For too long, arguably 50 years, the term “state-of-the-art technology” has been conspicuously absent from the lexicon of the U.S. utility industry.Critics declare that aging technology is placing the industry in a position of escalating risk – both from a power delivery perspective and a financial viability perspective. The emerging imbalance between energy supply and demand in the U.S. and throughout the world threatens system stability and reliability, power quality, and the cost of power itself.But enough of the doom and gloom; there are viable technology solutions that offer attractive ROI waiting to be deployed, and yes, they are indeed “state-of-the-art.”
At a very basic level, utilities require a fresh perspective that lends itself to better grid usage. Shifting the grid from its current reactive environment where a utility company too often has to rely on a customer call to be made aware of a problem to a dynamic two-way communication grid that can restore balance between energy supply and demand has been underappreciated for too long.
According to a recent Wall Street Journal article, “A report by the North American Electric Reliability Council warns demand for electricity is increasing three times as fast as resources are being added in the U.S., a trend that could shake electricity-system reliability in the coming decade. NERC counts 67,000 megawatts of resources in the works in the U.S. versus 141,000 megawatts of expected demand growth by 2015, leaving a shortfall of about 81,000 megawatts, an amount equivalent to 160 large power plants. One megawatt can power 500 to 1,000 homes. Increasingly, it is left to a deregulated market to determine whether and when new resources get built. Available resources are expected to fall below safe levels in many parts of the U.S. and Canada, such as New England, the Rocky Mountain region and Texas, in the next 2-3 years.”
A similar story can be told in many countries around the world. To address the problem of unrelenting demand in a meaningful timeframe, technologies that delay the need for new generation capacity and more efficiently use distributed energy resources by trimming peak load are of increasing interest to the power industry, the public and regulators alike.The proverbial light at the end of the tunnel – yes, there is one – is that key constituency groups are more actively engaged than ever in the search for better solutions, and, ultimately, to harnessing technology to restore balance between energy supply and energy demand on existing grid infrastructure.
The late Nobel laureate Rick Smalley observed that even though our civilization has many problems, energy is central to all of them.While lingering cynicism in the utility industry that stems from scores of magic bullet solutions proffered over the last 30-years have stemmed progress, this cynicism is quickly being pushed aside by real power solutions that have merit from all sides. Many utilities are discovering that attractive alternatives to the status quo do exist.
Demand Management – An Evolving Solution
What can be done to mitigate the problem of a growing supply/demand imbalance?
Without a change in approach, this imbalance would have to be addressed by sinking hundreds of billions of capital dollars into new electric generation capacity. The expected increase in the supply side of the equation is necessary and will occur. The demand side of the equation has long been forgotten as generation resources were plentiful and sometimes viewed as inexhaustible. Technologies exist today that can now manage the demand side of the equation.
A variety of programs known as Demand Management have been developed to better match the higher cost of delivering at peak demand levels to the price charged. These programs encourage customers to react to the time-value of electricity and have the potential to rapidly even out demand at a relatively low cost, thereby freeing up existing peak load capacity to meet near term growth in demand, and mitigating the reliability and cost issues that arise from the imbalance.
Meaningful success of Demand Management initiatives depends upon the implementation of cost-effective solutions that can, within minutes, send signals to thousands of customers, confirm interruptible load shedding activities, or directly control loads or generation at customer sites. Supported by the right technology, Demand Management can be an effective hedge against reliability risks (such as generation shortfalls, transmission congestion and distribution shortcomings) and financial risks (such as wholesale price spikes).
Demand Management technology is a very viable alternative to the traditional method of energy imbalance remediation, which is the construction of new generation facilities which can take up to 15 years to construct and are extremely expensive. New generation facility construction capital expenditures average $1.6 million per Megawatt constructed. In addition, emissions from new generation capacity have a negative environmental impact, increasing carbon dioxide load on our environment.
