The clock has started ticking down on backup generators in California’s demand response programs. On January 1, 2019, the California Public Utilities Commission’s Demand Response Prohibited Resources decision officially takes effect. The decision (officially Decision 16-09-056) mandates that fossil-fueled resources can no longer be used to provide demand response.
The decision doesn’t remove fossil fuel generators from use for backup or for facility power generation, just from demand response (DR). It’s clear, though, that they face near-certain elimination from the California power landscape in the near future. The historic green energy bill signed by Gov. Jerry Brown on September 10th, 2018, specifically requires that 50 percent of California’s electricity be powered by renewable resources by 2026—seven short years away.
Needless to say, this has some profound implications for the future of distributed energy resources (DERs) and DR in the nation’s most populous state (and the world’s fifth largest economy). California’s “bold path” toward 100 percent zero-carbon electricity by 2045 will take it through uncharted territory potentially full of threats to the reliability of its far-flung electrical grid and the costs of the electricity it provides.
Demand response in California, as elsewhere in the country, has been a valuable tool in managing demand-side energy use, protecting the grid, and funding progressive sustainability initiatives. Generators have been a valuable part of DR, providing additional opportunities to save and earn as part of their commitment to a balanced California grid. But California has long been strict on the use of non-emergency generation for demand response, and the green energy bill tightens restrictions to an outright ban.
With fossil-fuel generators permanently pulled from DR participation in California, then, the question facing participants is, “Now what?” There are no easy answers—in a constantly evolving energy universe like California’s, there never are. That said, CPower recommends a couple of steps you can take to ease your transition into a post-fossil fuel world and continue to save and earn.
No Generators? No Problem.
The 2015 court ruling that vacated the EPA’s rule—referred to in the industry as “the Vacatur”—took effect in 2016 and upended DR participation. Hundreds of fossil-fuel backup generators were withdrawn from DR programs in most of the nation’s wholesale energy markets
One water agency, though, found they could still successfully participate in DR without their generators. Virginia’s Lake Gaston Water Supply Pipeline supplies water to Virginia Beach, the state’s most populous city. The Vacatur forced them to withdraw their diesel-powered generators from their DR program. Without the generator to sustain pumping during curtailment as part of DR, they faced the prospect of not being able to curtail the required power during an event, which meant pulling out of DR completely.
Working with CPower, Lake Gaston’s curtailment service provider since 2010, managers were able to research new methods of DR participation without generators. These measures included a full pump shutdown, something they weren’t sure they could do successfully. After a thorough analysis and review of their operations with CPower, it turned out that they could. Read the full story here.
Back to Basics
Before you mourn kilowatts lost, take a moment and consider if there are kilowatts to be found to replace them. Start by asking yourself, “What’s changed since I received my first demand response check?” The answer might be, “Everything,” or something close to it.
How have your day-to-day operations changed in response to changing market conditions? What upgrades have you made to your lighting, HVAC, IT, security, and communications? Is your physical space smaller or bigger? Have you added locations? What’s the state of your building envelope? Is it sufficiently insulated? Has on-site staffing grown or declined?
These are questions to be answered when you have a knowledgeable energy engineer, like those at CPower, conduct a thorough assessment of your facility. Your new “deep dive” assessment forms the foundation for creating a new curtailment action plan, one that matches your available kilowatts to available demand response and demand-side energy management programs. Chances are you’ll find new kilowatts to replace those lost from removed generators, and possibly more.
Dollars for DERs
Now is the perfect time to think beyond the generator and embrace other dispatchable distributed energy resources, or DERs, for your backup power. Behind-the-meter technology like storage batteries—charged by renewable but intermittent resources like sun and wind as well as grid energy—can be enrolled by CPower in California’s demand response programs (Capacity Bidding Program, Base Interruptible Program, and Demand Response Auction Mechanism aka DRAM) as available generation to help when the grid is stressed. You can combine your DER asset with demand response programs to offset kWs lost from generators.
For example: California State University, Dominguez Hills is one of the most sustainability-focused campuses in the state system. In 2017, CSUDH joined with CPower and Stem, provider of the school’s 1 MW intelligent storage system, to create a combined curtailment and storage program. By stacking these technologies, CSUDH significantly reduced their environmental footprint, provided approximately 400 kW of grid relief, and generated revenue that flows back to the school to fund further sustainability initiatives. For their efforts, CSU was also recognized with the 2018 Smart Energy Decisions Innovation Award for Customer Project/Onsite Renewable Energy.
As California moves toward 100% zero-carbon energy, it’s safe to say that fossil-fuel generation, on both the micro and macro level, will continue to be phased out. Demand response, however, will continue to have an important role in California’s energy re-imagining. Demand response continues to fulfill its primary role, protecting the grid of the world’s fifth largest economy. Look for thought leaders and decision makers to find new and better ways to integrate renewables and dispatchable renewable energy resources into statewide demand-side energy management programs. And look for CPower to continue to advocate on behalf of our customers to ensure their ability to save and earn while protecting the grid.
