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Energy Risk, Reserves, and Revenue and what it all means to you. Join CPower on March 21st as we help you understand the causes and effects of low reserve margins. Joe and Mike will detail how the ever-increasing importance of demand response (DR) programs might not only help save the day for grid reliability, but create tremendous revenue opportunities for you, too.
UPDATE March 5: ERCOT announced today that, due to expected record high demand and “historically low” 7.4% expected reserve margin, they have “identified a potential need to call an energy [emergency] alert at various times this summer.” (Emphasis ours.) Alerts allow ERCOT to take advantage of resources available only during scarcity conditions—particularly demand response. ERCOT will release its final summer report in May.
Two significant factors projected for ERCOT — the Electric Reliability Council of Texas—stand to have a noticeable impact on its energy market: Reduced supply and record peak demand. The resulting clash between these two market drivers point to the very real possibility of unexpectedly high prices for organizations participating in ERCOT’s Load Resources (LR) demand response program. Let’s take a look at what’s driving these two important factors, and how this could translate into an opportunity to generate revenue through demand response.
Reserves have dropped dramatically. Since mid-2017, ERCOT has approved the retiring of four coal-fired generation plants responsible for generating more than 4,500 MW in capacity. It’s not just coal generation, though. Since the May 2018 Capacity, Demand, and Reserves (CDR) report, three planned gas-fired projects totaling 1,763 MW and five wind projects totaling 1,069 MW have been canceled. Another 2,485 MW of gas, wind and solar projects have been delayed.
In its December 2018 CDR report, ERCOT projected total available generation capacity for Summer 2019 at 78,555 MWs—an estimate, as it turns out, that’s too low. ERCOT recently learned that it is losing another 470 MWs from the Gibbons Creek coal plant going offline this summer. That drops reserve capacity to 78,085 MWs—a low, low 7.4% reserve margin, just over half of the long-standing target margin of 13.75% of peak electricity demand.
And demand will peak. Last year, ERCOT set an all-time peak demand record of 73,473 MWs on July 19 between 4 and 5 p.m. This year, ERCOT predicts more “record-breaking peak demand usage” for the summer: 74,853 MWs, 1300 MWs higher than last year’s all-time peak.
That leaves a gap of—hold on—just 3,232 MWs. Low supply. High demand. Tight, tight margins. All that adds up to the potential for record high prices in ERCOT’s Load Resources (LR) ancillary services demand response program that ERCOT deploys to maintain sufficient operating reserves.
Already, LR prices have increased since the retiring of 4,200 MWs of generation in 2018. (see chart.) Additionally, projected wholesale energy prices in ERCOT for Summer 2019 are some of the highest we have seen. It’s not a stretch to anticipate high, if not record high, LR prices this summer.
High prices in Load Resources mean generous revenue paid to you for your participation in the program which pays businesses for being available to curtail energy on short notice when the grid is stressed. LR has the potential to pay organizations two to three times more than other ERCOT demand response programs.
CPower can help you get the most out of the Load Resources program by working closely with your organization to develop a customized curtailment strategy, including automation, that suits your business objectives and operational considerations. Start the conversation today. Learn how to maximize your curtailment revenue with CPower and ERCOT’s LR program.
Distributed Energy Resources (DER), including storage, are proliferating the world of energy management in a big way. Today, these assets are primarily implemented to provide operational resilience and demand management; however, additional opportunities are rapidly evolving.
As intelligent application of DER assets increases for commercial and government sectors, the opportunity to leverage these same assets into revenue generating channels also increases.
Through programs like demand response, your DER assets become vehicles for saving and earning, which increases ROI, shortens project payback periods or helps fund other energy projects, all while providing greater support for grid reliability.
Join DER and storage experts from CPower Energy Management and Stem and learn about:
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.
When a new EPA law threatened demand-side energy management at the largest hospital in The Ocean State, CPower answered the call.
