GETTING TO ENERGY EFFICIENCY WITH 2 LITTLE MAGIC WORDS (DEMAND RESPONSE)

Coordination of Energy Efficiency and Demand Response; A Resource of the National Action Plan for Energy Efficiency
Charles Goldman, Michael Reid, Roger Levy and Alison Silverstein, January 2010 (Lawrence Berkeley National Laboratory)

SUMMARY
Here’s how to be super cool in Silicon Valley: Mutter the words “demand response” or, better yet, the acronym “DR.” Wait for somebody to start talking about Energy Efficiency (somebody will) and then say “demand side management” or its acronym, “DSM.”

The more the cost of electricity rises, the more the electricity-devouring Silicon Valley high tech companies become energy conscious. Google recently got permission from the Federal Energy Regulatory Commission to become a utility just so it can exercise more control over its energy mix, add more New Energy to its supply and implement better control of its Energy Efficiency (EE).

The Silicon Valley IT giants long ago took the standard EE steps like improving their insulation, windows and doors. Now what they are studying is how they can more effectively reduce their demand during periods like hot summer afternoons when the price of electricity peaks because everybody in California is running their air conditioners. This is called demand response (DR).

The chip wizards are also competing to invent the best demand side management (DSM) technologies for utilities so that they can interact with customers electricity consumption, via a smart grid, to prevent brownouts or blackouts when sudden fluctuations in supply or demand threatens the utilities’ capability to keep the lights on.

Coordination of Energy Efficiency and Demand Response; A Resource of the National Action Plan for Energy Efficiency, from researchers at the Lawrence Berkeley National Laboratory, is an examination of how EE and DR fit together.

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It was written in support of the 10 implementation goals of the 2008 National Action Plan for Energy Efficiency Vision for 2025, an agreement between 50 major electric and gas utilities, state utility commissioners, state air and energy agencies, energy service providers, energy consumers, and energy efficiency and consumer advocates under the auspices of the U.S. Department of Energy (DOE) and the Environmental Protection Agency (EPA). The goals:

(1) Establishing Cost-Effective Energy Efficiency as a High-Priority Resource
(2) Developing Processes to Align Utility and Other Program Administrator Incentives Such That Efficiency and Supply Resources Are on a Level Playing Field
(3) Establishing Cost-Effectiveness Tests
(4) Establishing Evaluation, Measurement, and Verification Mechanisms
(5) Establishing Effective Energy Efficiency Delivery Mechanisms
(6) Developing State Policies to Ensure Robust Energy Efficiency Practices
(7) Aligning Customer Pricing and Incentives to Encourage Investment in Energy Efficiency
(8) Establishing State of the Art Billing Systems
(9) Implementing State of the Art Efficiency Information Sharing and Delivery Systems
(10) Implementing Advanced Technologies

The LBNL paper (1) summarizes the research on the relationship between energy efficiency and demand response, (2) presents new information from program administrators, customers, and service providers, on current practices and opportunities in the coordination of energy efficiency and demand response, and (3) discusses the barriers to coordinating energy efficiency and demand response programs.

The goals of the Silicon Valley circuit and system builders are simple: (1) Make gads of money and (2) save the world. EE is the easiest cheapest way to begin doing both those things. The LBNL paper demonstrates that DR is a valuable means toward achieving EE, which makes DR pretty cool.

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COMMENTARY
The purpose of the National Action Plan for Energy Efficiency Vision for 2025 was to make EE cost effective by its target year so as to impact the 70% of U.S. natural gas and electricity consumption that takes place in U.S. structures (homes, businesses, schools, governments, and industries).

Definitions:
(1) Energy Efficiency (EE) is “using less energy” at any time to provide the same or better service to energy consumers without compromising economic efficiency.
(2) Demand Response (DR) is when customers change their normal energy consumption in response to (a) the fluctuations in energy prices over time or to (b) incentive payments that reward consumers for lowering their consumption when demand (and therefore price) is highest (and possibly high enough to threaten the function of the power supply system).

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Demand response is a tool already being implemented by utilities and incorporated into the plans of state and regional regulators.

According to the Federal Energy Regulatory Commission (FERC), DR was already in 2008 capable of cutting ~41,000 megawatts (~5.8%) of the summer peak demand. FERC estimates DR could cut 138,000 megawatts (14%) of peak demand) by 2019.

An Electric Power Research Institute (EPRI) study found DR and EE could cut summer peak demand by 157 gigawatts (14%-to-20% of projections) by 2030.

Most DR programs now in effect are designed to respond over a limited time to power supply-threatening events by curtailing or shifting the grid operator’s load.

Just beginning to be implemented are (1) critical peak pricing (CPP) and (2) real-time pricing (RTP) that exercise dynamic and time of use (TOU) rates in conjunction with information fed back to consumers in an ongoing effort to reduce total energy use and utility bill costs.

