Navigant Research Blog

New York Details Its Energy Vision

— August 27, 2014

The New York State Public Service Commission (PSC) has released its latest straw proposal on its Reforming the Energy Vision (REV) proceeding.  It includes recommendations that incumbent utilities take on the central Distributed System Platform (DSP) role, at least in the short term.  This was one of the most controversial issues in the REV plan, with the potential for the utilities to be stripped of many of their responsibilities by the PSC and replaced by a new independent entity.  PSC staff decided to stick with the utilities – partly for substantive reasons, partly out of expediency.

The paper includes a table comparing the roles of a utility versus a DSP, exhibiting a great deal of overlap.  So the utilities can breathe a major sigh of relief with that recommendation, knowing that they will maintain many pivotal duties.  But the paper does point out that utilities do not currently have all of the capabilities and competencies needed to successfully operate the DSP and will need to hire new staff with different skill sets, as outlined in my earlier blog on utility hiring trends.

Seeking Alignment

Also noteworthy, from the standpoint of demand response (DR) and distributed energy resources (DER), is the recommendation that all utilities be required to develop DR tariffs, including fees for storage and energy efficiency.  PSC staffers are wary about the potential effects of the pending U.S. Circuit Court case on Federal Energy Regulatory Commission Order 745 on DR compensation, which could complicate DR participation in wholesale markets like the New York Independent System Operator (NYISO).  On the other hand, the report is rather light on recommendations for expanding time-of-use rate structures, which may also encourage increased DR participation.

Addressing the concern about a lack of coordination between retail and wholesale markets, the report states that market rules allowing DER participation in both markets must be aligned to ensure that DER interaction is efficient and properly valued.  The PSC argues that this goal can be accomplished with DSPs acting as aggregators in NYISO programs.  That’s a threatening statement to the third-party DR aggregators that would not want the utility/ DSP to compete with them in the wholesale markets.

Are Smart Meters Necessary?

From the consumer perspective, the report references a recent survey of residential electricity customers in New York that found that, although few customers say they are knowledgeable about their electricity usage, many place a high value on easy access to information regarding their energy use, the price of electricity, and methods for controlling their energy costs.  This indicates the potential for substantial increases in residential customer adoption of home energy management and DER products.

Notably absent from the REV plan is a recommendation regarding advanced metering infrastructure (AMI).  Electricity cost and rate increases are sticky political issues in New York currently, and PSC staff did not highlight AMI as a requirement for achieving REV goals.  The only reference to AMI actually speaks to how to avoid it: “To the extent that the cost of advanced metering equipment presents a barrier to customer adoption of DER programs or time variant pricing, utilities and market participants should consider alternatives to AMI technologies to enable program delivery.”  In other words, the report acknowledges that AMI functionality may be useful for REV purposes, but doesn’t say how that functionality can or should be achieved.

Comments on the straw proposal are sure to be plentiful from all sides.  I view this plan as less aggressive than the original REV paper, but ultimately, it is more achievable in the short term – which may help build momentum for the longer-term transformation.

 

New Approaches Boost Energy Efficiency

— August 7, 2014

National Grid’s U.S. division has rolled out a home energy management (HEM) pilot in Massachusetts that combines free hardware and special applications in a bid to get customers to cut their electricity use and help the utility manage demand more efficiently.  The pilot is targeted at customers in Worcester, which, for the past few years, has been the focal point of National Grid’s testing of smart grid technologies, including new Itron smart meters and other infrastructure upgrades.

About 15,000 customers are eligible to take part in the pilot.  They can choose from several free bundles of technology.  One of the more novel devices is a digital picture frame made by Ceiva that receives electricity consumption data from a smart meter and makes suggestions for reducing use.  Smart thermostats from Carrier and smart electrical plugs from Safeplug are also available.  Ceiva’s software, called Homeview, enables customers to view consumption data online and on mobile devices.  For the utility, Ceiva’s Entryway software suite supports the management of smart meter-connected home area networks, residential demand response (DR) capabilities, and energy efficiency programs.  The pilot is scheduled to last about 2 years at a cost of $44 million.

Cheers All Around

A number of utilities are deploying similar technology to help customers reduce energy consumption.  Glendale Water & Power and San Diego Gas & Electric support Ceiva devices as part of their efforts to encourage customers to use electricity more efficiently.  In addition, utilities like NV Energy, using EcoFactor technology, and Oklahoma Gas & Electric, which has deployed thermostats from Energate and software from Silver Spring Networks, have taken the lead on HEM programs for several years (for a deeper dive into the HEM space, see Navigant Research’s report, Home Energy Management).

Utilities like National Grid and the others mentioned here are to be commended for providing a range of technologies that help customers reduce consumption while also helping utilities meet efficiency targets.  That’s what a smarter grid is intended to do, and more utilities should do the same.