The moment he learned what the EPA’s law meant for diesel generators participating in demand-side energy management, Marc Leduc figured he and Rhode Island Hospital had a problem.
The largest hospital in its state, Rhode Island Hospital is the only Level I trauma center for southeastern New England and provides expert staff and equipment in emergency situations 24 hours a day. Round-the-clock electricity consumption is both an operational necessity and a huge expense for the hospital.
For Mr. Leduc, the hospital’s Chief Engineer since 2011, executing an optimized demand-side management strategy has proven the best way to offset what would otherwise be a hefty energy spend.
Rhode Island Hospital generates half of the electricity it consumes with its onsite generation plant, consisting of four steam generators and three diesel generators. Even with such self-sufficiency, the hospital still purchases half its electricity from the grid–as much as 5 MW on a hot summer day–which comes with capacity charges that have been on the rise throughout New England for the last several years.
Enter CPower and demand-side energy management.
Since 2007, Rhode Island Hospital and CPower’s Bill Cratty, a veteran of the energy industry since 1964, have collaborated on a demand-side energy management strategy that allows the hospital to save on electricity costs with peak demand management and earn revenue with demand response.
The hospital’s three diesel generators have played a starring role in its demand-side success.
The Challenge: Upgrading to Compliance
Until the Spring of 2017, Rhode Island Hospital used its diesel generator set to power its facilities when the hospital curtailed its load from the grid as part of a peak demand management program, which lowers the hospital’s capacity tag and results in reduced capacity charges the following year. The hospital also routinely fired up its generators during demand response events, which pay participants for using less energy when the grid is stressed or electricity prices are high.
For Rhode Island Hospital, an optimized demand-side energy management strategy utilizing its diesel generators was essential in offsetting its energy spend.
In 2013, the Environmental Protection Agency enacted the National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines (NESHAP/RICE) to regulate pollutants emitted from stationary diesel engines. Part of those standards allowed for the limited use of backup generators for demand response.
In 2015, the U.S. Court of Appeals for the District of Columbia Circuit overturned the specific rules that allowed backup generators to participate in demand response.
Implemented in May 2016, the Court’s ruling mandates that only backup generators that meet the NESHAP/RICE standards are permitted to be used during emergency demand response dispatches. Two of Rhode Island Hospitals three diesel generators, each supplying 2 MW, were non-compliant and could no longer be used during demand response events.
“It [the law] was a big hit for us,” says Mr. Leduc. “Not only [did we lose] the money we generate from the [demand response] program, but the reduction of the peak load for capacity was probably the biggest hit for us, budget-wise. Capacity charges are right now about 25% of our budget.”
Mr. Leduc looked for answers on how to get back into the market and found them when he talked to CPower and Bill Cratty. Mr. Cratty, already intimately familiar with the hospital’s demand-side strategy, stepped in and immediately set a course by which the hospital could upgrade its emissions controls so their diesel generators could return to participating in demand response.
Having worked with Mr. Cratty since 2007, Mr. Leduc knew he could trust CPower’s ideas and suggestions, believing they would lead to the hospital successfully returning to the market. CPower recommended a company that could handle the upgrading and permitting of Rhode Island Hospital’s diesel generators, which are scheduled to return to full demand response participation by Spring 2019.
Selling up with a Little Help from Friends
According to Mr. Leduc, convincing the hospital’s upper management of the positives related to upgrading their diesel generators was “easy.” CPower’s Bill Cratty armed Mr. Leduc with figures that showed a clear return on investment (ROI), with future earnings from demand response covering the cost of the upgrades with a payback period of six months.
“The money we’re putting in to [the generator upgrade project],” says Mr. Leduc, “is ridiculously small compared to what the payback is.”
Advocacy and Guidance
CPower’s additional role as energy market advocates proved instrumental in helping facilitate Rhode Island Hospital’s generator upgrade project. Ray Berkebile, CPower’s Senior Director of Engineering, has led CPower’s approach to helping customers deal with EPA regulations concerning diesel generators, personally reviewing over 3000 generators from 2015-2017.