The ability to control demand at very specific locations and isolate it to specific grid elements enables Demand Management to reduce significant operational risks including rolling blackouts, profit risk due to volatility of energy feedstock, risk to assets from overload conditions, risks to customers from outages and risk to the environment from CO2emissions.The primary objectives of Demand Management are:
• System reliability: The Electric Power Research Institute (EPRI) has estimated that power interruptions and inadequate power supply already cause domestic economic losses of more than $100 billion annually. Demand Management programs can enhance reliability of the electric system by providing negotiated reductions in use during peak conditions.
• Cost effectiveness: Demand Management technology is all about cost avoidance and cost reduction. The major costs Independent System Operators (ISOs) avoid with Demand Management are energy and capacity. Additional savings include reducing line losses within the transmission and distribution system as well as reducing ancillary services such as Spinning Reserves needed to meet short-term load fluctuations and power quality requirements. Demand Management has the potential to reduce price volatility.
• System efficiency: Demand Management can also boost the efficiency of system capacity utilization by trimming peak load through the cycling of interruptible load.
• Risk management: Demand Management is a risk management tool and will allow utilities to offer customers pricing tools and risk management products that are financially effective and rapidly dispatchable.
• Environmental concerns: Electricity generation represents a challenging burden on the environment that is costly to mitigate.
Undoubtedly the approach to Demand Management that has received the most attention to date is Advanced Meter Infrastructure (AMI). AMI systems are based on smart meters that provide an automatic connect/disconnect feature and automatic meter reading (AMR). Some systems provide breakers to control load for the entire premise or relay limited pricing information to a utility’s customers. The breaker method used mostly in international markets essentially turns off the customer once they exceed their current threshold. The customer must then manually reset the breaker. Non-AMI based systems have also been developed that control a limited number of high load devices, generally with industrial customers. These early attempts at Demand Management are inherently constrained.
Typically solutions have used one-way electronic broadcast or manual processes to relay price signals to customers. While many AMI solutions have limited two-way communications capability, communication from the premise back to the utility is slowed by the interval requirements of the solution provider’s proprietary communications scheme. Therefore, a one-way broadcast (to advise a customer that peak conditions are being reached and some form of real time pricing will be in effect) is the extent of the communication.
The effectiveness of traditional Demand Management solutions is reliant on the customer’s ability and willingness at the time of peak conditions to actually make a change in their consumption. Customer communications and timely availability about participation during peak load events often limit effectiveness.
Under these circumstances, the utility has no way of knowing what non-critical load is available to be shed and has no way of receiving confirmation of how much load was shed. This leaves the utility operator in a “wait and see” mode during peak operational times. Typically the cost justification for a move to AMI has been heavily supported by the operational efficiencies and cost reductions associated with replacing human meter readers and automatic connect/disconnect functionality to avoid a truck roll for new activations or removals.
Demand Dispatch – Next Generation Demand Management
A superior technology, called Demand Dispatch, sidesteps the unpredictable commitment shortfalls of consumers and avoids the implausible premise that “committed” customers will be at their premise to take an energy reduction action at the precise moment and time necessary.
Demand Dispatch technology allows for automated curtailment of energy usage as curtailment is needed. Using robust two-way communications and power system software to manage a network of premise controllers, Demand Dispatch technology can efficiently manage interruptible load in very granular way – device by device in a customer’s premise.
For example, sensors at a customer’s premise can communicate the use of non-essential, interruptible power (for volunteered appliances like pool pumps, air conditioners and water heaters). Small amounts of savings from individual premises can add up for impressive grid-wide shedding of non-essential loads on a real time basis.
The enterprise software system monitors each premise for temperature and load, stores all information related to usage programs by premise, sends dispatch instructions to premise controllers, and manages the network via Internet connections through multiple radio concentrator units. The communications network links the premise control devices to a central control room (operations center).
The communications network can be fiber, wireless, power line or other broadband technology. The solution really is technology agnostic. Premise controllers are small devices placed into every participating end customer premise. Every premise control unit includes a radio for communication to the communications network then back to the central computer.
Utility Benefits: Utilities gain operational efficiencies and improved asset protection. The granularity of a demand dispatch system enables the utility to manage load at very specific points of its grid.Loads can be shed over an entire operating region to optimize generation needs or on a substation by substation level to protect assets. If a feeder or substation transformer is nearing its capacity then specific loads can be shed to take it within its operational threshold. The development of powerful management algorithms provides the utility with a much more automated approach to distribution automation and asset protection.
