Navigant Research Blog

A Tumultuous Year for Demand Response

— January 6, 2015

Weatherman_webThe participation of demand response (DR) in the wholesale markets has been fairly stable for the last 5 years or so.  2014 blew those trends out of the water.

The year came in like a lion, with the polar vortex hitting the entire United States during the first week in January.  Virtually every region of the country activated DR resources during that freeze.  Overall, DR performed well, dispelling myths that it could not contribute to winter reliability.

The spring brought the annual forward capacity auctions for the 2017-2018 power year for ISO New England and PJM, which both showed lackluster results for DR.  In New England, while capacity prices doubled around the region, the amount of DR cleared capacity stayed flat from the prior year’s auction.  Meanwhile in PJM, while the capacity price in the eastern region stayed flat and the western price doubled compared to the prior year’s auction, DR cleared 10% less capacity than last year.

Legal Bombshell

Then the fireworks began.  Everyone in the industry had been waiting for a ruling from the U.S. Circuit Court of Appeals on Order 745 from the Federal Energy Regulatory Commission (FERC) on DR compensation in response to a challenge that was raised by the Electric Power Supply Association a couple years earlier.  The court dropped a bombshell by questioning the very jurisdiction of FERC over DR, and the entire DR community stopped in its tracks.

The rest of the year was consumed by appeals and writs and stays and various other legal maneuvers, with some parties trying to get the court’s decision to take immediate effect and others trying to delay it as long as possible and get the U.S. Supreme Court to take up the case.  As we enter 2015, the fate of the order is still in the balance, and probably will be until the spring, when the Supreme Court will likely decide whether to take up the case.

Meanwhile, Elsewhere …

Other accomplishments in the DR world have been overshadowed by the FERC 745 case.  Baltimore Gas and Electric unveiled the first default Peak Time Rebate program.  New York and California are undertaking large-scale utility transformation efforts.  Internationally, many markets in Europe are percolating with DR activity, and Asia is heating up as well, led by South Korea opening up its electricity market to DR in November.  Finally, merger and acquisition activity in the space has accelerated, with EnerNOC going on a buying spree and Constellation selling its DR business to Comverge to create CPower.  Many of the above topics, along with several other interesting developments, can be found in Navigant Research’s free white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond.

Will 2015 be equally eventful?  I certainly don’t expect a repeat of the polar vortex situation, so in that respect, DR should get a respite.  I do expect chaos on the regulatory front to continue, though, regardless of the outcome on Order 745.  The regional transmission organizations will likely continue to squeeze all resources, including DR, for higher reliability standards.  More states are expected to push for retail-level DR, both as a reaction to Order 745 and out of their own needs.  And the international arena is likely to expand strongly, providing a relief outlet for companies looking to diversify outside the United States.

 

The Trouble with Trying to Reduce Residential Energy Consumption

— January 5, 2015

A recent story in The Wall Street Journal (subscription required) reminds us of the difficulty in trying to reduce energy consumption.  The story, by Jo Craven McGinty, notes that after 3 decades of effort aimed at lowering residential energy use in the United States, the overall level of consumption is still about the same, about 10 quadrillion BTUs per year.

Taking a deeper look, however, there is some positive news in the data.  While overall consumption is nearly unchanged, the average energy consumption per household has decreased, dropping to about 90 million BTUs a year in 2009 (latest year available) from about 114 million BTUs in 1980.

So, what is going on? Several things: newer homes tend to be larger than older ones.  And though they have more efficient envelopes and systems (double-pane windows, improved insulation, and efficient heating-cooling systems), it takes more energy to heat larger spaces, and the proliferation of devices in homes has required more energy use.  We now plug in more TVs, computers, DVRs, mobile phones, and second refrigerators.

The Efficiency Paradox

While our homes are more efficient, this is offset by an increase in energy consumption, a phenomenon called the rebound effect, or the Jevons Paradox, which holds that an increase in efficient use of a resource, like energy, can result in greater use and reduce the benefit.   This is not a hard and fast rule, and it is often debated among economists.  Nonetheless, there is a propensity toward squandering some efficiency gains once realized.  For example, when gas prices drop significantly, the cost per mile is lower, and people are more inclined to drive further or faster.

As McGinty points out, Americans receive mixed messages, being hectored to conserve energy while also being constantly invited to buy new gadgets and appliances that require energy.  This is evident in the U.S. Energy Information Administration data showing how consumption by type has changed.  In 1993, appliances, lighting, and electronics accounted for 24% of home consumption, which rose in 2009 to 34.6%.  Space heating was 53% of home energy consumption in 1993 and decreased to 41.5% in 2009.