Mr. Berkebile met with Rhode Island’s Department of Environmental Protection (DEP) to educate the agency on the benefits up upgrading diesel generators so they may participate in demand-side energy management and help alleviate both grid stress and high electricity prices. Mr. Berkebile was able to demonstrate that properly-permitted diesel generators can have an impact on the grid’s overall balance and health without running for an excessive amount of time.
Toward The Future, Bright with Distributed Energy Resources
Rhode Island hospital’s demand-side energy future is poised to include more than successful peak load management and demand response. With CPower by its side, the hospital is exploring ideas to achieve greater sustainability through distributed energy resources (DERs).
CPower’s Bill Cratty believes hospitals, with their need to be operational 24/7/365, are suited to take advantage of emerging DER technologies. Rhode Island Hospital is currently exploring options for the installation of solar canopies on the hospital’s parking lots, which would add another source of on-site energy generation to the hospital’s current fuel mix. Adding such DER sources contributes to improved sustainability for hospitals that consume power round-the-clock to care for patients and must continue to consume electricity even when the grid is unavailable to deliver it.
With CPower by its side, Rhode Island hospital is set to continue leading the healthcare industry as a shining example of how optimized demand-side energy management offsets energy spend and contributes to increased sustainability.
In this white paper, we’ll explore the various forms that demand-side energy management takes. We’ll look at how one university seized the opportunity to generate significant revenue from demand response participation and succeeded spectacularly. Finally, we’ll examine distributed energy resources and how another university found an innovative way to both optimize their energy program and maximize their revenue with intelligent storage.
Virginia Beach, VA – Faced with the prospect of losing hundreds of thousands of dollars in demand response revenue, this Virginia Beach site discovered a way to keep the money flowing without interruption.
THE CUSTOMER: LAKE GASTON WATER SUPPLY PIPELINE
The Lake Gaston Water Supply Pipeline, also known simply as Lake Gaston, is at the heart of the economic vitality of the City of Virginia Beach (see our City of Virginia Beach case study). Located west of the city, on the North Carolina border, Lake Gaston employs six vertical-turbine centrifugal pumps, each with a nominal capacity of 10 million gallons per day, to supply Virginia Beach with the 30 million-plus gallons of treated drinking water that its residents consume each day. (The high-capacity pumps give the station the flexibility to increase pumping up to 60 million gallons per day.) The water flows through a 76-mile-long pipeline (which includes six overhead river crossings) from the lake to facilities in nearby Norfolk for treatment.
Since 2010, Lake Gaston has participated in the demand response program offered by CPower through Virginia’s Department of Mines, Minerals and Energy (DMME). This program pays government entities market rates for curtailing their electricity usage during times of high demand on the grid. Participants save on their energy costs and earn revenue that can be reinvested in upgrades, energy efficiency projects, and more. Lake Gaston’s participation has earned them nearly half a million dollars since 2011 (see chart below).
Steven Poe, the city’s Water Master Planner, assumed management of Lake Gaston in 2015. At the time, Lake Gaston had already earned more than $221,000 in DR participation, and Steve understood he could count on a continuing and beneficial revenue stream. Unfortunately, he hadn’t counted on a court ruling that dramatically changed the role of emergency generation in demand response.
THE CHALLENGE: CONFRONTING THE VACATUR
In 2013, the federal Environmental Protection Agency (EPA) issued emission standard exemptions that permitted emergency generators to operate up to 100 hours a year for “emergency demand response.” Lawsuits from environmental groups, state governments, and commercial power generation groups challenged the EPA’s ruling, saying it would hurt air quality and grid reliability. In May, 2015, the United States Court of Appeals for the DC Circuit vacated the 100-hour rule (on procedural grounds). This vacating ruling, dubbed “the Vacatur,” would take effect on May 1, 2016.
