Summer 2019 is right around the corner, which means another season of PJM’s Emergency Capacity demand response (DR) program is set to kick off. This 2019/2020 marks an important pivot point for DR in PJM. With DR enrollment underway, let’s take a look at some things to expect this summer.
2019 Summer Outlook
Weather-wise, early indications point to the PJM region experiencing normal to mild summer temperatures. That’s good news for DR customers in Emergency Capacity but may be challenging for peak shavers to accurately predict PJM’s 5 CP (Coincident Peak) hours. The weak El Nino climate is not expected to have much of an impact, although there’s a good chance that the historically wet 2018 season will carry over to 2019. So don’t put away those rain slickers just yet!
Capacity-wise, PJM forecasts summer peak load of 151,358 MWs. Unlike in Texas, where the grid operator ERCOT (Electric Reliability Council of Texas) is forecasting a reserves situation that make summer emergency events likely, the PJM region at this point seems to have adequate reserves. As we learned during the 2014 Polar Vortex, though, nothing is completely certain when it comes to expected supply and demand. Here’s hoping the summer weather forecast proves to be right.
Goodbye Base and Summer Capacity, Hello Capacity Performance— and Seasonal Aggregations
June 2019 will mark the final season of PJM’s summer-only DR programs. PJM retired the Limited and Summer Extended DR programs after the 2017/18 delivery year, and now will retire the Base Capacity program at the conclusion of the 2019/20 delivery year.
This will usher in the long-talked-about Capacity Performance (CP) DR program as the lone DR program available, starting next year for the 2020/21 delivery year. As you probably know (and as we discussed in last year’s white paper on the myths around CP), the CP program required DR participation and compliance year-round, not just during the summer. As originally designed, CP DR customers would have to participate with one load reduction value for the entire year. To many, this has caused far more problems than it solved, as many DR customers feared having their participation levels drastically reduced — or even dropped from the program entirely — due to concerns over their inability to participate and comply in the winter.
Fortunately, PJM and the FERC (with a little help from CPower Market Development and others, advocating on our customers’ behalf) may have found a way to put those concerns to rest.
The FERC (Federal Energy Regulatory Commission) recently approved a PJM filing that will now allow DR customers to participate in CP with two different summer and winter seasonal load reduction values. Of course, there’s a catch. Participating with separate summer and winter values is contingent upon the customer’s curtailment service provider (CSP, i.e., CPower) being able to offset its seasonal load to create “CP Aggregations.”
How does that work? Let’s take two customers, Alpha Amalgamated Alloys and Beta Better Ball Bearings. Each has participated in summer-only DR for years. Now, however, they have to make year-round commitments, and they’re stuck.
Enter the new rule and their CSP, CPower. CPower works with each to determine what each can contribute for summer and, separately, for winter. Alpha determines that they can reduce 5 MW in the summer but only 2 MWs in the winter. Beta determines that they can reduce 1 MW in the summer but 4 MWs in the winter. And they’re both in the same utility zone within PJM.
Under the rule as originally created, Alpha would be faced with having to curtail only 2 MWs in the summer, when they used to be able to curtail—and monetize—5 MWs. Meanwhile, Beta would be unable to monetize their additional 3 MWs of now-required load in the winter. That could change the desire to participate in Emergency Capacity DR for these two long-time customers.
The new rule, however, allows their CSP to aggregate (or combine) their reductions to create a CP zonal aggregation of 6 MWs year-round. Their combined summer reductions and winter reductions balance each other out and comply with the new CP requirements. Each continues to benefit from DR participation in PJM.
This program rule change, thankfully, allows more flexibility and opportunity for PJM’s DR customers to participate as Emergency Capacity resources (which PJM always needs). This assumes, however, that their CSP has the market position and a diverse portfolio to successfully manage these DR CP programs.
Shameless plug: CPower, of course, has the capability to generate zonal CP aggregations across all PJM zones and all customer types. We’ve worked hard to not only build ourselves into the top curtailment aggregator in PJM; we’ve also advocated tirelessly before PJM to create this opportunity for our customers to ensure that CP doesn’t negatively impact PJM’s vital electric reserves. In this way, barriers become opportunities, and everyone wins.
What to Look Out For
PJM has pushed back their next Base Residual Auction (BRA) for the 2022/23 delivery year from May, 2019, to August, 2019 and the possibility still remains that it could get pushed back again until early Spring 2020. This will allow for some RPM rule changes to be implemented. If you’re interested in future capacity prices and DR availability, stay tuned, as the results for that auction won’t be known for a few more months.
PJM stakeholders are discussing potential changes to the mandatory DR test even that occurs each summer if there is no actual emergency event called. Some topics of discussion are: increasing the test event to longer than one hour; compensating test event compliance with emergency energy payments; PJM scheduling the test event instead of the CSPs; and possibly a mandatory winter testing provision. Nothing’s set in concrete yet, and CPower will keep you up-to-date as the discussions move forward.