Annual Residential Energy Consumption by End Use, U.S.: 2009

                               (Source: U.S. Energy Information Administration)

Helping to reduce residential consumption lies at the heart of home energy management systems and represents a key goal of utility energy efficiency programs.  No one is suggesting these efforts should stop just because the net result can seem frustratingly ineffective, or merely incremental.  But, as noted in Navigant Research’s report, Home Energy Management, one of the inhibitors to wider adoption is the uncertainty around net benefits.  Some argue that one way to avoid the rebound effect would be a tax to keep the cost of energy use the same.  But that would be a hard sell.

 

Itron Utility Week: Beyond Smart Meters

— December 1, 2014

Nearly 1,000 executives from the water, gas, and electric utility industries gathered in San Antonio between October 17 and 24 to discuss “resourcefulness” – Itron’s term for smarter grid, water, and gas utility technology and solutions – and share best practices.  The conference featured a Knowledge Center showcasing the solutions offered by both Itron and its partners, and dozens of panel sessions covering five tracks: Energy Efficiency and Conservation, Data Management & IT, Advanced Measurement & Communications, Smart Grid, and Analytics & Applications.

The opening general session featured a fascinating keynote address by Scott Klososky, principal at Future Point of View, on “Achieving Humalogy” (“digital Darwinism” and how organizations must evolve to stay relevant), and a killer poetry slam by David Bowden entitled
“Dead Leader Walking” – providing a millennial’s take on management (you can watch the keynote here, skip to 1:23:00 to view the slam).

In the Fog

Itron showcased its new grid edge intelligence solution, Itron Riva, at the meeting.  Itron Riva leverages open standards and Cisco’s IOx Fog computing platform to support Internet of Things functionality, including distributed computing power and control and analytics for automated decision-making at the network edge.  Itron Riva also delivers an integrated, hybrid radio frequency/power line communications (RF/PLC) network, which dynamically selects the best network path for the environment.  Itron Riva has been tested and debugged in a Hong Kong deployment with CKP Power.

Itron notes that the hybrid architecture means the system can flexibly switch from the RF solution (in the winter, for example, when foliage isn’t blocking the path) to PLC (in the summer).  The solution is also good for utilities with both rural and urban environments to cover.

At its Alliance Briefing, the president of Itron’s electricity group, Mark de Vere White, shared his insight on how the smart grid market is shaping up.  De Vere White noted that, while the North American market had slowdowns post-American Recovery and Reinvestment Act (ARRA) funding, the company sees that turning around now, and added that managing solar is a high priority.  Globally, Itron is “very optimistic” about 2015 and anticipates smart grid market acceleration in 2016 and 2017.  Itron’s ERDF Linky deployment in France will begin in the second half of 2015.

Spanning the Globe

In the Asia Pacific region, Itron is seeing activity in Australia, New Zealand, Singapore, Thailand, Japan, and Tonga.  De Vere White also noted growing Latin American interest in Brazil, Mexico, Columbia, Ecuador, and Chile.

Other topics emphasized at Itron Utility Week included smart city technology and how smart grids and smart cities intersect (including a presentation by Amy Aussieker of Envision Charlotte), as well as Itron’s new managed services offering, Itron Total Services.

 

Big Retailers Boost Home Energy Management

— October 28, 2014

Home energy management solutions have struggled to gain traction beyond early adopters and consumers enrolled in a sprinkling of utility programs for demand response.  That could be changing as more retailers push connected home devices that have advanced energy controls as a component.

Best Buy, for example, has been selling a handful of smart home products for several years, and for a time it tested dedicated home energy management sections in three of its locations.  But now the electronics retailer plans to set up new connected home departments within about 400 of its 1,400 stores.  These new sections are expected to show up around Thanksgiving, and will be staffed with blue-shirted experts who will be trained to offer smart home solutions for homeowners.  Products on the energy side will include smart thermostats from Nest and Honeywell and smart lighting controls from Philips and Belkin, ranging in price from about $50 to $350.

Out on the Floor

Beyond hardware products, Best Buy will also highlight services for the connected home from a variety of providers, including Comcast, DirecTV, Time Warner, ADT, and others that can tie the hardware to services geared toward automation, security, and energy management.  This could be a key to wider adoption of home energy management, since many people have not heard much about energy management services.

Other retailers, such as Walmart, Lowe’s, and Home Depot, offer similar products and services for increased home automation, security, and energy management.  Office supply giant Staples now offers Connect, which combines a hub with a single mobile app to connect door locks, thermostats, and lighting for homeowners or small business owners.

One of the main inhibitors to growth for home energy management products and services has been a lack of awareness among consumers, as noted in Navigant Research’s Home Energy Management report.  This current wave of retailers promoting a variety of solutions to create a more intelligent home should help increase customer knowledge and drive adoption.  It will likely take a couple of more years to reach widespread consumer adoption, but this current retail push is a start.

 

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