Navigant Research Blog

Natural Gas Demand Response – Not Just for Electricity Any More: Part 2

— May 17, 2017

Coauthored by Brett Feldman

What Is Holding Back Natural Gas Demand Response?

As we discussed in our earlier blog, demand response (DR) in the electricity sector has been a common practice for decades for utilities and grid operators. Historically, DR has been less prevalent in the natural gas industry, but changing market factors have increased interest in the practice.

In this blog, we discuss the opportunities for DR in the natural gas sector and describe some of the major challenges. A key area of opportunity for natural gas DR lies in alleviating pipeline capacity constraints during periods of peak usage, which are typical spikes in demand driven by extreme weather or logistical issues.

Natural gas DR is alluring because it is theoretically less expensive than expanding existing infrastructure or constructing new pipeline and it incentivizes consumers of natural gas to defer or forego demand during periods of peak usage in exchange for compensation. Before we can determine the price of deferred natural gas consumption, however, we must establish its value.

What Is the Value of Natural Gas DR?

One of the reasons electric DR has been successful is that it reduces electric demand. Perhaps most importantly, it also has a clear, established value: the wholesale, retail capacity, and energy price that an electric DR provider typically receives for each negawatt of reduced demand that other market participants—like generators—are paid for each megawatt of delivered power.

There is no equivalent price for a nega-molecule of methane in natural gas markets. The price value of gas DR would have to be a negotiation due to an absent market structure. To provide an incentive for natural gas DR, the price would need to be equal to or less than the price paid for consuming the gas. A key challenge to determining the value of DR is that although natural gas prices can demonstrate significant volatility during periods of increased demand, many consumers of natural gas do not pay these high prices—at least not directly.

How Do We Develop a Price Signal?

Residential consumers, for example, purchase their natural gas supply and transportation through their local distribution company (LDC). The LDCs, in turn, typically rely on a variety of gas transportation and commodity supply plans with varying terms and prices. As part of their obligation to serve, the LDCs are required to build gas supply plans that mitigate the exposure of customers to volatility in prices. During a period of extreme increases in demand, the LDC may need to procure additional supply during certain days throughout the year, but these purchases are typically a small fraction of the overall daily demand. Most LDCs charge customers monthly, which causes the extreme price increases to become a small component of the overall bill.

Many commercial and industrial (C&I) customers, including power generators, purchase natural gas supply from a LDC. Larger C&I customers arrange transportation through an interstate or intrastate pipeline company to obtain their commodity via a marketer. Although the physical delivery arrangements are different compared to the residential sector, the economics are similar and the barriers to the development of a price signal for deferred consumption remain the same.

The absence of a clear price signal is a significant impediment to the adoption of natural gas DR despite the promise of providing a potentially less expensive means of alleviating pipeline constraints. Regardless of these challenges, natural gas DR offers a viable method to shift gas consumption during periods of peak demand.

Part 3 of our blog series will explore what utilities have tried for natural gas DR in the past and what new concepts could develop in the future.

 

Natural Gas Demand Response – Not Just for Electricity Any More: Part 1

— March 31, 2017

Coauthored by Jay Paidipati

Demand response (DR) in the electricity sector has been a common practice for decades for utilities and grid operators. When there are emergency situations or high prices, some residential customers and commercial and industrial (C&I) businesses are willing to reduce their electrical load or turn on distributed generation in return for financial compensation or the knowledge they are helping to maintain the grid. Historically, DR is less prevalent in the natural gas industry, but changing market factors have increased interest in the practice.

Similar to the electric side, some utilities offer large C&I natural gas users interruptible rates (IR). IR is an optional program between customers and the utility company that gives the utility company the right to shut off gas service to facilities in return for a reduced rate. It is a blunt instrument compared to customers shutting down parts of their operations to reduce gas usage. Some customers maintain backup gas storage onsite so they can switch to in case of interruption.

A more fine-tuned type of natural gas DR starts by putting communication devices at a customer’s site, then dispatching the device during critical times. The current implementation uses smart thermostats to control residential furnaces and slightly reduce temperature settings during peak heating times.

Why Natural Gas DR Now?