 

Refrigeration’s Chilling Effect on Energy Efficiency

— August 6, 2014

China’s meteoric rise has had profound impacts on its economy, people, and environment.  Navigant Research has examined the consequences this growth has on energy used by buildings and cities.   As the country of 1.3 billion becomes more prosperous, the next transformation occurring is in cold storage.  In a recent article, The New York Times Magazine delved into the adoption of refrigeration in China.  On the consumer level, China’s domestic refrigerator ownership has grown from just 7 % in 1995 to 95% in 2007.  As a result, the cold chain (the temperature-controlled storage and distribution infrastructure) is growing as well.

The United States, which leads the world in cold storage, currently has about 3 times the cold storage per capita as China does.  In China, less than one-quarter of meat and 5% of fruits and vegetables travel through a cold chain, compared to about 70% of U.S. food.  As China’s living standards rise, refrigeration and energy use are set to explode.  Currently, cooling accounts for only about 15% of global electricity consumption.

The threat associated with increased living standards is not isolated to China.  An estimated 40% of fruits and vegetables in India are lost to spoilage as a result of poor infrastructure.  Although the Indian economy has not performed as robustly as China’s, there is hope that growth will pick up shortly.  However, with that hope comes the risk of unsustainable energy consumption on a staggering scale, as India and China combined account for more than one-third of the world’s population.  As such, vast advances in the energy efficiency of refrigeration are needed.

Birth of the Cool

Refrigeration, like air conditioning, relies on the vapor compression cycle.  The vapor of a refrigerant is compressed to the point where it is superheated and then travels through a condenser where heat is rejected from the refrigerant vapor and it is condensed into a liquid.  Next, the liquid goes through a throttle valve where it evaporates into a low-temperature, low-pressure mixture of liquid and vapor.  Lastly, this mixture travels through an evaporator that absorbs heat from the space being refrigerated and evaporates the mixture so that it can be compressed and the cycle can start again.

Incremental improvements have been made in the efficiency of refrigeration, but there is a physical limit to how efficient the vapor compression refrigeration cycle can be.  It may be time to rethink the fundamentals of refrigeration.  The U.S. Department of Energy, for instance, has been investigating the use of non-vapor compression technology.  But the answer may not be cooling at all.  Cooling is a means to an end; it is an effective method of inhibiting microbial growth.  But it is not the only method to do so.  Fenugreen FreshPaper uses naturally occurring antimicrobials to keep fruits and vegetables fresher longer – with near-zero energy use.

 

Utilities Warm to Cloud-Based Smart Grid Analytics

— August 5, 2014

Managed services for smart grid applications — also known as smart grid as a service (SGaaS) — haven’t exactly lit a fire under utility executives.  Despite the numerous advantages to outsourcing non-core activities like communications, software applications, monitoring, etc., many large utilities, citing security, control, and economics, prefer to keep these functions in-house.

But as smart grid deployments extend beyond the largest utilities, it seems likely that organizations constrained by finances or personnel will be obliged to consider the SGaaS model if they want to take full advantage of smart grid technology.

Vendors are repackaging their solutions in a spectrum of managed offerings, from hosted to managed to full business process outsourcing.  And cloud service providers, including Amazon, Microsoft, and Google, are actively courting utilities’ business.

On July 14, Itron announced that it has selected Microsoft’s Azure cloud platform for its managed Itron Analytics solution.  Microsoft Azure will maintain the infrastructure, allowing Itron and its customers to focus on the analytics.  Itron says its analytics solutions can be installed locally, run by the utility in the cloud, or operated and managed as part of Itron’s Total Services.

The Whole Enchilada

Itron’s Total Services boxes up the metering, communications, and meter data management, along with analytics, in a fully managed offering.  In other words, Itron will not only turn the knobs, but will also respond to the information coming in.  Texas New Mexico Power (TNMP) in Lewisville, Texas engaged Itron to provide meter data analytics for its 230,000 meters earlier this year.

TNMP told me that “a smart meter can trigger hundreds of alarms; our staff may not have the expertise to best respond, whereas Itron’s analysts do have that proficiency.”  TNMP is also working with ABB’s Ventyx unit for an outage management system (OMS) that will be hosted and administered by Ventyx.

Hefty Growth Ahead

Navigant Research’s report, Smart Grid as a Service, forecasts that the SGaaS market will grow strongly over the next decade.  Our forecast includes a host of managed services for utilities, including home energy management, advanced metering infrastructure (AMI), distribution and substation automation communications, asset management and condition monitoring, demand response, and software solutions and analytics.  We expect to see a $1.7 billion market in 2014 growing to more than $11 billion in 2023.  Software solutions and analytics sold under a software as a service (SaaS) model are the largest category of SGaaS spending today, followed by AMI managed services.

Annual SGaaS Revenue by Category, World Markets: 2014-2023

 

(Source: Navigant Research)

Challenges to the model do remain, however.  Most notably, the rate of return model that most investor-owned utilities work under encourages them to make their own capital and personnel investments.  But for smaller utilities (e.g., cooperatives and municipals here in the United States), the speed with which solutions can be deployed, and the absence of large upfront investment, will be attractive.

 

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