The following is an excerpt from “Monetizing Energy Assets in the Commercial Real Estate Industry: A Complete Guide for Earning Revenue with demand-side energy management” by CPower:
For the past several years, the economic and policy climate of North America has created an impetus for green and sustainable energy-efficient buildings. The commercial real estate (CRE) industry has contributed to this momentum.
Keeping the supreme goal of providing a great tenant experience at the forefront of their operations, commercial real estate facility managers and executives are increasing their focus on energy management plans rooted in a sustainable building philosophy based on cost-effectiveness and energy-optimization.
The CRE industry’s current push toward a more efficient and sustainable future comes at a serendipitous time when energy markets around the country are working to integrate distributed energy resources (DERs) onto their energy grids in an attempt to diversify their fuel mixes.
Right now and for the foreseeable future, grid operators and electric utilities in each of the nation’s six deregulated energy markets have created a wealth of incentive programs to encourage commercial and industrial organizations to help integrate their grids with distributed energy.
CRE organizations with distributed resources at their facilities like backup generators, solar photovoltaic cells, fuel cells, energy storage and more are therefore in a position to reap significant financial benefits by working with a properly licensed company that can help them monetize their existing energy assets.
The Importance of Tenant Experience
No two commercial buildings are alike and every commercial real estate organization is unique. One trait CRE organization’s share, however, is the unwavering desire to provide a great experience for their tenants.
More and more commercial real estate companies are realizing that sound demand-side energy management–the practice of modifying consumer demand for energy–can play an integral part in providing a great tenant experience.
Without satisfied tenants, of course, the CRE industry wouldn’t exist. That’s why every measure a CRE organization explores concerning energy management should be examined through the tenant-experience lens.
Demand for Green Buildings
Utility costs related to energy, water, and waste have a significant impact on a CRE organization’s profits. For decades, CRE organizations have sought to reduce these impacts by making their buildings more efficient and (if at all possible) environmentally friendly.
Green buildings–those which are environmentally responsible and resource-efficient–are estimated to consume 30-50% less energy than non-green buildings. Green buildings also use an average of 40% less water, emit 30-40% less carbon-dioxide, and produce 70% less solid waste.
Green Buildings, Happy Tenants
In the last several years, CRE organizations across North America have recognized the direct correlation between green buildings and tenant attraction.
The increasing popularity of green leases, which include an up-front establishment of sustainability goals and allocation of implementation responsibilities between the owner and the tenant, is proof that the notion of sustainability is a value shared between CRE organizations and the tenants they serve.
Since the Great Recession, many tenants’ business performance has been and continues to be evaluated by customers and investors looking at aspects beyond the strictly-financial. Tenants want to tell the story of their operating in a green building that actively pursues sustainability efforts with a positive effect on the community and the environment.
CRE organizations who oblige will not only provide a superior tenant experience, they’ll also be in a position to monetize their efforts through demand-side energy management.
Energy Assets in the CRE Industry
CRE Organizations that have made their buildings more energy efficient–whether by lighting upgrades, HVAC improvement, or any other measure, may be eligible to earn money for the permanent reduction of their electric demand.
They may already possess energy assets like back-up generators, energy storage, solar generation, and more that can also earn revenue through demand-side energy management.
When selecting a company to guide your demand-side energy management, it’s important to consider the company’s scope of demand-side expertise. Do they serve the markets where your properties reside? Does the company specialize in one type of demand-side energy management, or is it equally skilled in a wide range of energy asset monetization practices?
Most importantly, a demand-side energy management partner should earn your trust in every aspect of the relationship your organizations share.
Demand-side energy management is not a one-size-fits-all exercise. No two buildings are alike and every CRE organization is unique in its complexities.
Like your business, your demand-side energy management strategy should evolve and refine over time, forever in pursuit of perfection as energy markets continue to change and your needs as an organization evolve.
Visit https://cpowerenergymanagement.com/commercial-reit-lp to learn more about CPower’s extensive experience in the commercial real estate industry, including how Tishman Speyer Commercial Real Estate earned more than $1.4 million through demand-side management with CPower as their guide.
To read the entirety of “Monetizing Energy Assets in the Commercial Real Estate Industry: A Complete Guide for Earning Revenue with demand-side energy management” click HERE.
California always seems to be at the center of innovation. When it comes to sustainable and renewable energy goals, it continues to deliver by leading the evolution of our nation’s energy mix away from finite sources that dominated the 20th century to the renewables that are poised to power our world today and in the future. Achieving the state’s ambitious energy goals, however, involves changing the way California procures, distributes, and uses energy.