The Vacatur threatened to have a disastrous impact on Lake Gaston’s DR participation—and earned revenue. Lake Gaston was designed to pump continuously and could not do so without the use of its diesel engine generator.
The Vacatur left Steve no choice but to withdraw his diesel-powered generator from the DR program. Without it, he not only faced loss of revenue from its participation, but potentially the loss of all DR revenue. If the generator could not be used to sustain pumping during curtailment, then Lake Gaston would not be able to curtail the required power during a called event without jeopardizing Virginia Beach’s water supply. The pumps, then, would also have to be pulled from the program, essentially shutting down the lucrative revenue stream.
Or would they?
Steve felt that the financial benefits of DR participation warranted a closer look for a creative solution. “When we realized we couldn’t curtail anymore with our generator, we didn’t want to miss out on the incentives,” he says.
But to reach their target, they would have to conduct a full shutdown. Could they shut the pumps down—and bring them back up—without damaging both pumps and pipelines? And if they could, would that be enough to continue in DR without damaging their savings and earnings?
THE STRATEGY: SHUT ‘EM DOWN
Full shutdowns are rare in nearly all industrial settings, but Lake Gaston had a precedent. In 2014, a 39-ton coal ash spill on one of the lake’s tributaries forced the pump station to shut down for about two months. This was the first extended shutdown of the pump station in its history and caused a great deal of concern. Lake Gaston was designed to maintain a minimum sustainable pumping rate of eight million gallons per day flowing through the pipeline to maintain water quality and prevent issues with start-up. When pumping resumed, Virginia Beach learned that the pipeline was resilient and could recover with minimal effort.
Using that experience, Steve and his team are able to shutdown the major energy consuming equipment at the pump station – including the pumps and industrial HVAC system – within one and a half hours of being notified of a DR event. They’ve learned that participation without their generator is worth the extra effort of executing full shutdown and start up procedures, which requires monitoring the SCADA system and gradual reduction and startup of pumps to prevent water hammer.
THE CPOWERED SOLUTION: DMME + CPOWER DEMAND RESPONSE
Steve and his team had proven that pumps could be shut all the way down and brought all the way back up, on demand, with no damage to pumps and pipelines. He could curtail his assets enough to continue to participate in DR. The question remained, though: Would it be enough? “We were worried,” Steve says, “that if we didn’t cooperate or couldn’t participate in the test or event, there would be a penalty.” That could erase any financial benefit.
Fortunately for Steve, he had Leigh Anne Ratliff, CPower Account Executive, working with him. Leigh Anne has been with DMME since the inception of the joint DR program, and with Lake Gaston since they enrolled in the program in 2010. (She also works extensively with the City of Virginia Beach.) No one is as familiar with the DR program and Lake Gaston’s participation than Leigh Anne.
Leigh Anne told Steve that, because Lake Gaston (and the City of Virginia Beach) participate through DMME’s demand response program, there would be no consequences for not participating in a test or event. “The great thing about the DMME contract with CPower,” Leigh Anne explains, is that you really cannot be penalized. You’ll never owe anything. The worst that can happen is you’ll earn zero dollars for that test or event.”
THE RESULT: $400,000+ AND COUNTING
With penalties off the table and a successful pump shutdown protocol established, Steve continued Lake Gaston’s enrollment in the DMME DR program. He has yet to see zero dollars earned.
“We’re committed to saving money and being good stewards of public resources,” Steve says. “CPower is very supportive and encouraging for us to participate, to meet our commitments. When I first stepped into this position and informed my supervisors about the program, we all thought it was just too good to be true. But it has really worked out, and we are happy to continue participation.”
|Lake Gaston Water Supply Pipeline—Demand Response Earnings|
|Delivery year||kWs submitted||Earnings in $|
|Totals to date||12,923||$ 409,722.17|