Just Released: 2019 State of the Market
Finally, CPower has released, “2019 State of Demand-Side Energy Management in North America.” This is an invaluable resource filled with analysis and commentary from CPower’s market experts (including yours truly). It covers all regions served and supported by CPower in the U.S. and Canada and will be an important source of information for DR customers and partners regionally and nationally. Download your guide here.
If you have any questions about goings-on in PJM now and in the future. don’t hesitate to reach out to the PJM team. As always, we’re here to help.
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.
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.
In this paper, CPower’s Meg Kelly will explain how organizations can earn revenue for their qualified energy efficiency (EE) projects by offering their permanently reduced demand into PJM’s forward capacity market.
The paper will detail what types of projects qualify for monetization and the best practices for measuring and verifying EE projects so they can earn maximum revenue through PJM.
Virginia Beach, Virginia – Energy Manager’s determined pursuit of energy efficiency savings earned the city tens of thousands of dollars in rebates in just a few short years. (Download this case study as a PDF)
THE CUSTOMER: THE CITY OF VIRGINIA BEACH
Located where the Chesapeake Bay meets the Atlantic Ocean, the City of Virginia Beach is anything but a sleepy resort town. It is the most populous city in the Commonwealth of Virginia, and boasts an economy comprising tourism, national and international corporate headquarters, advanced manufacturing, military bases, and agribusiness.
Besides the beach (the longest pleasure beach in the world, according to the Guinness Book of Records), visitors are drawn year-round to Virginia Beach’s many renowned attractions, including:
- The Virginia Beach Convention Center the nation’s first convention center to earn LEED® Gold certification as an existing building from the U.S. Green Building Council;
- The Virginia Aquarium & Marine Science Center, which attracts 650,000 visitors a year and hosts more than 10,000 fish, mammals, birds, and reptiles representing more than 300 species from around the world; and
- The Virginia Beach Boardwalk, three miles of oceanfront access, bike paths, live entertainment, restaurants, shops, and a 12-ton bronze statue of King Neptune.
Keeping the Convention Center, the Aquarium, and 350+ city buildings running in top shape uses a great deal of energy. That means, Virginia Beach is a city that understands the value of world-class demand-side energy management in municipal operations.
THE CHALLENGE: PERMANENT ENERGY (AND COST) REDUCTION
Virginia Beach’s city government serves its citizens and visitors from more than 350 facilities citywide. By 2010, constant increases in energy costs incurred at these facilities had risen to $20 million a year, a total plagued with “lost” buildings and meter reading errors in the hundreds of thousands of dollars.
To address this and other issues, including utility billing, Virginia Beach created the position of Energy Manager and hired Lori Herrick, MBA, LEED Accredited Professional, to lead its energy initiatives and manage municipal energy expenditures. With $5 million from the city, an unexpected $4 million windfall from the U.S. Dept. of Energy, and a mandate to conquer the city’s energy challenges—Ms. Herrick went to work.
THE CPOWERED STRATEGY: FINDING READY KILOWATTS
Energy efficiency (EE) projects result in permanent energy reductions, which the city recognizes as arguably the cheapest, most abundant, and most underutilized resource available to local government. With this in mind, Ms. Herrick sought to find out more about an energy program being offered through DMME, the state’s Division of Mines, Minerals and Energy. The program in question promoted energy performance contracts (EPC) to significantly reduce energy costs through energy efficiency measures that meet a guaranteed level of energy savings.
Ms. Herrick began the process of enrolling city facilities in DMME’s EPC programs, but was soon faced with the complex challenges of identifying what facilities, and how many kilowatts, to enroll. Fortunately, she received another windfall. She was introduced to CPower’s champion of Virginia demand-side energy management, Leigh Anne Ratliff.
Ms. Ratliff has worked with DMME since 2007 to offer integrated demand response services on a performance basis with no set up costs to the state. Demand response programs pay organizations such as government agencies for curtailing, or reducing, their electricity usage during times of high demand. Government entities who participate in demand response both save costs on reduced electricity use and earn revenue for their trouble.
As Ms. Herrick soon found out, CPower has an additional strength: the ability to provide complete measurement & verification (M&V) services for energy efficiency projects, necessary to receive utility rebates and credits. More importantly, CPower has unmatched experience in finding additional kilowatts (kWs) all too easily overlooked in already completed energy efficiency projects—and successfully submitting those kWs for even greater returns on the city’s investments.
