Navigant Research Blog

Utilities Boost Efficiency with Smart CVR

— March 18, 2014

Dynamically optimizing voltage levels via sophisticated smart grid technologies, smart grid conservation voltage reduction (CVR) continuously reduces energy consumption and demand during peak periods, when electricity prices are inflated and demand may exceed the available energy.  At American Electric Power (AEP) in Ohio, 17 circuits have already been equipped and tested with smart CVR capability, and the initial results were so promising that AEP Ohio is now doubling down on this technology.  Utilidata will deploy its advanced CVR solution on 40 more circuits at AEP Ohio.  Ram Sastry, director of distribution services support at AEP, is confident that smart CVR will give the company’s energy efficiency program a turbo boost.  Also in Ohio, Duke Energy aims to have a systemwide smart CVR deployment (a project called Integrated Volt/VAR Control, or IVVC) in full production by 2015 to reach the state’s energy efficiency and peak reduction targets over the next 10 years.  Duke Energy used a small portion of the $200 million the company received in Department of Energy (DOE) smart grid investment grants to help finance the CVR investments in Ohio, one of many states that now incorporate CVR as an energy efficiency resource.

Untapped Potential

The DOE investment grants, combined with companies’ matching investments, are expected to result in the installation and/or automation of about 18,500 capacitors nationwide between 2009 and 2014, according to a recent presentation from the DOE.  (Automated capacitors play an integral role in most smart CVR projects.)  This is a large sample set of automated capacitors, serving as a nationwide demonstration of smart CVR, spurring osmosis between utilities and capturing interest from the National Association of Regulatory Utility Commissioners.  Not all 18,500 automated capacitors are to be used for smart CVR, but even if they all were, that would represent only enough capacitors to populate a small fraction of all substations and feeder circuits in the United States.  In other words, there’s a large, untapped market for smart CVR.

Government smart grid funding is nearing its end, but manufacturers and vendors of smart grid equipment and CVR software solutions will soon see a nice boost from increased adoption of smart CVR outside of DOE-funded projects.  Navigant Research’s Conservation Voltage Reduction report analyzes the market for smart CVR in North America.  While the market is still forming, revenue from smart grid equipment and software products dedicated to CVR solutions is expected to reach $30 million to $40 million this year.  With an intention to meet efficiency targets, most major utilities are already piloting various CVR control schemes.  As more large-scale deployments are expected to ramp up over the next few years, smart CVR component sales are expected grow into a $100 million market annually by 2017.  Total utility spending associated with smart CVR, including planning, installation and systems integration costs, could easily be 2 to 3 times higher.

 

Automated Demand Response Draws Vendors of All Stripes

— March 10, 2014

Automated demand response (ADR) technology was pervasive at the recent DistribuTECH conference in San Antonio, as vendors from all sides of the utility spectrum are looking to get a piece of the DR pie and extract more value out of their core offerings.  Companies that focus on utility operational systems want to incorporate DR management, while those that specialize in customer energy management want to move up the value chain and offer utilities full service customer DR programs.  Metering companies want to show the benefit of their hardware and data to provide smarter DR, and pure-play DR providers want to protect their territory and expand in both of the other directions as well.

There were also some interesting press releases related to ADR in conjunction with DistribuTECH. AutoGrid announced a new $12.75 million investment round led by German utility E.ON.  This funding will support AutoGrid’s customer growth, including international expansion.  It will also allow the company to develop new applications for its Energy Data Platform software, which provides predictive analytics for big data and automated control for DR purposes.

Comverge released a new suite of IntelliSOURCE advanced applications for demand management optimization. The main component is a machine learning system that utilized big data analytics and two-way device telemetry to improve forecasting capabilities.  This gives utilities the ability to transform DR from a mostly emergency resource to a real-time operational resource that facilitates renewable energy integration and supply management.  Called Demand Response Optimization, the engine can determine the most cost-effective assets for a utility to deploy, taking customer and environmental factors into account.

Worldwide Growth

EnerNOC introduced a new utility DR product called Demand Manager, which is a software-as-a-service (SaaS) platform that provides utilities and retail electric providers with the tools to manage their DR programs.  Unlike the typical model, where EnerNOC provides a turnkey, fully outsourced program management service, Demand Manager allows utilities to buy software and professional services if that’s what they prefer.  The offering includes a data-integration application programming interface (API) that allows EnerNOC’s software to integrate with utility interval meters, thereby leveraging smart meter investments.

I have also heard from several utilities recently that they are looking to procure new demand response management systems in order to initiate ADR programs in addition to or in place of their existing manual or direct load control programs, so activity appears to be heating up on both the vendor and customer sides of the equation.

In my recent report on ADR, I forecast that the number of ADR-equipped sites worldwide will grow from fewer than 217,000 in 2014 to more than 1.9 million by 2023.  The report, Automated Demand Response, examines the global ADR market with a focus on two key sectors: C&I and residential.  Along with global market forecasts, the study provides an analysis of the market drivers and challenges, as well as the key technologies, related to ADR.

The full scope of ADR technology and the ADR market landscape will be covered in our upcoming webinar, “Automated Demand Response,” which will take place March 11, 2014 at 2:00 pm EDT.  Click here to register.

