Navigant Research Blog

Regional Energy Integration Captures National Attention as California Quietly Leads the Way

— November 7, 2016

IT InfrastructureCalls for a North American supergrid enjoyed a brief plug during the final presidential debate when Hillary Clinton, clarifying a past statement publicized by WikiLeaks, stated: “[W]e trade more energy with our neighbors than we trade with the rest of the world combined. And I do want us to have an electric grid, an energy system, that crosses borders. I think that would be a great benefit to us.”

As Clinton suggested, establishing a regional supergrid could generate numerous benefits, including improved operational efficiency, reduced costs, and the ability to harness renewable power on a bulk scale, thereby accelerating the decarbonization of the electric power system. Yet, as discussed in a recent Navigant Research report, many barriers to supergrid development remain, and a truly integrated hemispheric electricity market seems a distant dream. Even so, progress toward increasing integration within the United States and across North America is proceeding incrementally. California, consistently at the vanguard of energy innovation, offers an example.

California Market Expands, Eyes Mexico

California’s Energy Imbalance Market (EIM) began operating in fall of 2014, when the California Independent System Operator (CAISO) linked up with Oregon-based PacifiCorp to form a wholesale power market. Managed by CAISO, the EIM pools resources across participants’ territories, automatically balancing real-time electricity supply and demand and enabling utilities to access renewable energy generated across a wider geography. NV Energy of Las Vegas joined the EIM in December 2015, and both Arizona Public Service and Puget Sound Energy of Washington joined in October of this year. To date, the EIM has saved over $114 million and avoided over 140,000 metric tons of CO2 emissions.

With a 2-year track record of savings, the EIM is set to expand further. Portland General Electric and Idaho Power are both slated to join within the next 18 months, and the Sacramento Municipal Utility District (SMUD) announced its intent to join in late October. SMUD would be the first municipal utility to join and would likely be followed by several others.

With integration among Western utilities growing, CAISO is now pursuing expansion south of the border, recently announcing plans to explore extending the EIM to Mexican grid operator El Centro Nacional de Control de Energia (CENACE). CENACE’s Baja California Norte Grid already has two connections to the California grid, and its participation in the EIM is expected to enhance the overall economic and environmental benefits of the market while opening additional renewable generation to Mexico, which is targeting 35% of its electricity from renewables by 2024.

Full Integration a Long Way Off

Despite steady growth, the EIM represents only limited energy market integration. The EIM’s authority is restricted to balancing real-time supply and demand among participants and dispatching least-cost resources to meet load requirements every 5 minutes. CAISO is also pursuing a full-service day-ahead regional energy market that would require deeper market integration and, in theory, lead to more comprehensive benefits. The regional energy market would take the form of an expanded CAISO and would be designed to enable more efficient integration of renewable resources, improve regional transmission planning, and optimize use of all available generation and transmission capacity in the day-ahead market, further reducing consumer costs.

Under state legislation, CAISO is required to complete studies on the environmental and economic benefits of a regional energy market and to submit a proposal for CAISO expansion before the end of 2017. Final study results were released in July, but the proposal was delayed to allow more time to address concerns, including the risk that integrating with coal-heavy PacifiCorp could hurt California’s clean energy agenda. The proposal is now expected to reach the state legislature in January.

With potential EIM expansion into Mexico and a broader regional energy market plan in the works, California has cemented its role as a major driver of increasing energy market integration in the West. Yet the incremental nature and uncertain pace of integration suggest that the hemispheric electricity system Hillary Clinton alluded to is still a long way off.

 

Title 24 Is Lighting the Way for Building Energy Efficiency Standards

— October 11, 2016

LEDsIn the United States, California is seen as a leader in energy efficiency policy, due in large part to Title 24, a part of the California Energy Commission’s Energy Efficiency Standards. These standards reduce electricity and natural gas usage in the state, preventing the construction of additional power plants. Title 24 is focused on both residential and non-residential buildings and dates back to 1987. The standards are updated on a roughly 3-year cycle; the current version of the standards went into effect on July 1, 2014 and will be superseded by the 2016 standards, which are set to take effect on January 1, 2017.

2013 Standards

The current 2013 standards improved upon the 2008 version for new construction as well as additions and alterations made to buildings across multiple areas, including lighting, mechanical systems, and electrical power distribution, among others. Previously, lighting for non-residential buildings needed to comply with the most current standard when 50% of luminaires were replaced.

