Navigant Research Blog

A New Era of Demand Response

— November 9, 2015

Tightrope_webWhat does the future of demand response (DR) look like? Hawaii is now a test bed, guinea pig, and innovator, as you can hear during a free 30-minute discussion this Thursday.

The amount of DR capability in North America has grown considerably in the past 5 years, both at utilities and within competitive markets such as PJM. However, DR technologies and policies have generally relegated DR to a minor role as a last-called resource. DR has typically been slower to respond than combustion turbines, and the load relief it provides has been difficult to assess precisely (if at all) in the real-time operating environment in which control center staff operate. Furthermore, regulatory policies in support of DR have generally focused on the magnitude of megawatts achieved at the expense of the quality and usefulness of those megawatts. However, slowly but surely, this trend is changing.

The use of DR in grid planning and operations has solidified as utilities increasingly rely on DR to meet installed capacity requirements and sometimes even operating reserve requirements. Furthermore, independent system operators led by PJM have incorporated DR into procurement mechanisms for capacity, energy, and ancillary services. Industry acceptance of DR as an integral part of the future grid continues to grow, with states like California and New York rolling out major regulatory initiatives and utility Hawaiian Electric issuing a request for proposals to DR aggregators for the provision of grid services, including ancillary services, from demand-side resources. So which technologies and policies will drive DR into the future as a more integrated and valued resource?

The Peak Load Management Alliance (PLMA) is hosting a free webinar on November 12 at 12:30 EST to highlight the significant regulatory and utility strategy initiatives taking place in Hawaii, where massive customer investment in behind-the-meter PV is encouraging Hawaiian Electric to develop innovative uses for DR to help manage the grid in real time. This could be the future for many utilities that are only now seeing the first effects of customer investment in renewables, storage, and other distributed energy resources.

This is a follow-on discussion from a Power Engineering article by Navigant regarding how a new era of DR is blurring the lines between generation and demand-side resources in Hawaii and elsewhere. The article covered some of the emerging DR technologies that are allowing DR to be viewed more on par with generators and reviewed new applications that are raising DR’s prominence as a valued resource alternative for utilities and system operators. Looking ahead, emerging state policies and utility initiatives are driving DR to a heightened prominence that would have been difficult to envision just 5 years ago.


Opower Releases Behavioral Demand Response Results

— November 4, 2015

Opower, one of the largest providers of behavioral energy efficiency and demand response (DR) solutions to utilities, recently announced results from its latest behavioral DR (BDR) program this summer. The company reports that it deployed over 12 million personalized communications across 29 DR events, delivering 3% average peak reduction and over 5% savings for programs employing peak time rebate pricing plans. Utilities included Baltimore Gas and Electric, Commonwealth Edison, DTE Energy, Consumers Energy, Pacific Gas and Electric, and Hydro Ottawa.

This news underscores a growing trend of utilities looking to expand their demand-side management (DSM) programs through non-hardware-based methods in order to more cost-effectively engage a larger swath of their customer bases. With increased access to advanced metering infrastructure (AMI) smart meter data, electronic communication methods, and software-based tools, many companies are designing ways to use behavioral and analytical concepts in the energy industry that have been successfully implemented in other industry sectors.

Behavioral methodologies include ideas like home energy reports, which compare residential customers’ usage to their neighbors, and BDR, where customers get notifications when energy prices are high or when the grid is stressed. These methods rely on customer actions, as opposed to automated responses through hardware like thermostats or light bulbs. Such programs may capture less savings per customer than hardware, but due to a lower capital cost, they can be rolled out to many more customers to achieve a similar or greater aggregate impact.

Analytical tools like virtual energy audits and end-use disaggregation provide opportunities to greatly increase the effectiveness of DSM programs for commercial and industrial customers. As opposed to the standard practice of utilities sending energy engineers to do onsite audits of every building in order to determine energy savings potential, software programs can take in utility meter data and layer on facility characteristics and weather history to create an accurate picture of energy usage before stepping in the door. This allows for prioritization within a portfolio of buildings so that the highest-potential sites can be targeted first for further investigation, rather than random door-to-door approaches.

These types of programs are described in Navigant Research’s new report Behavioral and Analytical Demand-Side Management. The programs are still emerging, and there are barriers to overcome in order to reach large-scale deployment, but the path does appear favorable for success. Most of the activity currently comes from vendors and utilities in the United States, but it will soon spread to Europe, Asia, and beyond.


SCOTUS on FERC Order 745: Nothing but a G Thing

— October 26, 2015

Now that it seems like we are past the point where we might see a quick decision by the Supreme Court on the Federal Energy Regulatory Commission (FERC) Order 745 case on demand response (DR), let’s reflect back on the hearing last week. Unfortunately, I did not actually get into the hearing, despite waiting outside in line for 4 hours. Looking at the court’s website, it seemed like there should be room for a couple hundred public viewers.

