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Dirty Power: The Story Behind UFR and ERCOT’s LR Demand Response

April 02, 2019

In our last ERCOT blog post, we laid out the record high demand/historically low supply scenario facing ERCOT and its customers this summer. As we reported, ERCOT acknowledges that this situation could result in emergency energy alerts. This will more than likely result in high electricity prices, perhaps record high prices. If you participate in ERCOT’s Load Resource (LR) demand response program, those high prices will mean generous revenue paid to you for participating in LR.

In the rush to enroll in LR and capitalize on some Texas-sized payouts before the summer enrollment deadline, though, a lot of commercial and industrial customers have encountered an unexpected ERCOT roadblock: UFR. And they want to know: What’s a UFR? What’s it got to do with LR DR? Why do I need it? And how do I get it?

To answer these questions and get everyone on the path to significant summer revenue, we have to start with dirty power.

Dirty power is a term used to describe electricity that is affected by abnormalities such as power surges, excessive line noise, and fluctuating frequency. It usually describes power intended for delivery through the electrical grid, and that’s how we’ll use it here. It can have several causes, but the end result is almost always the same: damage to your equipment and infrastructure that can cripple your daily operations.

You probably don’t think of electrical power as “dirty.” It’s hard to imagine, perhaps because you can’t see, smell or touch it. You can see, touch or smell dirty water and dirty air. Same with work clothes, office windows, and motor oil.

But electric power can in fact be “clean” or “dirty.” Unlike the examples above, though, dirty power stays dirty. You can’t clean it, at least not easily. The abnormalities that make it “dirty” are usually generated at the source and can flow to the farthest reaches of the grid almost instantly.

Wind is a major source of dirty power. Ironically, it’s also the current centerpiece of Texas’s nation-leading embrace of “clean” renewable energy. The Lone Star State’s drive to incorporate more renewable energy sources to power the grid has established Texas as the largest producer of wind power in the U.S. ERCOT says wind accounted for 17.4 percent of electricity generated in its service area (roughly 90 percent of Texas) in 2017.

But this intermittent source of power generation is also a major source of “harmonics” — a distortion of the underlying sinusoid of a signal, referred to as over or under frequency events. That’s dirty power. West Texas, where there are a lot of wind generators, is dramatically affected by frequency changes. As the wind increases or decreases, the generation created by wind turbines flows onto and off the grid, causing frequency changes as the load drops and rises. At the least, these frequencies can cause overheating and premature equipment failure.

That brings us to UFR. UFR stands for Under Frequency Relay. According to IEEE, UFRs are used to automatically shed a certain amount of load whenever the system frequency falls below an acceptable level for grid stability. Think of it as an industrial-strength circuit breaker that protects the grid — and your business — from shorting out.

So, why does ERCOT require that LR participants have UFRs installed? Because UFRs help them fulfill their mission to maintain the security and reliability of the ERCOT system. That includes helping the grid stabilize autonomously by stopping the spread of Under Frequency.

As the number of wind turbines dotting the windswept Texas plains has increased, so has the possibility of frequent under frequency conditions. So has the need to stop the spread of UFR throughout the grid. (The oil and gas communities across West Texas were among the first to adopt UFRs in the fields, largely to protect their machinery.)

To do that, they need you. Customers that can meet certain performance requirements can be qualified to provide operating reserves as a Load Resource and be eligible for a capacity payment. In short, LR DR. And that requires that an Under Frequency Relay be installed that opens the load feeder breaker on automatic detection of an under frequency condition.

As we noted above, dirty power can spread easily and rapidly across the state and affect every organization attached to the grid, especially commercial and industrial concerns. And we also noted that to be considered a Load Resource and receive capacity payments, you have to be available as needed. A great way to knock out an available Load Resource is dirty power in the form of an under-frequency condition. UFRs assure that your availability will not be affected by this particularly spreadable form of dirty power.

If you want to enroll in LR and don’t have a UFR, CPower can help. We work with world-class third-party resource vendors and partners who can design and install UFRs to the exact specifications of the CPower curtailment plan developed for your facility. By working with the best, we assure you of the best opportunity to save and earn.

You don’t need a UFR to go about your daily business. But you do need it to receive the financial benefits of being a Load Resource available to provide invaluable operating reserves as needed. Considering that the growth of renewables, especially wind, shows no signs of abating in Texas, and with it the threat of under frequency conditions, having a UFR might just be a good idea, period.

2019 State of Demand-Side Energy Management in North America

The 2019 State of Demand-Side Energy Management in North America is a market-by-market analysis of the issues and trends the experts at CPower feel organizations like yours need to know to make better decisions about your energy use and spend.

ERCOT Summer 2019: Supply, Demand, and Red-Hot Energy Prices

February 20, 2019

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.

It’s no coincidence that the 2018 average LR price ($/MWh) spiked dramatically during July, the month with ERCOT’s all-time peak demand record. Don’t expect things to cool down in 2019.

