Demand Response January 2016

Last week, the Supreme Court upheld the Federal Energy Commission’s (FERC) Order 745, which had been effectively in limbo for the past couple of years. This order had been the legal basis for expanded demand response activity. Demand response is the array of programs whereby an end user (me, a business, a factory) agrees to reduce their electricity usage when the system operator needs it. Often, it is matter of cycling groups of users “off the grid” for a short time. Taking groups of users “off the grid” for a few minutes can have a surprisingly powerful impact in terms of stabilizing the electricity marketplace.

In return for NOT demanding electricity at specific times, these end-users get compensated for the amount of electricity they did NOT use. Actually determining how much electricity someone did not use can get a little tricky, but the concept still applies—conservation of power is compensated just as the generation of power is compensated. In fact, it is not uncommon for the unit price of this compensation to be the same in both instances. This unit price is the Locational Marginal Price per kilowatt hour.

My personal image of demand response is the $20 monthly credit I get from PECO in return for allowing them to cut off my air conditioner for up to 15 minutes at a time during the hottest of summer months. My house can heat up, but it won’t heat up that much in 15 minutes. So, I am OK with this. Residences such as mine were about 15% of the demand response activity in 2014 and 2015. Office buildings and schools were each just shy of 10%. The biggest single sector by far was the industrial manufacturing sector, which accounted for nearly half (50%) of 2015 demand response activity.

As it happens, by virtue of my residence near Philadelphia, I am in the PJM Interconnection zone. PJM is one of the more advanced ISOs when it comes to demand response. Depending upon which specific transactions are included, PJM reports in the neighborhood of $8-10 million in demand response activity in 2015, affecting several hundred million megawatt hours. Many methods including HVAC, lighting, manufacturing  operations, and using generators are all acceptable demand response tools.

I am glad that the Supreme Court upheld Order 745. It had led to a vast expansion of demand response activity; PJM has stated that within the first market (demand) year after FERC issued Order 745, demand response volume equalled what had been achieved in the previous 5 years combined. That is a big impact. Now that the rules have been settled for demand response moving forward, hopefully it will expand again. Not only will electricity demand be reduced, but price volatility can be lessened if not largely eliminated on excess demand days, which can potentially occur year round.

That is a true economic and environmental win-win.

A post I wrote in 2011 that mentioned Demand Response

 

Can I Really Buy Green Power?

I have officially become one of the 1.6 million Pennsylvanians to switch electricity providers. I now have a fixed rate of 7.27 cents per kilowatt-hour—100% green power. This compares favorably to the (RH) rate I was paying PECO, and compares favorably to what the RH rate will be this summer—so I am pretty pleased both on the cheaper price front and the green power front. When I decided to switch, my goals were a) cheap as possible and b) green as possible.

When Pennsylvania lifted the rate caps for electricity at the beginning of January 2011, I did not know a whole lot about the market for electricity. In fact, I barely knew that there was a market for electricity at all. My first task was to decode my electric bill so I knew what I had a choice about. I learned about generation and transmission charges, and the “price to compare”—PTC. Generation and Transmission is what I now have a choice in, and the PTC is the PECO utility benchmark for those generation and transmission charges. For 2011, I decided to watch the PTC to see what would happen before I switched.

I discovered that the PTC is generally lowest in the winter, highest in the summer and in between during the fall. I also learned that the price for electricity is as volatile as the stock market, and in the summertime, the price can shoot up—way up. I began to understand the concepts of variable, fixed, and mixed (blended) pricing for electricity. This was getting more complicated by the season. To top it off, I am (or was) an RH Residential Heating customer. Since I got volume discounts in the winter, no one really wanted me because they would not (or could not) match the RH discount I was getting.

This changed in January 2012 when the RH discount began to be phased out. I started getting real offers in the mail and referred to the state’s power switch website. I had to weed through the fixed, variable, and blended rate offers. “Fixed” could mean 6 months or 12 months—“variable” means the rate changes monthly, and blended means the price for the first 500 KwH is fixed, while any usage above that in any given month is at market rates.

If I happened to be an energy manager for a large enough commercial/industrial user instead of my house, I would absolutely consider doing such a blended contract, because it is certainly possible to “play the market”—if you can watch your usage. For me as a residential customer—I cannot watch my usage closely enough to prevent exposure to (summertime) price spikes. I won’t save enough to make it worth it. But I did know that the PTC was going up April 1, with every indication that it would go up again in July. So I decided to now lock in the best price I could.