CPOWERED SOLUTION: FOLLOW THE DATA (AND FIND THE MONEY)
Because the permanent energy reductions resulting from energy efficiency projects can pay dividends for up to four years after completion, Ms. Herrick and Ms. Ratliff set about the task of unearthing four years’ worth of city files to find buried EE gold – kilowatts that others missed. Looking back, Ms. Herrick says, “We were determined… it was kind of a no-brainer, to go through the files of projects we’ve done and submit the information. We were analyzing these projects to make sure the payback was there… They gave us a lot of data that Leigh Anne could use to calculate our benefit to the grid and then give us a check for it.”
From the outset, Ms. Herrick considered no project too big to tackle, working to help the Virginia Beach Convention Center earn its LEED® Gold certification (see below). She also considered no project too small to enroll, at one point submitting a 7kW project. As Ms. Ratliff explains, “If she had it, she sent it. One building got a credit for $52 in 2017. We’re learning on the cost-benefit element of this, but Lori is always looking further, to get every bit out of it that she can. In that way, she’s revolutionized what people put into energy efficiency.”
SPOTLIGHT: VIRGINIA BEACH CONVENTION CENTER
The Virginia Beach Convention Center (VBCC) is the crown jewel among the city’s facilities. It was the first convention center in the state to receive certification from Virginia Green, the Commonwealth’s voluntary campaign to promote environmentally friendly practices in Virginia’s tourism and hospitality industries. As noted above, it is also the nation’s first convention center to earn LEED® Gold certification as an existing building from the U.S. Green Building Council. These certifications are increasingly important in the competitive convention planning industry, where the VBCC competes nationally. Customer awareness of, and insistence on, “sustainable destinations” plays a greater and greater role in siting conventions.
The VBCC is also a shining example of how state-ofthe-art EE projects can enhance a city’s energy budget as well as its national reputation. Nearly all lighting in the convention center is LED lighting, and the HVAC is controlled through a state-of-the-art Direct Digital Control (DDC) system that incorporates an automated demand response program to control spikes in peak electricity demand. The automation limits any impact to convention-goers and still saves energy dollars.
“Together, we developed a process to systematically go through the building to reduce demand with the least impact on customer events.” – Leigh Anne Ratliff
It’s also a shining example of how the city and CPower Engineering worked together to successfully address one of the biggest challenges facing active convention centers: controlling peak demand electricity and total kilowatt usage. Event load-ins and load-outs at VBCC can be particularly problematic because the bay doors open directly from the loading dock into conditioned exhibit space.
“The Convention Center was a very cool energy project, because people in that space change every day,” Ms. Ratliff explains. “Bay doors are open for hours at a time, a lot of bodies and boxes moving in and out. The open bay doors are a significant source of heating and cooling loss. So how do we control that without disrupting loadins and other convention-goers already onsite?”
The first step was to analyze the status of the bay doors during times of peak demand. The Center’s zoned DDC system, which controls the Center’s HVAC, was programmed to prevent the air conditioning from running in the exhibit halls if the bay doors were open. In addition, the DDC system receives power pulses from the electricity switch gears throughout the day. In the next phase, an automated demand response program was integrated into the DDC system. When the system reads that the Center’s demand is getting ready to peak, it automatically implements one of three phases. Phase 1 changes back-of-house temperatures by one degree. If demand continues to peak, it implements Phase 2, which changes back-of-house temperatures by two degrees, all the way to three degrees at Phase 3. This automated program reduces the demand on VBCC’s chillers, which in turn reduces peak electricity demand.
“Our CPower engineers worked with VBCC’s staff to understand how the bay doors and events taking place in the building impact peak demand and usage,” Ms. Ratliff says. “Together, we developed a process to systematically go through the building to reduce demand with the least impact on customer events.”
With its DDC system program finalized and firmly in place, the Convention Center was able to ease demand on the grid, with near-zero disruption to its customers’ activities. In fact, the Center saved an astonishing 15 percent off their peak during its first year. And since the price of electricity peaks along with demand, this translated into significant cost savings that they otherwise would not have been able to attain.
THE RESULTS: $87,000 AND COUNTING
CPower is instrumental in helping the City of Virginia Beach navigate the complexities of PJM energy efficiency credits and paybacks. CPower submitted the uncovered EE data to PJM and earned the city both savings and revenue. For the delivery years 2017 through 2022, earnings from PJM for the city will reach just over $87,000 (see chart), with the VBCC earning $40,000 alone. And the city’s just getting started. “We just got another big round of funding,” Ms. Herrick says, “so Leigh Anne’s going to be hearing a lot from us.”