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.

 

ERCOT Webinar Series

July 11, 2018
CPower’s on-going ERCOT webinar series is an invaluable tool for navigating Texas’s unique energy-only market, and maximize your participation in ERCOT’s lucrative demand response programs.Join CPower experts as they provide in-depth insights, proven strategies, and up-to-the-minute assessments— and show how you can ensure vital grid reliability while reaping the rewards of demand response participation.

Will Prices Rise With The Temperature In Texas This Summer?

June 14, 2018

As we discussed in our recent blog post about this summer’s potential “perfect Texas storm,” two significant factors projected for the ERCOT (Electric Reliability Council of Texas) energy market could have a noticeable impact on demand response participants: Reduced supply and record peak demand. The resulting clash of supply and demand projections points to the possibility of unexpectedly high prices for those organizations participating in ERCOT’s Load Resources (LR) demand response program.

As we noted last November, ERCOT approved the retiring of three coal-fired generation plants, reducing available generation capacity by about 4,200 MW. In its Final Summer 2018 Seasonal Assessment of Resource Adequacy(SARA), ERCOT projects the Summer 2018 total generation capacity available to be 78,184 MWs, resulting in a capacity reserve margin of roughly 11%. That’s well below its capacity reserve margin target of 13.75% of peak electricity demand.

In a slow economy, reduced supply might not be a problem. But that’s not the case in Texas. The economy is booming in the Lone Star State—in fact, it’s currently the fastest growing economy in the nation. That’s good news for Texans, but not-so-good news for Texans looking forward to a summer of uninterrupted electric supply and the state’s historically low energy prices.

Here’s why. ERCOT predicts “record-breaking peak demand usage” for this summer—72,756 MW. According to the SARA report, that’s more than 1,600 MWs higher than the all-time peak demand record of 71,110 MW set in August 2016.

ERCOT recognizes that this tight margin—a mere 5,428 MWs—might be cutting it too close for comfort. With an eye to grid reliability, it says it could find it necessary to deploy Ancillary Services—Load Response, or LR—and Emergency Response Service (ERS) demand response capacity “to maintain sufficient operating reserves.”

The law of supply and demand usually looks something like this:

Low supply + High demand = High prices

With that in mind, will we see record high prices this summer? The forward ERCOT energy market certainly seems to think so. Projected wholesale energy prices in ERCOT for August 2018 have more than doubled since the 4,200 MWs of generation announced it planned to retire in early 2018.

While the price customers receive for participating in LR is different than the energy price they pay when using energy, there is generally a correlation in that when energy prices rise in ERCOT, LR prices also rise. This is due to the structure of the ERCOT market where lower reserves available typically results in higher energy and LR prices.

As we’ve laid out above, we can expect lower reserves available in ERCOT this summer and therefore higher energy prices than we have historically seen.

While it remains to be seen if this summer will ultimately result in record high LR prices, we can already see in the above chart that there has been an increase in LR prices since the 4,200 MWs of generation retired in early 2018. Will this trend continue? That largely depends on the weather and generation availability this summer, but a great way to offset the increase in energy prices is through participation in LR which allows you to proactively gain revenue from your energy usage.

Join CPower on Tuesday, June 26, for the third in our ERCOT Webinar Series, “The Perfect Texas Storm: Low Reserves, High Prices, and Record Peak Demand for Summer 2018.” Join CPower’s Texas experts Mike Hourihan and Joe Hayden as they tackle the topics that will impact demand response customers this summer.

The webinar is free and now open for registration.

“The Perfect Texas Storm: Low Reserves, High Prices, and Record Peak Demand for Summer 2018”

Date: June 26, 2018

Time: 10:00-11:00 a.m. Central Time

REGISTER NOW

Are You Ready For This Summer’s Perfect Texas Storm?

In October 1991, Hurricane Grace formed near Bermuda and began moving north. At the same time, a massive low-pressure system moved south from Canada. They converged in the North Atlantic, creating a deadly, cataclysmic weather event that was dubbed “the perfect storm,” later immortalized in the film of that name starring George Clooney.

No such weather event (or related George Clooney appearance) is currently predicted for Texas this summer. However, two significant man-made forces are currently converging in the ERCOT (Electric Reliability Council of Texas) energy market: Reduced supply and projected record peak demand. The resulting “perfect storm, Lone Star-style” of clashing supply and peak demand projections has led ERCOT to ask those involved in demand response (as well as generators and transmission owners) to focus on maximizing performance.

Let’s take a look at these two big factors impacting ERCOT this summer. First, supply. In Texas, the name of the game is reliability. To ensure a reliable grid, ERCOT prefers to maintain a capacity reserve margin target of 13.75% of peak electricity demand. These reserves enable them to serve electricity needs in case of unexpectedly high demand or levels of unanticipated outages from generation plants.

