Navigant Research Blog

Utility Customers Respond to Variable Pricing

— September 7, 2014

On July 23, Baltimore Gas and Electric (BGE) customers earned more than $2.5 million by reducing their electricity usage during peak summer heat hours.  Over 640,000 residences voluntarily participated – nearly an 80% participation rate among those who were notified – amounting to an average bill credit of $6.80, enough to buy an ice cream cone while turning down the air conditioning a few degrees.

BGE is the first utility in the country to put all of its customers with smart meters on a default Peak Time Rebate program.

It works like this: BGE customers with a smart meter can participate in the BGE Smart Energy Rewards program by voluntarily reducing their electricity usage to earn a bill credit of $1.25/kWh saved from 1 p.m. to 7 p.m. on designated energy savings days.  Eligible customers will be notified, usually the evening before, by an automated phone call, e-mail, or text message.  BGE anticipates that there will be 5 to 10 energy savings days in a summer season.

Smarter Grids, Smarter Customers

BGE has had a traditional direct load control (DLC) residential DR program for many years, and it has been successful within its own parameters.  However, the company has been installing advanced metering infrastructure (AMI), as covered in Navigant Research’s Smart Meters report, over the last few years, and with that network comes new capabilities (and regulatory requirements to meet cost-benefit thresholds).  AMI provides the utility and potentially customers with near-real-time interval meter data, so the utility can send time-based price signals and get almost immediate feedback on customer performance.  Couple these abilities with new end-user device and thermostat technologies that enable fast response and remote control by the customer, and you have more customer-centric, flexible demand response (DR) programs than were possible before; this can increase customer penetration rates dramatically.

Right on Time

Other innovative companies are trying different variations of programs and pricing offerings.  The Sacramento Municipal Utility District (SMUD) is looking to become the first utility to have a default time-of-use (TOU) rate after running a successful pilot that showed that customers preferred TOU structures to their standard flat rate.  The guiding principles of Oklahoma Gas and Electric (OG&E) for DR include voluntary participation for customers and no DLC by the utility, relying completely on customer empowerment.  OG&E believes that pairing dynamic pricing with technological devices will achieve these goals.  The province of Ontario, Canada has instituted default TOU pricing for customers with smart meters since 2005, the only area in North America to do so.  A traditional DLC program already existed in the province, and now the plan is to combine the control ability of the DLC with TOU pricing to help customers respond to price variations.  Massachusetts is set to become the first U.S. state to mandate default critical peak pricing (CPP) based on a recent order by the Department of Public Utilities.

All of these developments and other innovative programs are covered in Navigant Research’s new report, Residential Demand Response.  The report discusses industry trends around the world and provides 10-year forecasts of sites, capacity, and revenue, including breakouts between DLC and dynamic pricing.  Over time, all these different pilot projects will blossom into full-blown programs and expand into other jurisdictions, creating a truly responsive demand side of the energy equation.

 

Managing Small Buildings’ Energy Use

— September 4, 2014

Engaging the small and medium commercial building (SMCB) market in energy management tools and solutions has been a challenge.  One reason is that the energy costs take up a relatively small proportion of energy costs for SMCB owners, compared to the massive energy bills in large commercial buildings.  Another reason is the lower penetration rates of digital controls and building management systems.  This is forcing major players to rethink how to pursue this market.  Most traditional building energy management system (BEMS) vendors essentially scale down their BEMS offerings for SMCB customers looking for better performance out of lighting and heating, ventilation, and air conditioning (HVAC) systems.

A new crop of firms is engaging the SMCB market with a more lightweight offering, not focusing on the details of equipment performance.  In early July, the electric utility Southern California Edison announced a partnership with FirstFuel Software to deliver rapid analysis for improved energy performance for medium-sized commercial buildings.  Using meter data analysis and building characteristics, FirstFuel will identify efficiency opportunities for the more than 10,000 medium-sized commercial buildings in the utility’s service area.  The FirstFuel system uses meter data in concert with general building characteristics to identify general building performance norms.  Following this analysis, FirstFuel develops an ordered list of energy conservation measures.  The direct partnership with the utility means that the best efficiency options will be available in real-time.

Breaking and Entering

The many pathways to engaging with the SMCB market will be interesting to watch.  While there are certainly more SMCBs than large buildings, the level of interaction and number truck rolls will hamper success unless solutions providers can focus on easily deployable tools.  Speaking of easily deployable tools, smart thermostat maker Nest (mentioned in a previous Navigant Research blog) is now getting into the SMCB market with an interesting strategy.  Partnering with Direct Energy, Nest offers a smart thermostat that can be purchased and installed by SMCBs and used to ensure customers’ energy use is optimized so that they can receive the fixed power rates they signed up for.  While this might seem like a gimmick to increase Direct Energy’s market share, it could help validate the value of efficiency management in a tough market.

And that market has potential.  In Navigant Research’s Energy Management for Small and Medium Buildings report, it is forecast that the global SMCB BEMS market is expected to grow from $231.3 million in 2013 to $1.3 billion in 2022.  Corporate commitments to reduce carbon and energy and a drive to reduce energy expenditures make the SMCB market ripe for BEMS vendors.  Other drivers, like regional policies, the increased prevalence of green building certification, and the associated relevance of BEMSs, are growing as well.  For owners and managers of SMCBs interested in energy management, the approaches will depend on their goals.  Some will want fast, low-touch solutions, like FirstFuel’s technology, while others will want the full suite of BEMS services, like that of large energy management systems for commercial buildings.  The dynamic BEMS market will be as diverse as its buildings, regardless of shape, or more importantly, size.