CPower’s California team—Jennifer Chamberlin, Diane Wiggins, and JP Harper—present a clear picture of the integral roles demand response and demand management will play as California leads our nation’s push toward a sustainable energy future. Topics include factors driving the market, the impact of distributed energy resources (DER) such as storage, and the important role demand response plays in DER today.
For a detailed look at how California is tracking toward its energy goals, read “The Evolution of the California Energy Market,” a white paper by CPower’s Jennifer Chamberlin.
2.5 MW of monthly demand response commitment gives the Desert Water Agency energy savings and additional revenue to offset costs.
The Customer: Desert Water Agency, Palm Springs, California
The Desert Water Agency (DWA) is a not for profit government agency providing water to the desert resort community of Palm Springs, in the Coachella Valley, as well as adjacent areas. Nearly all of the water that is used in the Coachella Valley comes from a groundwater basin, or aquifer estimated to contain about 30 million acre-feet of water. DWA pumps water using 29 wells spread throughout its retail area and delivers it to 23,000 water connections serving approximately 106,000 residents and businesses.
DWA embraces sustainable energy resources, including hydroelectric and solar, to power its pumps and generate energy savings. A solar field comprising 4,500 ground-mounted fixed tilt panels produces just over a megawatt of energy. The solar facility powers their Operations Center and Water Reclamation Plant and is projected to save the Agency and its ratepayers about $6 million in energy costs during its lifetime.
The Challenge: Tap the Demand Response Revenue Stream
The demand response program offered by CPower pays customers for reducing their energy usage upon same-day notification of a possible grid event. DWA understands the benefit of earning additional revenue by curtailing their power load and using that revenue to further offset energy costs. The key to DWA’s successful participation was technically implementing a curtailment program with the least possible disruption to its operations and its customers. Wells throughout the city that could participate in the program would be turned off when CPower issues a curtailment notification.
That left them with one important question: “Can we survive three to four hours of having wells shut down and still be able to refill our reservoirs to meet customer demand?”
The CPowered Strategy: One Well at a Time
Thankfully, with CPower’s help, the answer was “Yes.”
DWA chose CPower as their demand response provider to manage their participation in the demand response program. CPower provides a team of energy experts to review the Agency’s operations and energy goals. Together, DWA and CPower developed an energy management strategy that gives DWA the tools to optimize their participation in the program.
The strategy called for DWA to start with a small number of wells, to familiarize themselves with the curtailment process with minimal impact on day-to-day operations. As DWA’s staff became more comfortable with the process, more wells were added, until all eligible wells—25 of their total of 29—are now actively participating and generating revenue for the Agency.
“The CPower relationship has been outstanding… I fully trust them. The integrity is always there, they are always reliable and very knowledgeable.”
-Steve Johnson, Assistant General Manager
CPowered Solutions: Power Empowerment
Understanding the Agency’s preference for autonomy over automation, CPower empowered it with the tools to control its energy spend and demand response participation. The Agency can turn individual sites on and off at will upon notification through their supervisory control and data acquisition (SCADA) software to implement the custom-designed energy strategy developed with CPower’s experts. Perhaps best of all, the Agency can manage it all from their central Operations Center, without dispatching staff to well sites under a grid-stressing desert sun.
CPower collects utility meter data for each of DWA’s sites and supplies them with quarterly performance data. These data provide DWA with an understanding of each site’s base load value. The Agency can use these data to decide their optimum load curtailment commitment for each month of the program.
The Results: An Oasis of Cost-Saving Revenue
DWA typically nominates a changing rotation of eight wells each month into the program. The total monthly load drop amounts to about 2.5 MW. This is a significant commitment that helps relieve stress on the electric grid.
The program also provides DWA significant financial incentive for their participation. During a recent six-month period, May-October, they received $105,872.68 in payments for their participation. These incentives allowed them to further offset their energy costs, to the benefit of their customers.
Just as importantly, perhaps, DWA enjoys the total commitment of CPower’s dedicated California energy market experts. The Agency knows from experience that CPower will support their energy goals at every turn, with an energy strategy custom-made to meet their unique requirements.
Download a PDF version of this case study
For most of the last two decades, demand response in California has been largely procured and operated by the state’s electric utilities.
That trend is changing.
Demand response in California is currently experiencing significant changes as regulators implement measures to expand the state’s pool of energy resources and assimilate these resources with the California Independent System Operator’s (CAISO) markets.
This regulatory reform has created new opportunities in California for demand response programs, which pay businesses for using less energy when the grid is stressed or electricity prices are high.
The Demand Response Auction Mechanism
The Demand Response Auction Mechanism (DRAM) was developed in 2014 under the guidance of the California Public Utility Commission (CPUC) in an effort to harmonize utility-based reliability demand response with CAISO, the state’s grid operator.