Customer Benefits:Customers gain more direct control over their electric bill.They can sign up for a “comfort range” within which air conditioning or heating devices can be interrupted.In return they benefit in the savings and contribute to a greener environment. As compared to 20 years ago, a much larger percentage of load is non-essential. The square footage per family home and person has doubled in the last 30 years. 100% of new homes in the Southern U.S. have air conditioning throughout. Many more homes have pools and pool pumps – all non-essential load devices that can be shed in peak energy usage periods, given a consumer’s participation in the program. Demand Dispatch can communicate specifics about the type of load, pinpointing non-essential load and shedding it within the confines of the customer agreement. Utilities cannot be in the position of shedding load inappropriately (they wouldn’t want to reduce power on a home dialysis system, for example), but with more intelligent sensors, they can shed load intelligently.
This robust system technology allows for a much more assertive pursuit of supply/demand imbalance remediation. Demand Dispatch gives a powerful meaning to real time. With Demand Dispatch technology, the communications technology provides the utility with information every few minutes, not only providing information about the size of the load, the additional information of type of load (essential or non-essential) will allow for blackout or peak buying risk aversion. This allows for service reliability and cost savings with a minimal impact on the individual user.
The Demand Dispatch ROI
The U.S. Department of Energy’s Office of Electric Transmission and Distribution estimates that electric power outages and blackouts cost the nation about $80 billion annually.Even fleeting blackouts can cause massive losses to business, for example, Hewlett-Packard has estimated that a 15-minute outage at one of its chip factories would cost the company $30 million.
No company (and no utility) wants to provide less of the product it offers – it wants to meet system demand at all times, and at a margin consistent with overall business objectives. However, if service reliability is compromised, so is the company’s relationship with its customers. Sometimes the investment in new generation and transmission to serve peak demand simply doesn’t make good business sense. Therefore, Demand Dispatch must provide a good balance of reduced capital investment plus a strong return on investment for the utility.
Of significant importance to the value proposition of Demand Dispatch is the ROI outcome. Specific feasibility studies indicate that the implementation of Demand Dispatch technology will provide a very attractive return, with a pre-tax margin of 16%.
Demand Dispatch deployed optimally will refocus the real issues related to supply and demand. Regulatory drivers are shifting focus from building more generation to using existing generation more strategically by managing non-essential loads more aggressively. Demand Management that includes Demand Dispatch functionality should be considered a must by utilities responsible for distribution and/or generation. It has the potential to reduce operating costs, delay capital investment in new generation capacity and improve grid reliability. It also allows utilities to serve energy consumers better:
• consumers would gladly exchange peak supply for lower electricity bills;
• business and industry will welcome a range of pricing plans and increased service reliability;
• utilities will gain improved operational efficiencies and improved asset protection;
• regulatory agencies will look favorably upon increased visibility into grid performance and real-time data that mitigates service interruptions;
• and environmental advocacy groups will welcome the measurable amount of energy savings that can be achieved with existing generation facilities.
A demand and load management system that includes the benefits of Demand Dispatch as described above has the potential to be an integral part of a transformation in the utility industry. We must find an improved way to generate, deliver and use power without the inefficiencies of today’s system.
As the world’s appetite for power accelerates, the pressure to solve this problem will increase. The need for significant new generation capacity over the next decade makes this a problem to be solved today. We have the tools in the emerging technologies of a Smart Grid. Utilities and regulators have the opportunity to take on this problem and address core issues faced by the industry.
Finally, Demand Management and/or Demand Dispatch aren’t stand alone initiatives. They can impact many of the utility’s operations and all are significant. Investments that can be positively affected along the way include asset protection and Spinning Reserve replacement. It is likely that new generation is not yet a necessary step in addressing today’s imbalance of supply and demand. The first step is a more intelligent use of the existing resources, and the technology available to do so is here today.
