing wood pellets – a form of chipped and compressed wood – from North America and increasingly from the Southern United States. The growing demand for U.S. wood biomass is raising questions about the sustainability of the country’s forest resources.

Two reports from Environmental Defense Fund, in conjunction with colleagues at Pinchot Institute and University of Toronto, examine economic, environmental and public health impacts from the expanding wood pellet market. European Power from U.S. Forests documents how the EU policy is shaping the transatlantic trade in wood biomass. For the U.S. export market to benefit from the large potential capacity for pellet production, producers in the U.S. will need to meet or exceed EU sustainability standards. Some type of forest management or pellet supply chain is likely to be required.

Pathways to Sustainability evaluates the programs and practices that fall under the EU biomass requirements for wood pellets, concluding that few of the pathways completely meet the standards. EDF proposes a new approach to recognize the various ways landowners and biomass producers on both sides of the Atlantic can meet their environmental objectives.

Sustainability will remain a pivotal issue as EU member countries, the European Commission and various stakeholders seek to harmonize sustainability requirements. European bioenergy companies often view biomass sustainability as the largest unquantified risk in their supply chains. Developing sustainable pathways sooner, rather than later, will reduce economic risk and encourage market development for wood pellets in the U.S. and Europe.

A webinar will be held July 17, 2012 at 12 pm EST. Please join Will McDow (EDF), Brian Kittler (Pinchot Institute) and Jamie Joudrey (University of Toronto) for a discussion of E.U. policies, the growing demand for wood pellet exports and options to meet Europe’s sustainability requirements.

Posted in North Carolina, Renewable Energy / Comments are closed

Electric Utilities – An Industry In Transition

By Greg Andeck / Published: July 11, 2012

The recent merger of Duke Energy and Progress Energy represents yet another turning point for the electric utility sector, with significant implications for public health and the environment.  Duke’s six-state footprint – Florida, Indiana, Kentucky, Ohio, North Carolina and South Carolina – offers it an opportunity to lead the way on clean energy deployment.  The question is: Will the new Duke Energy – now the largest utility in the country – harness its size and scale to accelerate investments in energy efficiency and renewable energy, or stay anchored to the past?  EDF’s partnerships with Wal-Mart, FedEx and McDonalds have shown that when large companies are motivated, they are a powerful force for change.  But change doesn’t come easily.  It requires vision, leadership and a constant willingness to innovate.

This is true not just for Duke Energy, but for electric utilities around the country.  Over the past two years, four of the five largest investor-owned utilities have experienced a merger or change in the CEO role – AEP, Duke, Exelon and Southern Co.  The steps taken by these companies and their leadership will have a profound impact on our antiquated electric utility grid, human health and the environment.  The most visionary utility companies will do three things exceedingly well: 

1.       Get out ahead of environmental regulation

In 2002, Duke Energy supported efforts to tackle power plant pollution in North Carolina by supporting the “Clean Smokestacks Act.”  Xcel Energy followed a similar model in Colorado and endorsed the “Clean Air Clean Jobs Act.”  These landmark laws significantly accelerated clean-up of the dirtiest power plants in those two states and made it possible for the utilities to recover the costs of their investments.  It also enabled Duke and Excel to take early steps to modernize their fleets and prepare for future federal clean air requirements.  As a result of early actions, both companies are well-positioned for EPA’s recent Clean Air Rules – unlike the utility giant AEP, which continues to delay critical human health protections.  The world’s most successful companies skate to where the puck is headed, not to where it is, and are more competitive as a result.

2.       Treat efficiency and smart grid investments as new revenue centers, not side projects

The fact is that most electric utilities still see energy efficiency investments as side projects separate from their core business – generating power.  Without state building codes or energy efficiency standards in place, utility investment in energy efficiency remains low.  The reason is simple.  Even in states with decoupled rate structures in place, building nuclear plants is more profitable than energy efficiency projects.  Large generating plants require a large investment with a guaranteed rate of return over a long project lifetime.  In comparison, energy efficiency projects are generally small, often have an uncertain return and a short project life.  EDF is working with leading energy companies and regulators to craft new incentive models that make efficiency investments attractive, but utility companies must be willing to fundamentally alter their business models.      