However, only about 50 people who lined up, starting at 4 a.m., got in to see the full case. Apparently, a lot of seats were taken up by other spectators with priority access. Who knew so many energy geeks cared about this case? Regardless, the line outside was like an independent system operator stakeholder meeting, with many interested parties hoping to get a glimpse inside but holding mock trials while waiting.

I was able to read the hearing transcript and listen to the audio recording, so I could visualize the proceedings. There were two main issues at hand: does the FERC have jurisdiction over DR, and if so, should DR receive the full locational marginal price (LMP) for participating in the wholesale energy markets? The solicitor general of the U.S. Department of Justice, Donald Verrilli, represented the FERC’s case that it does have jurisdiction. Next, Carter Phillips, a lawyer representing EnerNOC and other petitioners, attempted to bolster Verrilli’s message and also weighed in on the LMP issue, which was the original scope of FERC Order 745. Finally, Paul Clement, a former solicitor general, spoke on behalf of the Electric Power Supply Association (EPSA) and other parties that supported the court of appeals’ ruling, which negated the FERC’s jurisdiction and rejected the LMP argument.

Weighing In

Of course, throughout that testimony, the justices interjected questions and comments on all sides of the issues. Justice Samuel Alito recused himself from the case, so there is a chance that a split vote could result, leading to an upholding of the lower court’s ruling. Justices Clarence Thomas and Ruth Bader Ginsburg were silent during the hearing, so assuming they sit along party lines on this issue, we have to interpret the comments of the remaining Justices. Chief Justice John Roberts and Justices Antonin Scalia and Anthony Kennedy appeared to favor the lower court’s ruling based on their peppering of Verrilli and Phillips. Justices Sonia Sotomayor, Elena Kagan, and Stephen G. Breyer seemed to lean toward deferring to the FERC, with Breyer referring to the “G thing,” meaning the LMP-Generation (G) payment method that EPSA preferred. It was interesting to hear analogies made to Ferraris, McDonalds, and Walmart by parties to try to explain how the wholesale and retail electricity markets interact.

There was a chance that a quick split decision could be announced and put us out of our misery, but it appears that window has closed, so now we have to wait probably several months for the final verdict. If DR ever appears before the Supreme Court again, I’ll know to bring my tent.


Massachusetts Energy Policy: “We Are Not Cape Wind”

— October 12, 2015

It’s exciting times for Massachusetts energy policy and legislation. On September 25, the state’s investor-owned utilities (IOUs) publicly presented their Grid Modernization Plans (GMPs) for the first time. On September 29, the state legislature held a public hearing on a series of energy bills, with hopes to combine them into a single piece of legislation. These developments stand up to the breadth and depth of industry transformation that any other state is undertaking, but might be more realistic and achievable than some of the visionary ideas flowing from its neighbor, New York.

The three IOUs (Eversource, National Grid, and Unitil) proposed GMPs that attack similar issues (reliability, cost, customer engagement, and distributed energy resources) but take different approaches. Unitil is the smallest of the group and has the most straight-forward metering and infrastructure plan to meet the needs of its targeted customer base. Eversource compiled the most-comprehensive single plan, heavily focused on reliability upgrades mixed with customer engagement offerings. National Grid took a menu approach and developed four options with varying levels of investment at different price points for the Massachusetts Department of Public Utilities (DPU) to choose from. It will be interesting to see how the DPU compares the different plans and tries to achieve uniformity versus customization.

The legislative arena tends to be more colorful than its regulatory partner, leading either to more getting accomplished or little substance amidst the bombast. The auditorium that held the hearing was standing-room only, with union members, anti-gas pipeline and anti-nuclear activists, solar and wind proponents, traditional generators, and everyone in-between standing shoulder to shoulder.

Massachusetts Governor Charlie Baker hobbled into the hearing on crutches, but did not stumble while delivering his message. Energy market forces alone are not enough to meet the commonwealth’s goals regarding energy costs, carbon reductions, and climate change mitigation. ISO-New England and the utilities are focused on reliability, and generators want to sell more power. Governor Baker is taking an all-of-the-above approach including gas pipeline expansion, large-scale hydropower (with the potential to combine with wind), increasing solar limits, continuing the state’s leadership in energy efficiency, and encouraging progress in the state’s home-grown intellectual capital leadership in energy storage.

The offshore wind industry took to the stand to promote its cause as well. The topline message from the industry executives was that they are not Cape Wind. That phrase was echoed several times, as if Cape Wind was a dirty word. It was clear that everyone wanted to separate themselves from the negative sentiments hanging from that unfinished project. The executives all promoted competitive solicitations to obtain the lowest cost resources.

Now that the opening bell has been rung, it is time for the regulators and legislators to sharpen their pencils, listen to their stakeholders and constituents, and figure out the best path forward to keep Massachusetts on the leading edge of energy sector transformation.


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