About the Authors
Jeff Tolnar, Chief Technology Officer, BPL Global Heidi Caroline, Vice President, Smart Grid Applications, BPL Global
BPL Global™, Ltd. is a leading international provider of Smart Grid applications to utilities and broadband services to consumers via power lines.
At a very basic level, utilities require a fresh perspective that lends itself to better grid usage. Shifting the grid from its current reactive environment where a utility company too often has to rely on a customer call to be made aware of a problem to a dynamic two-way communication grid that can restore balance between energy supply and demand has been underappreciated for too long.
According to a recent Wall Street Journal article, “A report by the North American Electric Reliability Council warns demand for electricity is increasing three times as fast as resources are being added in the U.S., a trend that could shake electricity-system reliability in the coming decade. NERC counts 67,000 megawatts of resources in the works in the U.S. versus 141,000 megawatts of expected demand growth by 2015, leaving a shortfall of about 81,000 megawatts, an amount equivalent to 160 large power plants. One megawatt can power 500 to 1,000 homes. Increasingly, it is left to a deregulated market to determine whether and when new resources get built. Available resources are expected to fall below safe levels in many parts of the U.S. and Canada, such as New England, the Rocky Mountain region and Texas, in the next 2-3 years.”
A similar story can be told in many countries around the world. To address the problem of unrelenting demand in a meaningful timeframe, technologies that delay the need for new generation capacity and more efficiently use distributed energy resources by trimming peak load are of increasing interest to the power industry, the public and regulators alike.The proverbial light at the end of the tunnel – yes, there is one – is that key constituency groups are more actively engaged than ever in the search for better solutions, and, ultimately, to harnessing technology to restore balance between energy supply and energy demand on existing grid infrastructure.
The late Nobel laureate Rick Smalley observed that even though our civilization has many problems, energy is central to all of them.While lingering cynicism in the utility industry that stems from scores of magic bullet solutions proffered over the last 30-years have stemmed progress, this cynicism is quickly being pushed aside by real power solutions that have merit from all sides. Many utilities are discovering that attractive alternatives to the status quo do exist.
Demand Management – An Evolving Solution
What can be done to mitigate the problem of a growing supply/demand imbalance?
Without a change in approach, this imbalance would have to be addressed by sinking hundreds of billions of capital dollars into new electric generation capacity. The expected increase in the supply side of the equation is necessary and will occur. The demand side of the equation has long been forgotten as generation resources were plentiful and sometimes viewed as inexhaustible. Technologies exist today that can now manage the demand side of the equation.
A variety of programs known as Demand Management have been developed to better match the higher cost of delivering at peak demand levels to the price charged. These programs encourage customers to react to the time-value of electricity and have the potential to rapidly even out demand at a relatively low cost, thereby freeing up existing peak load capacity to meet near term growth in demand, and mitigating the reliability and cost issues that arise from the imbalance.
Meaningful success of Demand Management initiatives depends upon the implementation of cost-effective solutions that can, within minutes, send signals to thousands of customers, confirm interruptible load shedding activities, or directly control loads or generation at customer sites. Supported by the right technology, Demand Management can be an effective hedge against reliability risks (such as generation shortfalls, transmission congestion and distribution shortcomings) and financial risks (such as wholesale price spikes).
Demand Management technology is a very viable alternative to the traditional method of energy imbalance remediation, which is the construction of new generation facilities which can take up to 15 years to construct and are extremely expensive. New generation facility construction capital expenditures average $1.6 million per Megawatt constructed. In addition, emissions from new generation capacity have a negative environmental impact, increasing carbon dioxide load on our environment.
The ability to control demand at very specific locations and isolate it to specific grid elements enables Demand Management to reduce significant operational risks including rolling blackouts, profit risk due to volatility of energy feedstock, risk to assets from overload conditions, risks to customers from outages and risk to the environment from CO2emissions.The primary objectives of Demand Management are:
• System reliability: The Electric Power Research Institute (EPRI) has estimated that power interruptions and inadequate power supply already cause domestic economic losses of more than $100 billion annually. Demand Management programs can enhance reliability of the electric system by providing negotiated reductions in use during peak conditions.