3.       See competition as opportunity

Even in highly regulated markets, new market entrants and competitors are beginning to change the face of utilities with strong monopoly power.  The costs of solar panels have dropped by over a third in the past few years, making solar energy cost competitive with retail electricity prices in many parts of the country.  Companies like SolarCity are even financing and then leasing solar systems to home owners, enabling cash-strapped customers to reduce their dependence on the grid.  Hundreds of companies now exist to help all kinds of customers reduce their energy bills and dependence on electric utilities.  (I should know – I just insulated my attic and crawl space – and am already benefitting from lower electric bills.) 

Utility companies that help bring energy efficiency and renewable energy to market can retain ownership of environmental attributes (like renewable energy credits) and earn new revenue streams.  Otherwise, those benefits are likely to go to third parties or customers.  Smart utilities recognize the threat that this small, yet growing base of companies provides to their business model, and aim to bring technologies and services to market faster than new competitors.  Rather than trying to delay the inevitable, savvy utility leaders make their companies part of the solution – and profit from doing so.  Companies like San Antonio’s CPS Energy are making this idea a reality through partnerships with a wide range of service providers.

The next generation of electric utilities and their leaders must run their businesses differently than their predecessors or risk being left behind.  Just like the once monopoly-oriented telecom industry, those companies that are willing to adapt and transition to this new energy paradigm will prosper and be well rewarded.

Posted in Climate, Energy Efficiency, Grid Modernization, North Carolina, Utility Business Models / Read 1 Response

Do Shale Gas Activities Play A Role In Rising Ozone Levels?

By Elena Craft, PhD / Published: July 10, 2012

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

Source: AFP

As we continue seeking relief from rising temperatures this month, it’s also time to be on the watch for ozone alerts. The annual Texas smog season – April 1 through October – already appears to be in full swing this year with numerous counties around the state exceeding health-based ozone concentrations many times since March.

Just last week, the Houston Chronicle highlighted the magnitude of ozone exceedances that the area hasn’t seen since 2003. Additionally, the month of May was the nation’s “smoggiest” in the past five years according to a recent report released by Clean Air Watch. Texas ranked second, surpassed only by California, for the most Code Red and Code Orange days so far in 2012, with 18 days and 27 days respectively.

Ozone-forming pollution is emitted by cars, refineries and various industrial plants. As more Texans begin to see shale gas drilling rigs pop up around them, many are asking the question: Could emissions from natural gas and oil operations significantly contribute to ground-level ozone? The answer is an unequivocal yes.

The Role of Natural Gas and Oil in Rising Ozone Levels

While burning natural gas produces less smog-forming pollution than coal combustion but more than renewable energy generation, much of the equipment used in the drilling, production, processing and transporting of natural gas and oil produces significant amounts of such pollution. This equipment releases volatile organic compounds (VOCs) and oxides of nitrogen (NOx), which combine in the presence of sunlight to form ground-level ozone or “smog.” According to the state of Colorado, natural gas and oil operations were the largest source of ozone-forming pollution, VOCs and NOx in 2008.

The Texas Commission on Environmental Quality has reported that storage tanks used in the exploration and production of natural gas and oil are the largest source of VOCs in the Barnett Shale. Recently, there have been additional concerns that San Antonio may not meet federal ozone standards due to Eagle Ford Shale development. Peter Bella, natural resources director at the Alamo Area Council of Governments, told the Houston Chronicle that the city is “right on the edge of nonattainment.”

Ozone concentrations comparable to those recorded in some of the most heavily polluted U.S. cities have been measured in rural parts of Wyoming and Utah, where little other industrial activity occurs:

It’s important to note, however, that ozone monitoring does not exist in many oil and gas development areas, so we don’t know the full extent of the potential problem. For instance, though the Texas Commission on Environmental Quality has committed to start monitoring in the Eagle Ford, there is not currently sufficient monitoring to characterize ozone problems in the area.

Protection of Human Health

As natural gas and oil development expands into new regions, adverse air impacts are likely to follow, absent sufficient emissions controls. It is crucial for states to have strong standards in place, especially for a state such as Texas, which experienced exponential production increases in a short period time. The Eagle Ford Shale alone saw a 432 percent increase in natural gas production from 2010 to 2011.

We are happy to report that EPA recently finalized clean air measures that will serve as an important first step in reducing harmful pollution discharged from a variety of oil and natural gas activities. In fact, last month, EDF President Fred Krupp testified before the U.S. Senate in support of these new clean air standards, which will result in significant reductions in smog-forming pollutants and hazardous air pollutants like benzene, a known carcinogen. As a co-benefit, the standards will also reduce methane, a potent climate forcer.