In December 2014, the Commission issued D. 14-12-024 which requires the state’s IOUs: Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E) and Pacific Gas and Electric Company (PG&E) to design and implement Demand Response Auction Mechanism (DRAM) pilot programs in 2015 for 2016 capacity (DRAM I or 2015 DRAM) and in 2016 for 2017 capacity (DRAM II or 2017 DRAM). The three utilities recently completed a solicitation for 2018/2019 capacity (DRAM III) procuring over 200 MW of DR resources across the state.
Now in its third year, the program seeks to allow CAISO to add reliable demand response resources to areas of California where electric reliability may be at risk.
DRAM is a pay-as-bid program with three goals:
1)Fully integrate DR resources with the CAISO energy market
2) Test whether third parties can bring these resources to the table without structured utility programs
3) Allow residential resources to participate directly in the CAISO markets
The DRAM program also provides market participation testing from a broader base of distributed energy resources, including behind-the-meter storage. Under DRAM, these resources have the opportunity to behave not just as system capacity, but also as local and flexible resources.
California’s recent actions aim to revise the market’s existing demand response program structure and are an indication that DR has an important role to play in the state’s future.
The best way for an organization to take advantage of the DRAM program and the opportunities available in the California Market is to consult a trusted demand-side energy management company.
Such a company can evaluate an organization’s facilities and determine its curtailment capabilities. Next, they can explain in full the many demand response and demand management programs that are available in the California Market and help determine which offer the particular organization the best chance for curtailment success.
To learn more about how CPower can help your organization earn with the Demand Response Auction Mechanism program, please visit CPowerEnergyManagement.com/dram-california.
To continue learning about how the California grid is changing to meet the needs of the future, read: The Evolution of The California Energy Market: How Demand Response and Demand Management will Play Integral Roles in The Golden State’s Energy Future
Demand response participants will play an essential role in keeping Southern California’s energy grid stable this summer. Here are a few reasons why and a few insights on how DR customers can position themselves for a successful season.
The leak at Aliso Canyon has consequences for energy supply in California.
In October 2015, Aliso Canyon— the largest natural gas storage facility in California—suffered a leak in the LA Basin/Porter Ranch area, resulting in the emission of more than 97,000 metric tons of methane. To put the tonnage in perspective, the leak produced enough methane gas each day to fill a balloon the size of the Rose Bowl. The leak was plugged after 112 days.
The fallout has proven costly for the natural gas infrastructure in Southern California. According to the “Aliso Canyon Risk Assessment Technical Report,” the leak reduced Aliso Canyon’s gas stores to less than 20% of its capacity.
Low capacity means high risk for blackouts this summer.
The drop in capacity could cause trouble for the 17 natural gas generators served by the Aliso Canyon facility if (and when) electric demand is high this summer. The Assessment Report also warns that millions of California customers may suffer an interruption in electrical service during as many as 14 days this summer when demand is expected to be at its highest.
The grid will be at its most fragile in the evenings when the sun sets, causing a drop in available solar resources. The drop in solar coincides with a spike in demand as people come home from work and flip on their air conditioning.
Demand Response will help grid reliability.
The joint agencies that produced Aliso Canyon Assessment Report have also drafted an Aliso Canyon Action Plan that calls for, among other mitigation strategies, demand response to help keep the grid stable in the LA Basin this summer.
California’s Base Interruptible Programs (BIP), in which participants provide load reduction on a day-of basis in Southern California Edison’s (SCE) and Pacific Gas and Electric’s (PG&E) service territory, allows for fast dispatching of emergency resources and is therefore expected to be heavily utilized to alleviate grid stress in Southern California this summer
How energy prices may trigger key curtailment programs:
Summer electricity prices may climb high enough to trigger SCE’s Aggregator Managed Portfolio (AMP) program, as well as statewide Demand Response Auction Mechanism (DRAM) programs, which aim to offset grid stress and avoid potential blackouts by reducing load via demand response.
Due to the high amounts of solar and other renewable generation available in California during the call hours of these programs, overall energy prices are not as tightly correlated with natural gas as they can be in other states.
The gas shortage caused by the leak at Aliso Canyon will drive heat rate levels in the LA Basin. This will cause natural gas heat rate triggered programs like CAISO’s Capacity Bidding Program (CBP) in PG&E to have a potentially higher instance of calls this summer.
Preparation is the key to successful demand response.
This summer, more so than in previous seasons, demand response will be a crucial component of grid reliability! When the grid sends out its distress notice, time will be of the essence to avoid blackouts. Make sure your curtailment plans are in place and your curtailment personnel are at the ready.
CPower can help answer any questions you may have to help you prepare for the summer season. Click HERE to contact our California team.