However, the 2013 standards increased this requirement, stating that lighting alterations must comply with the most recent standards when as little as 10% of luminaires are replaced, a requirement that is consistent with changes to the ASHRAE 90.1-2010 standard. The 2013 standards also require that non-residential building lighting controls must include continuous dimming or three intermediate levels between on and off settings, compared with the one intermediate level previously required.

The 2013 standard also specified multiple changes to the use of occupancy sensors linked to lighting. Parking garages must incorporate occupancy sensors so that lights on seldom-visited levels can be dimmed or turned off when not needed. Warehouses, stairwells, and corridors must include lighting controls that partially dim lights when the space is unoccupied. In addition, hotels must include occupancy controls linked to all lighting fixtures, including plug-in lighting (such as table lamps) and HVAC equipment.

2016 Standards and Beyond

The 2016 standards will build upon the 2013 iteration in an aim to increase energy efficiency. Under the new standards, non-residential lighting control requirements will be easier to apply in regard to occupancy controls and multi-level lighting. When multi-level controls are needed, they will only be required to allow the user to activate control steps. If the lighting is dimmable, then the multi-level control must be a dimmer that allows for this in addition to a manual on and off function.

The new standards also include new exceptions to multi-level lighting requirements. Public restrooms and areas that are required to utilize full or partial off occupancy sensors are now exempt from multi-level requirements.

The new standards are projected to be 5% more energy stringent for non-residential buildings and 28% more stringent for the residential requirements. As the Title 24 standards continue to evolve and increase their stringency, they have become progressively more significant by increasing energy efficiency requirements for new construction and renovations and retrofits. Title 24 serves as a beacon for other states looking to revise and create building energy standards.

 

Distributed Energy Resources Hit the Auction Blocks in California and New York

— August 30, 2016

Cyber Security MonitoringAs we head into the fall fantasy football season, this summer has been good practice for those in the distributed energy resource (DER) world to value their portfolios and bid into auctions to provide their services. In both California and New York, utilities recently held auctions to procure DER to address electric grid needs. Although the outcomes are similar, the methodologies to get there were quite different.

First, California’s investor-owned utilities—Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDGE)—ran the second edition of the state’s Demand Response Auction Mechanism (DRAM). Since the California Independent System Operator (CAISO) does not have a capacity market, the California Public Utility Commission (CPUC) ordered the utilities to offer DRAM as a way to incentivize DER to provide similar product characteristics to capacity. In total, the utilities procured almost 82 MW, about 4 times the minimum requirement of 22 MW. However, a group of bidders is currently petitioning the CPUC, arguing that the utilities could have procured even more resources within their budgets.

New York took the spotlight in the form of Consolidated Edison’s (ConEd’s) Brooklyn Queens Demand Management (BQDM) auctions in July. Unlike DRAM, which is concentrated on statewide capacity issues, BQDM is a focused effort to relieve distribution constraints in a targeted area of high load growth. While final results are not yet public, initial information from ConEd states that 22 MW of resources were procured for 2018 from 10 bidders, with clearing prices ranging from $215/kW/year to $988/kW/year. These prices are much higher than ConEd’s existing demand response programs, which pay in the area of $90/kW/year, and the New York Independent System Operator’s (NYISO) capacity market, which offers around $130/kW/year in ConEd’s territory.

Different Mechanisms

There are some notable differences between the DRAM and BQDM mechanisms. First, DRAM has one product with a standard set of requirements that all bidders must meet and compete against. BQDM has two separate product types that bidders must choose to offer, one for the 4-8 p.m. time period and another for the 8 p.m.-12 a.m. period. These 4-hour blocks were created to allow energy storage devices with 4-hour charging capacities to participate.

Another major difference is the auction process itself. DRAM is a pay-as-you-bid format, where bidders submit their offers by a deadline and then the utilities review them and select the least-cost combination of bids, with each bidder receiving its submitted price. BQDM, on the other hand, is a live, descending clock auction, in which bidders log into an auction platform at a given time and can submit bids as prices are displayed. The price keeps decreasing until the auction reaches its desired number of megawatts. Then all remaining bidders receive that uniform clearing price, even if they would have bid lower than that price. The pay-as-you-bid versus uniform clearing price debate is a classic economic debate that has raged for years.

As usual, there are multiple paths that can achieve similar goals. Best practices and lessons learned will be observed with experience—but I doubt if California and New York will ever admit that the other did something better.

 

Deploying Energy Efficiency to Lower CO2 Emissions and Comply with the Clean Power Plan

— May 17, 2016

Cloud ComputingThis post originally appeared on the Association of Energy Services Professionals (AESP) website.