As we noted last November, ERCOT approved the retiring of three coal-fired generation plants, reducing available capacity reserves by about 4,200 MW. In its Final Summer 2018 Seasonal Assessment of Resource Adequacy (SARA), ERCOT projects total summer capacity to be 78,184 MWs, and the Summer 2018 planning reserve capacity to be 5,428 MWs, or roughly 11% reserve margin. That’s well below its capacity reserve margin target of 13.75% for peak electricity demand.

Second, demand. Texas currently boasts the nation’s fastest growing economy. Its growth is driven, as Forbes reported in May, by a resurgence in oil and gas drilling in the panhandle as well as growth in manufacturing that outpaced national growth rates in that sector. ERCOT’s SARA report acknowledges that this growing economy will continue to drive demand for electrical power, going as high as 84,814 MWs by 2023.

In fact, ERCOT predicts “record-breaking peak demand usage” for this summer—72,756 MWs. According to the SARA report, that’s more than 1,600 MWs higher than the all-time peak demand record of 71,110 MW set in August 2016.

So—72,756 MWs of demand. 78,184 MWs of capacity, 5,428 MWs of reserve planning capacity… frankly, that’s cutting it pretty close. Maybe tooclose. In fact, ERCOT thinks these tight reserves could trigger the need to deploy Emergency Response Service (ERS) demand response capacity, “to maintain sufficient operating reserves.”

If this happens, it increases the potentialforreal-time emergency events in order to maintain the grid’s reliability. How does this affect ERS participants?

ERS pays organizations like yours for using less energy when the grid is stressed and electricity prices are high. There are two types of ERS programs: ERS 10 and ERS 30, which pay businesses for being available to curtail their electricity load within 10 and 30 minutes respectively. The request to curtail is a referred to as a “called event”.

In the aftermath of the SARA report’s release, our ERCOT office heard from a number of customers who were concerned about the potential for real-time extended events. They feared disruptions to operations and the potential negative impact these disruptions could have on their customers and their bottom line. But how likely are we to see calls to curtail in ERS?

Looking at historical data, not very likely. Called events in ERS are rare. Between 2008 and 2017, a total of three events have been called. In the last eight years, we have seen no events at all. Over the past ten years, capacity shortage events above and beyond annual tests have averaged 0.3 per year in ERS 10, and 0.2 per year in ERS 30. As far as frequency goes, over the last 10 years the most that the ERS program has seen in one year is… two.

Based on the numbers, then, the odds are good that you won’t have to endure many, if any, curtailment requests. We’re confident that you should still be able to participate as in years past, and continue to earn revenue for your availability.

That said, CPower recommends the following steps to maximize your performance in ERS this summer.

Check your plan. Businesses and organizations change, expand, contract, evolve, and are seldom the same year over year. The curtailment plan you first developed with CPower’s engineers may no longer be the best fit for your current electricity usage and operations. Contact CPower and set up a review of your plan. An up-to-date curtailment plan is the best path to success in demand response. (You may even find some additional kWs to enroll that weren’t there before.)

Automate your DR. Automation is required for ERS 10 participation, but it’s still optional in ERS 30. Having even one or two steps on your curtailment process automated can make the difference between performing and underperforming. Make sure you discuss automation opportunities, including incorporating CPower’s Link API, when you review your curtailment plan.

Test your generators—at full load. If you’re counting on your back-up generators to provide you with needed energy during your curtailment events, make sure they can handle the load. Too many generators undergo their monthly and weekly test running off load, for fear of wearing their generators out. The problem is, generators are designed to run at their stated rating, every time. In fact, testing at less than full load can ruin an engine in as little as 50 hours of accumulated running time. Ask CPower’s engineers to review your current onsite generation process as part of your curtailment plan review.

While you’re at it, set up some time to assess your generators for enrollment in demand response. Properly permitted, onsite generation is source of additional revenue. Talk with CPower about your options.

CPower is here to help you through what could be a long, hot summer in the Lone Star State. ERCOT expects everyone, including demand response participants, to give the grid maximized performance for the benefit of all. CPower is here to help you do just that.

Join CPower on Tuesday, June 26, for the third in our ERCOT Webinar Series, “The Perfect Texas Storm: Low Reserves, High Prices, and Record Peak Demand for Summer 2018.” Join CPower’s Texas experts Mike Hourihan and Joe Hayden as they tackle the topics that will impact demand response customers this summer.

The webinar is free and now open for registration.

“The Perfect Texas Storm: Low Reserves, High Prices, and Record Peak Demand for Summer 2018”

Date: June 26, 2018

Time: 10:00-11:00 a.m. Central Time

REGISTER NOW

Green Buildings Attract Happy Tenants and Bring Green Earnings to the Commercial Real Estate Industry

May 25, 2018

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.

 

Getting started

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.