 

Facing Solar Waves, Utilities Should Learn to Surf

— March 5, 2014

In my last blog, I described the relatively rapid fall that many incumbent telephone companies have suffered as wireless technology has replaced landlines as the dominant service providers for not only our voices, but also our data communications needs.

Why, as a participant in the electric utility industry, should you care?

Because the very same thing could happen to incumbent electric utilities, and maybe sooner than you think.  Solar panels and plug-in electric vehicles (PEVs) are spreading rapidly, allowing consumers to generate and even store their own power.  Prices are falling, and with or without government incentives, the penetration of renewable, distributed generation will continue to accelerate.  Storage will get better and commercial customers like Walmart will put panels across thousands of acres of rooftops.

All of this creates challenges for grid operations and (especially) electric utility business models.  (See my blogs on net metering and feed-in tariffs.)  As the fight over net metering has made abundantly clear, the century-old utility business model wasn’t designed for distributed generation – and this transformation is still in its early days.

Ride the Wave

But, couldn’t it also provide an opportunity?  In the first 10 years of wireless telecom service (according to surveys by CTIA), subscribership grew to just under 34 million.  In the second 10, it added 174 million, and since 2005, that figure has nearly doubled again.  That hockey stick phenomenon will happen in the solar and PEV industries, too.

NRG Energy, a retail energy marketer based in Princeton, New Jersey, has taken a proactive stance to solar.  Its NRG Solar division creates large-scale solar facilities and performs installations on commercial rooftops.  The NRG Residential Solar Solutions (RSS) division leases solar systems to homeowners, providing the panels, system design, monitoring, and performance guarantees, as well as several termination options (system removal, lease extension, or purchase).  RSS operates in 10 states, plus the District of Columbia, and has expansion plans in more states.  What’s more, NRG’s eVgo network is a privately funded electric vehicle infrastructure network of home charging stations and public fast charging stations.

NRG’s Alternative Energy division (which encompasses its solar activities) grew revenue to $83 million in 3Q 2013, up from $49 million the year before.  And while it still bleeds red ink, I can assure you that telcos lost money on their wireless divisions for many years before those units became the cash machines they are today.

Sizing the Competition

Vivant, SunRun, SolarCity, and SunPower are the big names among standalone solar financing and installation companies today; $1 billion was raised in 4Q 2013 alone for solar system financing.

SolarCity intends to grow its customer base to 1 million by 2018, while SunPower is reportedly about to announce a deal with Meritage Homes.  SolarCity earns about half of its revenue from solar system sales, with a low 5% operating margin, but it earns an attention-getting 66% margin on its lease business.

The level of competition and the public valuations of many of these solar companies demonstrate the market’s belief that solar (panels, financing, installation) will be a growth market for some time to come.

In order to enter the fray, regulated utilities will have to run their alternative energy ventures as unregulated subsidiaries (that’s how the telcos got into cellular), but the consolidated bottom line is what matters to investors.  And, as a consumer, I’m more likely to trust my solar installation and management to my longtime local power provider than an unknown, independent installer.  Ride the wave!

 

In the Real World, Smart Grid Programs Proving Themselves

— March 4, 2014

Two utilities on two continents are demonstrating the value of the latest technologies for helping residential customers reduce energy consumption and lower their costs.  This is important because often the benefits of smart grid technology have gone unnoticed or under-reported while stories highlighting the negative aspects of smart grid deployments gain attention.

In the United Kingdom, British Gas says that 9 out of 10 customers report that smart meters have helped them better manage their energy consumption, according to a survey.  Results of the survey also show that 54% of respondents with a smart meter are saving money, in some cases up to £75 ($125) per year.  Also, data from smart meters has motivated 40% of customers to take some type of energy efficiency steps, such as adding insulation.  British Gas has deployed smart meters to about 1 million of its customers so far.  The mandated widespread deployment of smart meters is set to begin in the fall of 2015.

Low Overrides

Here in the United States, Nevada’s NV Energy says customers enrolled in its mPowered program reduced air conditioning use by 12% and whole-house electric consumption by about 6% per year.  Program participants receive an EcoFactor smart thermostat that connects the home’s AC system to a cloud-based efficiency and demand response (DR) service.  Participating households reduced their load by 3 kW to 3.5 kW in the first hour of DR events last year.  Customers can override a bump in temperature settings during a DR event if they want to not take part, keeping the home cooled at a level they prefer.  However, the rate of overrides has held steady at about 11% in the first hour and 7% in the second hour since the utility has been tracking this metric since 2008.

These examples represent the latest evidence of smart grid technologies making a difference to customers after years of utility deployments and somewhat murky results.  Pilot programs and eager vendor hype have indicated savings of up to 20% on a given customer’s bill.  These two examples are noteworthy for being more realistic.  They’ve been normalized over time and over a wider customer base – plus, they’re similar to results from OGE and BGE.  What’s missing are similar normalized results from dozens of utilities that are using smart grid technologies to create greater efficiencies and provide ways for customers to control costs.  Those results will eventually come, but until then, many customers will remain skeptical.

 

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