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As of December 2009, one database of 2,016 U.S. and Canadian EE, DR and load management programs showed only 56 served both EE and DR purposes.

EE and DR are now measured differently, have differing suppliers, are delivered differently and have differing reward systems. Better coordination at the provider level would likely make costs lower and allocation more rational.

Coordination would help consumers who, oblivious to the jargon of EE and DR, are only interested in cutting their utility bills.

It would help providers because it would expand the market. And it would help society at large by reducing energy consumption and greenhouse gas emissions while making the supply of energy more secure and reliable.

Coordinating the implementation of DR with the expansion of EE will bring tools to customers sooner. There are 4 basic modes of coordination.

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(1) Combined offerings: Unlike present separate programs, customers could be offered EE and DR opportunities in one package;
(2) Combined marketing and customer education: Even if EE and DR delivery are kept apart, utilities, public benefit organizations and independent system operators (ISOs) could promote them as a package, simplifying both but expanding an understanding of the complicated subjects together.
(3) Combined market-driven service delivery: Utilities', public benefit organizations' and ISOs' marketing efforts could be expanded to include innovative private firms that market cost-cutting EE and DR systems and methods to customers seeking to save on their utility bills.
(4) Building codes and appliance standards that support both: Incorporating combined EE and DR mechanisms into building design and infrastructure and appliance design will bring all the benefits in a pre-coordinated package.

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Barriers:
(1) Some market and regulatory funding structures prevent combining EE and DR.
(2) Some customers have reservations about DR because: (a) DR benefits are uncertain due to market price fluctuations; (b) DR programs vary across regions and utilities and participation could be an inconvenience; (c) DR seems to be better for the utility than the customer; (d) DR could reduce access to EE benefits.
(3) Retail rates may undercut EE and DR objectives.
(4) Developing utility staff and contractors' capabilities with EE and DR takes time.

Utilities and grid operators can also combine EE and DR in resource use, budget planning, and rate design processes so that the amount of load shift available from individual customers and the economic options available to the customer and the utility can be incorporated into the selection of resources, budgeting and the design of rates.

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EE and DR at a customer site depend on 4 elements: the building, its electro-mechanical systems, appliances, and customer behavior.

Design, materials, and orientation determine building energy consumption and use but use can be modified and managed by high-tech DR tools.

Energy control technologies enable EE and DR. Programmable communicating
thermostats (PCTs) can automate energy management; embedded controls enable DR without the consumer’s participation.

Building energy management systems (EMS) deliver automated EE and DR.

Other enabling technologies: (1) Advanced metering infrastructure (AMI) that allows response to dynamic pricing and (2) energy information systems (EIS) that give customers feedback on their energy use.

The benefits of EE with DR will not come quickly. There are market, human, financial, and institutional obstacles. Leaders can provide clarity over the long-term transition that suits utilities’ large-scale capital investments.

Dynamic pricing will come with better price information and as the technologies allowing a response to it become more common.

Eventually, more EE and DR will lead to zero net energy sites. In 5-to-10 years, most DR is likely to be price-driven and enabled by automated controls “responding to near-real time pricing information without significant customer effort or intervention.”

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QUOTES
- From the report: “There are significant differences in how energy efficiency and demand response are measured, what organizations offer them, how they are delivered to customers, and how they are rewarded in the marketplace. Reducing these differences and coordinating energy efficiency and demand response could be beneficial. Better coordination of energy efficiency and demand response programs at the provider level could bring about cost efficiencies and more rational allocation of resources for both program providers and customers. Coordination could help customers, as most customers do not understand or care about the difference between energy efficiency and demand response and would be receptive to an integrated, packaged approach to managing their energy usage. Greater customer willingness could also increase demand response market penetration and capture energy savings and customer bill-reduction opportunities that might otherwise be lost. Over the long term, customer and utility smart grid investments in communications, monitoring, analytics, and control technologies will blur many of the distinctions between energy efficiency and demand response and help realize the benefits of this integration.”

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- From the report: “Large-scale deployment of cost-effective energy efficiency resources has the potential to provide significant bill savings for customers and reduce and defer the need for more expensive baseload or intermediate generation resources. Similarly, cost-effective demand response resources have the potential to reduce or defer the need for expensive peak generation and to enhance electric system reliability while also increasing the system’s ability to absorb intermittent renewable resources through sophisticated real-time monitoring, analytics, and load controls. Effective coordination of energy efficiency and demand response—by policy-makers, utilities, and third-party program providers—will be necessary to increase the effectiveness and utilization of energy management resources. While progress has been made in recent years, more work and effort are needed to achieve the full promise and potential of the synergy between energy efficiency and demand response.”