LOOKING AHEAD: DEMAND RESPONSE
In November, 2017, the Commonwealth of Virginia retained CPower through 2020 to continue to offer integrated demand response (DR) services to state agencies and departments through DMME. Ms. Herrick worked with Ms. Ratliff to identify five city sites they believe could be the most eligible for DR: Judicial and correctional facilities, the Convention Center, the Aquarium, and the central plant. The Convention Center currently participates in CPower’s DR program and earns revenue. The remaining facilities are undergoing audits to better understand their suitability. “DR involves curtailment, and we have to be careful when and how we curtail,” Ms. Herrick says. “That’s especially true of the aquarium. I want to earn revenue for the city, but we also don’t want to be responsible for a fish fry.” There’s no doubt, though, that Ms. Herrick will find a way to make it work. Above all else, she and the city are determined.
CPower will support their energy goals at every turn, with an energy strategy custom-made to meet their unique requirements.
SAVINGS AND EARNINGS: CITY OF VIRGINIA BEACH/VIRGINIA BEACH CONVENTION CENTER
Projects include lighting and green building. Sites include Aquarium, Boardwalk, Convention Center, library, maintenance garages, recreation centers, fire stations, police stations, EMS administrative and training center, and arts center.
City of Virginia Beach
|PROJECTS||ESTIMATED DR (kW)||FORECASTED GROSS $|
Virginia Beach Convention Center
|PROJECTS||ESTIMATED DR (kW)||FORECASTED GROSS $|
|PROJECTS||ESTIMATED DR (kW)||FORECASTED GROSS $|
Big news came out of the PJM Interconnection’s Base Residual Auction (BRA), for the 2021/22 delivery year, two weeks ago. Contrary to what most industry experts and trade journalists had predicted, PJM’s Capacity Performance (CP) emergency demand response program did not fail. In fact, we saw offered and cleared Demand Response megawatts (MWs) increase drastically, the highest volume of Energy Efficiency to ever clear a BRA, and prices came soaring back up, shocking prognosticators everywhere.
Although this may all be contrary to the opinions of the majority in the energy industry, it is right in line with what I highlighted in my white paper from October, 2017, “PJM Capacity Performance is Here. Don’t Believe the Myths.” In it, I outlined three “myths” that were clinging to PJM’s CP-only demand response program and shot each one down. Seven months later, the market has proven us right.
It would be impolite to say, “I told you so.” So instead I’ll show you. Here are the three myths that I discussed, and how the results Wednesday’s auction proved each of them wrong.
Myth #1: Demand Response has declined over the last six years.
I called this a “pernicious myth that can prevent organizations from opening a rewarding and potentially substantial revenue source.” The idea was cleared capacity was declining, which meant demand response is declining. Not so, I said. There’s a big difference between cleared capacity and enrolled capacity, and while cleared may have seen recent declines, enrolled was remaining steady and strong, which means DR overall remains strong and will continue to be.
Flash forward to Wednesday. The amount of Demand Response that cleared the BRA was 11,125.8 MW. Not only is that about 3,300 MW more than last year’s BRA (the first for CP-only). It is the highest amount of cleared DR in a BRA since the 2016/17 BRA five years ago. Now it remains to be seen if 11,125.8 MW of DR is enrolled in the 21/22 DY, but it’s well within reason to expect ~9,500 MW to be enrolled, which would maintain the amount of participating DR flat YoY.
Myth #2: New CP requirements make it difficult to participate in DR.
In my white paper I stated that although grid reliability is PJM’s number one focus (and rightfully so), and the new CP requirements imposed on Demand Response customers appear daunting (with higher noncompliance penalties and much longer requirements to perform), the impact on DR should be negligible. The implementation of CP to help prevent PJM from entering into emergency situations should mean less of a need for emergency resources such as Demand Response.
It appears that Demand Response customers are adjusting their mindsets from thinking that they can—or only want to—participate in summer-only emergency programs, to understanding that they do have the ability to be year-round resources. And Curtailment Services Providers now believe that they can support a Capacity Performance DR offering and feel there are sufficient customers that can comply and meet their RPM Commitments. This is evident in that over 2,000 MW more DR was offered into the 21/22 BRA than the 20/21 BRA. The DR industry is becoming more comfortable with the Capacity Performance program.
Myth #3: 100% CP means PJM is moving away from DR.
The RPM is an auction-based model that PJM uses to meet forward demand, and it does so by clearing sufficient capacity needed for reliability at the cheapest cost to load. PJM recognizes and understands the value that Demand Response resources bring to the market. The 21/22 BRA cleared at much higher prices across the RTO than nearly everyone projected. And although the prevailing thought is that many capacity resources adjusted and increased their offer prices, which caused prices to spike and PJM to clear Demand Response and Energy Efficiency resources in their place, nonetheless the need for these resources has been proven.
Despite what you may have been told, Demand Response is not back, folks. It never really went away. At CPower we expect the market and the programs to continue to change. It’s what we’ve always seen and are always prepared to see. And we will continue to adapt every step of the way while finding new ways to help customers reduce their costs and generate revenues to strengthen their energy management strategies.