• Cost effectiveness: Demand Management technology is all about cost avoidance and cost reduction. The major costs Independent System Operators (ISOs) avoid with Demand Management are energy and capacity. Additional savings include reducing line losses within the transmission and distribution system as well as reducing ancillary services such as Spinning Reserves needed to meet short-term load fluctuations and power quality requirements. Demand Management has the potential to reduce price volatility.
• System efficiency: Demand Management can also boost the efficiency of system capacity utilization by trimming peak load through the cycling of interruptible load.
• Risk management: Demand Management is a risk management tool and will allow utilities to offer customers pricing tools and risk management products that are financially effective and rapidly dispatchable.
• Environmental concerns: Electricity generation represents a challenging burden on the environment that is costly to mitigate.
Undoubtedly the approach to Demand Management that has received the most attention to date is Advanced Meter Infrastructure (AMI). AMI systems are based on smart meters that provide an automatic connect/disconnect feature and automatic meter reading (AMR). Some systems provide breakers to control load for the entire premise or relay limited pricing information to a utility’s customers. The breaker method used mostly in international markets essentially turns off the customer once they exceed their current threshold. The customer must then manually reset the breaker. Non-AMI based systems have also been developed that control a limited number of high load devices, generally with industrial customers. These early attempts at Demand Management are inherently constrained.
Typically solutions have used one-way electronic broadcast or manual processes to relay price signals to customers. While many AMI solutions have limited two-way communications capability, communication from the premise back to the utility is slowed by the interval requirements of the solution provider’s proprietary communications scheme. Therefore, a one-way broadcast (to advise a customer that peak conditions are being reached and some form of real time pricing will be in effect) is the extent of the communication.
The effectiveness of traditional Demand Management solutions is reliant on the customer’s ability and willingness at the time of peak conditions to actually make a change in their consumption. Customer communications and timely availability about participation during peak load events often limit effectiveness.
Under these circumstances, the utility has no way of knowing what non-critical load is available to be shed and has no way of receiving confirmation of how much load was shed. This leaves the utility operator in a “wait and see” mode during peak operational times. Typically the cost justification for a move to AMI has been heavily supported by the operational efficiencies and cost reductions associated with replacing human meter readers and automatic connect/disconnect functionality to avoid a truck roll for new activations or removals.
Demand Dispatch – Next Generation Demand Management
A superior technology, called Demand Dispatch, sidesteps the unpredictable commitment shortfalls of consumers and avoids the implausible premise that “committed” customers will be at their premise to take an energy reduction action at the precise moment and time necessary.
Demand Dispatch technology allows for automated curtailment of energy usage as curtailment is needed. Using robust two-way communications and power system software to manage a network of premise controllers, Demand Dispatch technology can efficiently manage interruptible load in very granular way – device by device in a customer’s premise.
For example, sensors at a customer’s premise can communicate the use of non-essential, interruptible power (for volunteered appliances like pool pumps, air conditioners and water heaters). Small amounts of savings from individual premises can add up for impressive grid-wide shedding of non-essential loads on a real time basis.
How it works:
The system consist of four basic elements:
1) the enterprise software system,
2) the communications network,
3) the premise control system and
4) interface links to existing systems within the utility and/or ISO.
The enterprise software system monitors each premise for temperature and load, stores all information related to usage programs by premise, sends dispatch instructions to premise controllers, and manages the network via Internet connections through multiple radio concentrator units. The communications network links the premise control devices to a central control room (operations center).
The communications network can be fiber, wireless, power line or other broadband technology. The solution really is technology agnostic. Premise controllers are small devices placed into every participating end customer premise. Every premise control unit includes a radio for communication to the communications network then back to the central computer.
Utility Benefits: Utilities gain operational efficiencies and improved asset protection. The granularity of a demand dispatch system enables the utility to manage load at very specific points of its grid.Loads can be shed over an entire operating region to optimize generation needs or on a substation by substation level to protect assets. If a feeder or substation transformer is nearing its capacity then specific loads can be shed to take it within its operational threshold. The development of powerful management algorithms provides the utility with a much more automated approach to distribution automation and asset protection.