I found a good price—Mission 1 (cheaper) accomplished. Accomplishing Mission 2 (green power) ended up costing me an extra $5/month on top of the regular power charges. I should mention that “buying” green power is somewhat of a misnomer. When I plug my light into a wall, the electricity feeding the bulbs comes from wherever PJM is getting it from for my zone. PJM is the entity that actually dispatches electricity from generators to buyers like utilities. On average, the breakdown is approximately 47% coal, 34% nuclear, 15% gas, the rest from various sources like wind and solar. What I am really doing is providing funding via my bill payments for Renewable Energy Credits (RECs) that are paid directly to wind, solar, water and other renewable power providers. This helps support them—so I am indeed supporting the production of “green’ power.

When I asked Energetix (my new supplier) about their green power, they said it was 40% wind and 60% hydro—water over a dam. In addition, I found out that Energetix is based in Rochester, NY and is a subsidiary of Iberdola–the Spanish wind energy company. They also own generation assets in New York State. They partner with an organization called Earth Kind Solar Energy to help with the “green” power they re-sell. Earth Kind’s website had some good case studies of other institutional customers who had used their services (solar)—and those had been re-printed in industry journals. Also, the commentary on some New York blogs checked out for Energetix as well. I forgot to ask who had certified their hydro power—but they seem legit.

So I am pretty happy with what I ended up when I switched. I got a good price for my electricity for the next year, lower than PECO’s PTC. I am also able to support green power development. Maybe I’ll do some research some day to find out which specific dams and wind farms my REC money is actually going to—and take a road trip to go see them. I am always looking for an excuse to go visit Upstate New York—I like it there.

PUC website for switching electricity providers:
http://www.papowerswitch.com/

Energetix’s green power partner:
http://www.earthkindsolarenergy.com/buy-wind-hydro-power/renewable-energy-credits/

Energetix Environmental Disclosure from 2008 (latest I could find):
http://www.energetix.net/Data/Documents/ENX%20Enviro%20Disclosure%200511.pdf/

Where My Electricity Comes From—An Exploration

Each month, I buy about 200 kW (kilowatts) of wind energy. PECO Wind is my electricity utility’s wind power arm. I figure at the very least I am helping to create a demand for wind power—and all things being equal, I would rather my electricity come from wind, or some other renewable source, than something like coal or oil, which are the current main sources for the electricity we use. So I did a little research to see where my electricity comes from before it gets to PECO. I was also a little curious as to where my electricity would come from in the future. Is there any prospect for me to reduce my dependence upon coal and oil.

Let’s call PECO my electric retailer. PECO in turn owns some electric generation facilities; they also can buy electricity from the regional power grid to resell to consumers like me. For PECO, the regional grid is the one operated by PJM Interconnection. PJM Interconnection is the organization that oversees the wholesale electricity markets in 13 states, including Pennsylvania, Maryland, Delaware, New Jersey, etc. If anyone would know the answer to my question (where does my power come from), they would.

They did. They had a chart that shows the percentage of the grid coming from various sources (coal, oil, wind, nuclear, hydro, etc.). I was pleased to find out that this includes renewable energy as a viable source of energy—not necessarily prominent, but viable. As of the end of 2008, renewables (including my PECO Wind purchase) accounted for a 1%-2% of the electricity grid. The important item for me is not so much the actual percentage that renewables are of the grid. The important thing is the fact that they are a recognized part of the electricity market in the first place. (Yes, I know that coal and oil based are the most dominant players, and will be for quite a while).

However, the percentage of renewable sources will increase in the future. This is because of several factors. One is that numerous states are implementing “renewable portfolio standards”. As a general rule, these require that utilities in a state procure a target percentage of their electric supply from renewable sources (wind, solar, biomass, etc). For example, the Pennsylvania standard is about 20% by 2020. Across PJM’s service territory, this equates to an eight-fold increase in renewables demand over the next 15 years. Another factor is that a significant percentage of new proposed power generation capacity is wind, solar and other renewables vs. coal and oil based.

Hopefully, these trends continue, which will bode well from a sustainability perspective. If the percentage of renewables in the grid goes up, then the percentage of non-renewables in the same electric grid has to go down. This means that if I use the same amount of electricity, my utilization of coal and oil can only decrease. I hope this is true—and if I can reduce my own usage of electricity, my dependence on coal, oil and other power sources I do not particularly like will go down even further. Now that is something to be hopeful for.

http://www.pjm.com/Home/faqs/renewables.asp
http://www.pjm.com/~/media/about-pjm/newsroom/downloads/20091028-renewables-dashboard.ashx