There is an indirect need for natural gas DR because of how it affects the electricity grid. In the past 5 years, natural gas has become the predominant fuel source for generation in many areas of the United States, often replacing coal and nuclear plants as they retire. However, the gas pipeline system was mainly designed to accommodate gas usage for end uses like cooking, heating, and cooling. The pipeline capacity did not anticipate large volumes flowing to power plants—especially in the winter when heating demand is highest.

The limited pipeline capacity was most evident during the polar vortex in January 2014, when pipelines were full but some gas generators could not get fuel, leading to electricity supply concerns and high energy prices. Since the polar vortex, other natural gas constraints and storage leaks have led to other fuel shortages. Some utilities and grid operators have instituted winter electric DR programs to address this concern, but curtailing natural gas usage is another.

The investigation into natural gas DR continues. Part 2 of this blog series will explore barriers to natural gas DR and which companies have successfully implemented it. Part 3 will explore what new concepts could develop in the future.

 

IoT Bridging the Gap for Intelligent Small and Medium-Sized Buildings

— October 24, 2016

Intelligent BuildingLarge building owners have been investing in intelligent building technologies and leveraging these data-driven solutions to reduce costs, improve operational and energy efficiencies, and achieve broader corporate objectives like sustainability. Small and medium building (SMB) owners, on the other hand, often struggle to maintain profits and sustain slim margins with more traditional approaches. Most of these smaller buildings lack the technology to generate the kind of data that ties energy consumption to operational and bottom-line performance. As a result, there is a lost opportunity for these business owners. The Internet of Things (IoT) concept, however, is changing the conversation around building management and delivering impressive results. There are three ways that IoT is opening new doors for SMB energy efficiency and business improvement.

#1: Secure, Scalable, and Easy to Install

IoT is a concept that spans nearly every area of the economy. It is about the connectivity of devices, data, and personalization of technology. IoT is an influential concept when considering energy management and operational efficiency in smaller facilities because it is a pathway to cost-effective technology deployment. An IoT platform for building energy management systems (BEMSs) entails sensors, gateways, and wireless communications to deliver better data to the analytics engine that in turn presents better insights and actions to customers. The significant reductions in cost from this technology approach—as compared to traditional controls and automation—make the benefits of developing intelligent buildings attainable for smaller facilities.

IoT-enabled intelligent building systems are secure, scalable, and interoperable. They assist with open communications and standards within the building space, assisting with reduced costs and improved integration possibilities. Security is becoming a high-profile aspect of intelligent building investment decisions. Solutions providers are installing network-secure IoT platforms that scale to support the same opportunities for improved efficiency and reduced costs in small and medium-sized buildings that are available in large buildings. IoT can deliver essential data, down to the asset level, to support better directives via the BEMS.

The bottom line is that IoT solutions deliver data-driven insights to SMB decision makers without significant business disruption for installation—and at a cost that is justifiable.

#2: Unifying Tool for Multiple Challenges

Energy management remains an important use case for BEMSs because the performance improvements of building systems deliver a transparent ROI through utility bill reductions.

  • Data aggregation: The promise of the intelligent building—and IoT for that matter—is the ability to have a centralized view of building operations to direct changes and make investments that drive down costs and improve experience. One of the big challenges for new customers is that their business has operated with management silos. Spreadsheets, monthly bills, and rules of thumb have often dominated the approach to energy or facilities management because the work at hand is the business happening inside the walls, not facilities optimization. IoT offers customers a new unified platform to bring data together across their silos to make better informed decisions that create efficiencies and cost savings—and even enhance sales.
  • Data presentment: Once the data is centralized, another benefit of an IoT-enabled intelligent building is the visual communications of sometimes complicated data sets. Dashboards, mobile applications, and automated alerts can give customers a quick and concise view of the performance of their facility.

#3: Clear Benefits beyond Just Energy Efficiency

The pain points that drive customers to invest in IoT solutions can vary in each situation, but there are some common themes Navigant Research has identified. It is clear the vendors that are making traction with SMB customers are pitching benefits beyond just energy efficiency.