Customer Benefits:Customers gain more direct control over their electric bill.They can sign up for a “comfort range” within which air conditioning or heating devices can be interrupted.In return they benefit in the savings and contribute to a greener environment. As compared to 20 years ago, a much larger percentage of load is non-essential. The square footage per family home and person has doubled in the last 30 years. 100% of new homes in the Southern U.S. have air conditioning throughout. Many more homes have pools and pool pumps – all non-essential load devices that can be shed in peak energy usage periods, given a consumer’s participation in the program. Demand Dispatch can communicate specifics about the type of load, pinpointing non-essential load and shedding it within the confines of the customer agreement. Utilities cannot be in the position of shedding load inappropriately (they wouldn’t want to reduce power on a home dialysis system, for example), but with more intelligent sensors, they can shed load intelligently.
This robust system technology allows for a much more assertive pursuit of supply/demand imbalance remediation. Demand Dispatch gives a powerful meaning to real time. With Demand Dispatch technology, the communications technology provides the utility with information every few minutes, not only providing information about the size of the load, the additional information of type of load (essential or non-essential) will allow for blackout or peak buying risk aversion. This allows for service reliability and cost savings with a minimal impact on the individual user.
The Demand Dispatch ROI
The U.S. Department of Energy’s Office of Electric Transmission and Distribution estimates that electric power outages and blackouts cost the nation about $80 billion annually.Even fleeting blackouts can cause massive losses to business, for example, Hewlett-Packard has estimated that a 15-minute outage at one of its chip factories would cost the company $30 million.
No company (and no utility) wants to provide less of the product it offers – it wants to meet system demand at all times, and at a margin consistent with overall business objectives. However, if service reliability is compromised, so is the company’s relationship with its customers. Sometimes the investment in new generation and transmission to serve peak demand simply doesn’t make good business sense. Therefore, Demand Dispatch must provide a good balance of reduced capital investment plus a strong return on investment for the utility.
Of significant importance to the value proposition of Demand Dispatch is the ROI outcome. Specific feasibility studies indicate that the implementation of Demand Dispatch technology will provide a very attractive return, with a pre-tax margin of 16%.
Demand Dispatch deployed optimally will refocus the real issues related to supply and demand. Regulatory drivers are shifting focus from building more generation to using existing generation more strategically by managing non-essential loads more aggressively. Demand Management that includes Demand Dispatch functionality should be considered a must by utilities responsible for distribution and/or generation. It has the potential to reduce operating costs, delay capital investment in new generation capacity and improve grid reliability. It also allows utilities to serve energy consumers better:
• consumers would gladly exchange peak supply for lower electricity bills;
• business and industry will welcome a range of pricing plans and increased service reliability;
• utilities will gain improved operational efficiencies and improved asset protection;
• regulatory agencies will look favorably upon increased visibility into grid performance and real-time data that mitigates service interruptions;
• and environmental advocacy groups will welcome the measurable amount of energy savings that can be achieved with existing generation facilities.
A demand and load management system that includes the benefits of Demand Dispatch as described above has the potential to be an integral part of a transformation in the utility industry. We must find an improved way to generate, deliver and use power without the inefficiencies of today’s system.
As the world’s appetite for power accelerates, the pressure to solve this problem will increase. The need for significant new generation capacity over the next decade makes this a problem to be solved today. We have the tools in the emerging technologies of a Smart Grid. Utilities and regulators have the opportunity to take on this problem and address core issues faced by the industry.
Finally, Demand Management and/or Demand Dispatch aren’t stand alone initiatives. They can impact many of the utility’s operations and all are significant. Investments that can be positively affected along the way include asset protection and Spinning Reserve replacement. It is likely that new generation is not yet a necessary step in addressing today’s imbalance of supply and demand. The first step is a more intelligent use of the existing resources, and the technology available to do so is here today.
About the Authors
Jeff Tolnar, Chief Technology Officer, BPL Global Heidi Caroline, Vice President, Smart Grid Applications, BPL Global
BPL Global™, Ltd. is a leading international provider of Smart Grid applications to utilities and broadband services to consumers via power lines.