This article was co-authored by Frank Stern and Rob Neumann. Amanvir Chahal and David Purcell also contributed.

There has been a great deal of discussion on compliance with the Clean Power Plan (CPP). Surprisingly, there is little discussion of specific costs and benefits in leveraging energy efficiency (EE) to reduce CO2 and move toward complying with the CPP. Navigant investigated the effects of deploying additional EE resources to decrease CO2 emissions in two regions—California and PJM [1]. Our analysis shows that deploying additional EE for CPP compliance results in reduced CO2, as would be expected, but it also reduces costs and system congestion. Additional EE can reduce cost to serve load by 3% to 5% in California and PJM, which reduces costs annually up to $825 million in California and $1.5 billion in PJM. Another benefit of deployed EE is system congestion relief, which reduces the cost to serve load—this is important since large, urban utilities are focused on reducing congestion points, and EE can be used as a solution.

CPP and CO2 Reduction Timeline

The CPP has been stayed by the U.S. Supreme Court until final resolution of the case through the federal courts. The U.S. Supreme Court may not have final resolution of the case until 2018, although it could be sooner. Regardless, many states and regions continue to move toward the CPP goals to reduce carbon emissions, plan for an advanced energy economy, and meet cleaner generation goals. It is not known at this time if the deadlines in the CPP will be modified.

Modeling EE for CO2 Reduction

Navigant has been modeling supply resources for many years and has been including EE as a modeled resource. For this analysis, we focused on modeling PJM Transmission Interconnection and the state of California. To establish our EE base case across California and PJM, we included levels of EE modeled in each of Navigant’s most recent PROMOD and POM [2] transmission model runs. The data and assumptions in these runs are updated and verified with industry experts each quarter. Variables in the model include (i) rate of EE adoption over time, (ii) amount of EE compared to new generation, and (iii) varying amounts of EE deployed. EE was modeled across CA and PJM for the three cases (high/medium/low)—each case was run for 2025 and 2030. These years are important since 2025 is the middle of the CPP implementation period and 2030 is the first year of full compliance with the rule (final goal). The low case included a 50% reduction in EE from the base case, while the high case included a 50% increase in EE from the base case—the base case in 2030 is 33 million MWh for PJM and 24 million MWh for California.

Modeled Results

Deployed EE can provide up to 8.8% of California’s and 3.6% of PJM’s overall CPP Compliance goal in 2030. There is also a reduction in the cost to serve generation load based upon deployed EE. In PJM, the cost savings from the low EE case to the high EE case results in over $1.5 billion in savings annually in 2030 (3.6% of total cost to serve load), while in California, the same metric results in up to $825 million in savings annually in 2030 (4.7% of the cost to serve load). To state it in different terms, the cost to increase EE in 2030 to assist meeting CPP requirements is approximately $900 million in PJM and $550 million in California, which results in an EE return on investment of $600 million in PJM and $300 million in California. This lowers 2030 system capacity requirements by 5.6% in PJM and 10.7% in California. The lower savings and returns in California are due to aggressive renewable and EE policies already underway today in advance of CPP compliance.

Another benefit of deployed EE is reduced system congestion, which reduces the cost to serve load. EE will lower the need for new thermal generation on the system and put downward pressure on capacity and resource prices. Our model shows that system congestion is reduced by approximately 1.5% and is seen systemwide. This amounts to cost reductions of more than $765 million a year in PJM and $270 million a year in California. This system congestion finding is important, since there are various efforts underway across the nation to improve congestion (e.g., Con Edison Brooklyn/Queens Demand Management Initiative).

Conclusion

CPP initiatives would benefit greatly by incorporating additional EE into the planning process. EE reduces emissions and systems costs and pushes out the need for large, costly new generation projects. Specifically, we showed that CO2 emissions would be significantly lowered in PJM and California in both 2025 and 2030, while system costs are lowered in PJM and CA by at least 3% and 5%, respectively. This all adds up to longer glide paths for meeting regulatory requirements or when state goals have to be implemented. By including EE as a resource into the resource mix, system planners and environmental offices gain significant benefits in the form of decreasing costs, flattening demand and a zero-emitting resource.


[1] PROMOD IV is a detailed hourly chronological market model that simulates the dispatch and operation of the wholesale electricity market. It replicates the least cost optimization decision criteria used by system operators and utilities in the market while observing generating operational limitations and transmission constraints. The Proprietary Portfolio Optimization Model (POM) is leveraged for regional analysis of regulatory impacts.

[2] PJM coordinates movement of electricity through all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia – numerous states and diverse regions.

 

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