  • Retail: The centralized data of an IoT solution can be translated into information that is critical for shop owners. Occupancy and environmental data can provide insight into the customer experience: How long do shoppers stay, what route do they travel, and how long do they wait for help? These are clearly non-energy benefits, but fundamental to retail customers’ bottom lines. While the IoT solution may help optimize the environmental conditions for energy efficiency, the cost savings on energy bills are only amplified by longer or more streamlined customer experience.
  • Small and medium-sized offices: Energy efficiency is foundational to calculating intelligent building ROI. Fewer kilowatt-hours used mean fewer dollars on that monthly utility bill. There is an important soft ROI for IoT-enabled solutions for office spaces, albeit a squishy metric of productivity. There are many use cases for intelligent lighting controls, HVAC optimization, and indoor air quality that tell the story of worker productivity. It is the simple narrative that happy employees are more productive. IoT solutions provide the data-driven insight to create the necessary environments to maximize worker satisfaction.

Join Casey Talon, principal research analyst at Navigant Research, Sunita Shenoy, director of Products at Intel, Doug Harp, COO at CANDI Controls, and Vladi Shunturov, founder and president of Lucid, on October 27 for a roundtable discussion. We’ll dive further into these ideas on how IoT can bridge the gap for intelligent buildings in SMBs. Register now.

 

It Takes a Lot of Energy to Catch ‘Em All

— July 29, 2016

Cloud ComputingPokémon GO has taken over the world. For those who have not yet played the game, it’s an augmented reality smartphone app where players walk around collecting Pokémon, battling in gyms, and generally having a good time. It’s also on the forefront of technological innovation, combining mapping data from Google with a narrative from the longstanding franchise. Niantic Labs, the developers of the game, have risen to the forefront of the technology world. Nintendo, one owner of the Pokémon franchise, became the most traded company by value of shares swapped on the Tokyo stock market this century. However, shortly after this rise, the stocks plummeted. Nintendo is not, after all, directly responsible for the development of the popular game and only owns a 32% stake in The Pokémon Company.

However, there is, as they say, a Butterfree in the ointment. The immense popularity of Pokémon GO has caused overrun servers and overheating data centers, making the free app crash every few hours. In addition, players are expressing frustration with the app’s  intense battery draining ability. A typical smartphone battery can drain in as few as 40 minutes of gameplay. The game is based entirely around GPS capabilities, which are notorious battery hogs. While GPS is running, a mobile device cannot enter a sleep state. In addition, communications channels with GPS satellites are very slow, and mapping software is processor-intensive, further compounding the energy intensity of such applications.

The intense data and energy use of the game has caused Werner Vogels, CTO of Amazon, to offer Niantic assistance in operating its servers. This intense usage of GPS capabilities, smartphone data, and server capacity promises to bring Pokémon GO to the top spot in smartphone application energy usage. According to SimilarWeb, in its first 4 days of use, the number of Pokemon GO users nearly surpassed Twitter users in the United States.

 Daily Active Users: Pokémon GO vs. Twitter

PokemonBlog

 (Source: SimilarWeb)

In terms of average time users spend using the app, Pokémon GO has surpassed social media sites WhatsApp, Instagram, Snapchat, and Facebook Messenger. The average player uses the app for 43 minutes a day. What’s more, Niantic plans to launch the app in over 200 countries as soon as servers are bolstered. With the current bulk of Pokémon trainers in the United States, a global phenomenon could have a large carbon footprint.

Pikachu-Powered Data Centers?

There’s little information available on the data centers that Niantic is using for the app, but the company is presumably using Google cloud data centers or something similar. Niantic was a part of Google until April 2015, when the two split. Google has always been known for its environmental stewardship in big data. The company’s data centers are reported to use 50% less energy than most in the industry, and it uses renewable energy to power over 35% of its operations. So while no data is available on Niantic’s end, it can be assumed that the company is using industry best practices in its data centers.

Niantic has not released any sort of impact statement on the app’s actual energy use, though it is almost certainly astronomical. Niantic is already hard at work developing improvements to the game, such as limiting the amount of personal data the app could access. The energy use could be measured to assess the app for potential energy improvements. A new tool called EnergyBox, developed by Ekhiotz Jon Vergara from Swedish Linkoping University, measures the energy consumption of mobile devices due to data communication. This tool finds that the way apps are designed helps to curb the energy used to send and receive large amounts of data. Niantic should take note of its app’s energy consumption before rolling it out globally, lest we be trapped in a Diglett-infested desert due to GO-related global warming.

 

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