For a more detailed examination of this promising sector, join us for our free webinar, Energy Management Systems for Small Buildings, on Tuesday, September 16.  Click here to register.

 

California Calculates the Value of Time in Energy Efficiency

— July 22, 2014

The 2013 update to California’s Title 24 building energy efficiency standards went into effect on July 1, 2014.  In addition to increasing overall building efficiency requirements over the 2008 standards, this update sets out more stringent lighting requirements for both residential and non-residential buildings.

The 2013 update also includes changes to California’s time dependent valuation (TDV) calculation.   Used only in California, TDV is a tool to gauge the value of energy efficiency measures.  Unlike other metrics, such as site or source energy (measured in kBtu), TDV includes the cost to provide energy based on time of use, as well as other variations in cost due to climate, geography, and fuel type.

TDV was developed in 2005 and was updated in both 2008 and 2013 to help California meet the energy efficiency goals established in Title 24.  In the 2013 update, the California Energy Commission (CEC) changed the TDV calculation to account for climate sensitivity by separating California into 16 different climate zones.  This alteration helps reflect differences in energy costs driven by climate conditions, which vary considerably throughout California.

Finer-Grained

One of the key barriers to wider TDV adoption is developing values for each climate zone.  As stated above, California alone has 16 climate zone values.  Another limitation is that many state officials are unaware of it. California is the only state that uses TDV, whereas metrics such as site and source energy are much more commonly employed both nationally and internationally.  Furthermore, TDV does not account for the potential grid modernization costs necessary to export excess electricity back to the grid.

But since TDV accounts for differing energy costs based on a range of factors, it more accurately captures the societal cost of energy consumption that’s missed in assessments based only on source or site energy parameters.

In the coming years, as California tries to build more zero energy buildings (ZEBs), TDV will play an important role in determining whether a building meets the required energy use intensity to qualify as zero net energy.  The forthcoming Navigant Research report, Zero Energy Buildings, will provide an update to the 2012 iteration and look further into the benefits and challenges associated with TDV as a metric.

 

Ending the Office Climate Wars

— July 17, 2014

For some commercial building tenants, interacting with the heating, cooling, and lighting of their offices has been a challenge.  There are the dummy thermostats, the inoperable windows, the buildings that are running heating and cooling at the same time, and the hot and cold calls from the corner office.

Many cubicle dwellers use space heaters in summer to keep their overly cooled selves from shivering, while others need fans to mitigate afternoon sun – even in the winter.

Improved automated buildings controls, networked light sensors, occupancy sensors, and re-commissioning have all helped office workers be more comfortable in their workplaces.  Yet, the overarching problem remains.  This is due in part to the challenge of keeping old and complex systems running optimally.  The other challenge gets back to the dummy thermostat: you can’t keep all people happy (or warm or well-lit) all of the time.  It’s no simple matter to gain an understanding of people’s comfort levels and equip a building to serve those different and diverse needs.

My Chair, My Climate

The University of California Berkeley’s Center for the Built Environment (CBE) has led a number of research efforts that try to determine how comfortable we are when sitting at our desks.  CBE has developed prototypes of office chairs that incorporate user-controlled fans and thermometers.  These climate-controlled chairs, known as Personal Comfort Systems, aim to take some of the balancing load off the HVAC system.  A 1-degree expansion of a building’s deadband (the temperature range where HVAC systems do not have to heat or cool) can result in energy savings reductions of 5% to 15%.

CBE also conducts regular occupant surveys in buildings of all kinds.  One recently found that occupants of LEED-certified buildings feel no more comfortable than those in buildings that lack the LEED plaque.  An interesting observation is that, over time, LEED-occupied people report less and less comfort.  Perhaps there’s a honeymoon period for green buildings when people seem to feel more comfortable.

The Goldilocks Strategy

For some occupants, the proximity to windows is an attractor, while others find the glare and the heat disruptive.  The smart glass company View has created a mobile application that enables users to remotely control their windows’ opacity from their desks.  The app allows a user to schedule tinting depending on personal need – for instance, when it’s time to wake from an afternoon nap.  For more on smart glass, see Navigant Research’s report, Smart Glass.

Meanwhile, a startup called Building Robotics is attempting to solve the collective comfort puzzle using an algorithmic technique.  Its innovative occupant comfort product, called Comfy, asks users to rate their comfort simply: too hot, too cold, or just right.  Comfy then tunes a building’s HVAC system to deliver maximal comfort based on occupant feedback instead of predetermined setpoints.  Using machine-learning algorithms and facility management guides, it can create user-focused HVAC schedules based on what feels good to most users, not what temperature air is being delivered.

Comfy will likely prove to be a disruptive technology, reducing the engineering focus on setpoints and increasing the striving for customer satisfaction (i.e., comfort).  As these types of technologies spread, office workers will be more comfortable.  And in serving them, buildings will use less energy.

 

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