In his testimony, he said “these common sense measures are a win-win: they reduce pollution, conserve valuable domestic energy resources, and in some cases, actually save producers money.” He added that it was “critical that we build on these clean air measures if our nation is to fulfill the President’s promise in his State of the Union to develop natural gas without putting the health and safety of our citizens at risk.”

While mounting evidence continues to link natural gas drilling with rising ozone levels, it is important to remember why we should care in the first place:

  • Ozone has been linked to a host of maladies, including premature mortality, heart failure, increased hospital admissions and emergency room visits for respiratory causes among children and adults with pre-existing respiratory disease, such as asthma and inflammation of the lung, and possible long-term damage to the lungs.
  • Children, the elderly, and people with existing respiratory conditions are the most at risk from ozone pollution.
  • Ozone also damages crops and ecosystems. Ozone is one of the most phytotoxic air pollutants – causing damage to vegetation in national parks and wilderness areas, especially in mountain regions and to valuable crops.
  • Ozone pollution also contributes to climate change. According to the Intergovernmental Panel on Climate Change (IPCC), ozone is the third-largest contributor to climate change after carbon dioxide and methane.

In the end, we’re talking about the protection of human health as well as our entire planet. Continue to visit this blog for updates on rising ozone levels in our state, as well as other vital information related to Texas air quality.

Posted in Climate, Natural Gas, Texas / Tagged | Read 2 Responses

A Dynamic Approach To California Energy Use

By Jamie Fine / Published: July 5, 2012

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

Californians are poised for a more functional, data-driven model for setting the prices people pay for electricity.  The new model will make the massive differences in costs of providing electricity during the course of a typical day more evident to us as energy users, thereby inspiring more efficient use of electricity resources.

The California Public Utilities Commission (CPUC) started a rulemaking to examine if the current rate structure for residential energy users is fair and equitable across customer classes and if it:

  • supports statewide-energy goals;
  • facilitating technologies that enable customers to better manage their usage and bills;
  • enables conservation and efficiency on the customer side of the meter; and
  • increases the reliance on non-fossil based generation to reduce overall greenhouse gas emissions.

We know already that the short answer is “no”, so CPUC is eyeing a transition to time variant (“dynamic”) rates.  According to Pacific Gas & Electric (PG&E), with time variant, or what is often referred to as “time-of-use”, pricing – rates “will be higher during summer weekday afternoons when electric demand is higher, typically noon to 6 p.m., May through October. In return you’ll pay lower rates at all other times. This means that when you use energy is just as important as how much you use.” 

EDF’s Energy team has been, and will continue to be, closely involved in the CPUC’s rulemaking, which will examine several facets of the current system.  EDF has also been involved in the related smart grid proceedings, such as the deployment of smart grid infrastructure – which provides the ability to both measure energy use in real time and inform customers about the costs (and environmental impacts) of their choices to use electricity at different times of the day.  This Advanced Metering Infrastructure (AMI) enables a smoother transition to dynamic rates for residential consumers.

EDF is very encouraged that the CPUC is considering  time variant pricing because it will help consumers to be more thoughtful about their energy usage, particularly at times when demand is peaking and pushing electricity supply sources to their limits.  This type of rate structure can encourage conservation and reduce peak demand while providing customers with more choices that can ultimately lower their monthly bills.  For example, allowing consumers to see how much they can save on their electric bills by reducing their energy use during peak hours will encourage a shift of energy-intensive activities, such as washing and drying clothing and dishes, to off-peak (and less expensive) times of the day. 

Because a dynamic pricing system will alleviate pressure on the electric grid during peak demand, it will also lead to a more stable, less expensive energy system that is increasingly resilient to extreme weather events.  The economic motivation should also help to create an easy way for consumers to make decisions more efficiently, thereby lowering their electric bills and shrinking their environmental footprints.   

Futhermore, dynamic pricing can help integrate renewables and electric vehicles into the electric grid by allowing utilities to respond to price signals more effectively.  For example, time-of-use rates support electric vehicle charging at times when grid resources aren’t strained, such as late at night or early in the morning when most people are sleeping. 

This new approach will facilitate conservation and energy efficiency, as well as an increase in the use of clean energy sources that avoid harmful greenhouse gas and urban air pollution.   If adopted, the dynamic pricing model can be a common sense approach to saving energy and money, while promoting energy efficiency and a smarter, “greener,” electric grid country-wide.

Posted in California, Energy Efficiency, Grid Modernization, Time of Use / Read 3 Responses