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DSM and Resource Planning

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1 DSM and Resource Planning
Jayant Sathaye, Amol Phadke and Ranjit Bharvirkar Energy Analysis Program Lawrence Berkeley National Laboratory Berkeley, CA Bob Lieberman Regulatory Assistance Project Presented at the Forum of Indian Regulators 11 June 2009 Work supported by the US Departments of State and Energy

2 Lawrence Berkeley National Laboratory
Managed by the University of California for the US Dept of Energy Founded in 1931, about 4000 staff 12 Nobel Prizes – IPCC (2008) – Jayant Sathaye Utility programs – Distribution loss reduction Demand-side management programs Load research and generation planning Transmission reliability Renewable energy

3 Regulatory Assistance Project (RAP)
RAP is a non-profit organization providing technical and educational assistance to government officials on energy and environmental issues. RAP is funded by US Department of Energy, several foundations, and international agencies. We have worked in 40+ states and 16 nations. Bob Lieberman Illinois utility regulator for the last five years. Term ended June 1st, 2009 Ran Chicago-based NGO that developed and ran energy efficiency and demand response programs Implemented integrated resource planning in Illinois

4 Contents I: Overview and Macro impacts – Dr. Jayant Sathaye II. Demand Side Power Purchase -- Dr. Amol Phadke III: ARR and Tariff Impact and Regulatory Treatment of DSM IV: Implementing DSM and Regulatory Perspective -- Ranjit Bharvirkar -- Bob Lieberman V. Next Steps

5 Asia Pacific Partnership (APP)
8 Participating Countries: Australia, Canada, China, India, Japan, Republic of Korea and the United States Eight task forces including one on power generation, transmission, distribution and demand management Goal: To develop, deploy and transfer cleaner, more efficient technologies and to meet national pollution reduction, energy security and climate change concerns consistent with the principles of the U.N. Framework Convention on Climate Change (UNFCCC). Assist partners to build human and institutional capacity to strengthen cooperative efforts, and to seek opportunities to engage the private sector.

6 Electricity Demand Savings Potential (Percentage, 2030)

7 7

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9 Memoranda of Understanding (MOU)
Maharashtra MOU signed in December 2007 Maharashtra Electricity Regulatory Commission Former Chairman Dr. Pramod Deo California Energy Commission Commissioner Dr. Art Rosenfeld California Public Utilities Commission Commissioner Dian Grueneich Lawrence Berkeley National Laboratory Former Director Dr. Steve Chu (Current Energy Secretary) Similar MOUs signed with the Delhi Electricity Regulatory Commission (Shri Berjinder Singh) and the Forum of Regulators (Dr. Pramod Deo) in March 2009

10 Maharashtra and Delhi MOU Scope of Cooperation
The Parties will endeavor to promote information exchanges and future joint research activities in the following areas: • Energy efficiency and Demand Side Management policies and programs • Regulatory policies for renewable energy development • Integrated Resource Planning • Electricity regulation and governance • Transmission pricing framework • Balancing market framework in Maharashtra • Market development through open access and consumer choice

11 Demand-side Management of Efficiency Project Motivation
Reducing carbon emissions from electricity use – DSM Programs (NAPCC, 11th Five Year Plan) Electricity shortage accompanied by blackouts and load shedding is common across India In Maharashtra, electricity deficit was 4800 MW in 2008 or more than 25% of available capacity

12 Maharashtra: Electricity shortage
In Maharashtra state, which is home to Mumbai’s booming industrial and services sectors, there are severe electricity supply shortages and rolling blackouts every day. Maharashtra is India’s largest electricity consumer; this one state uses close to half of what California uses on an average day. Many people simply do without electricity during these times, but for businesses that’s not an option. The shortage is typically met by small, inefficient diesel generators and battery inverters. With rapid growth in buildings in both the residential and commercial sector, this problem is only bound to get worse unless action is taken - residential electricity consumption is expected to grow at double the rate of economic growth. One of the first things people do with rising incomes - buy lamps, TVs and Fans. 12 3/31/2017 Dr. Jayant Sathaye 12

13 Maharashtra Project Motivation
Electricity shortage Affects industrial production quantity and quality, Lower production and sales lead to reduced sales tax payment Government loses sales tax revenue LBNL estimates sales tax loss of 20 cents/kWh Shortage met partially by extensive use of inefficient diesel and gasoline micro generators and hence high CO2 emissions Savings potential Energy savings potential of about 6,800 GWh/year CO2 savings potential of 3-5 Mt CO2/year

14 India Power Supply Capacity and Peak Demand Reference Scenario with Shortage
Assuming that from 2009 onwards deficit is 10% and12,500 MW of new capacity is constructed each year for three years Total investment for the 11th Five Year Plan would be Rs. 250 thousand crores

15 India Power Supply Capacity and Peak Demand Efficiency Scenario with No Shortage
Assuming that from 2007 onwards efficiency improvements (4300 MW/year) reduce deficit Potential exists to eliminate deficit. Construction of new power plants is reduced to about 9400 MW/year Total investment for efficiency and supply power plants is still the same as that in the reference scenario – Rs. 250 thousand crores

16 Efficiency Scenario with No Shortage: Efficiency Options
Energy Efficiency Measure Investment (Rs./kW) Daily Use (Hours/day) Peak Demand Savings (MW) 2008 Electricity Savings (TWh) Variable speed drives in industry 4,700 11 948 3.8 Ag. Pump Rectification 9,400 8 655 1.9 Motor rewinding and downsizing 10,810 10 914 3.3 High efficiency agricultural pump sets 8,460 715 2.1 Improved high efficiency refrigerators 14,100 12 320 1.4 CFL and Electronic Ballasts 4 821 1.2 Total Energy Efficiency Savings (MW) 4,372 13.7 Supply Capacity Additions (MW)  46,624 9,772

17 Macro-economic Results
Assuming identical investment in each of the two scenarios for the 11th Plan – Rs. 250 thousand crores Annual average electricity savings of efficiency scenario 41 TWh/year Assuming business use of saved electricity is 50% TWh/yr Total increase in business output Rs. 180 thousand crores/year Potential sales tax Rs. 12 thousand crores per year Assuming Rs. 6/kWh sales tax

18 Demand Side Power Purchase

19 Demand Side Power Purchase: Basics
Demand side Power Purchase is a bundled set of energy efficiency (EE) programs that are designed to deliver the energy and capacity equivalent of a power purchase on the supply side. purchase “negawatts” and “negawatt-hours” that are functionally equivalent to the kilowatts and kilowatt-hours procured Can resemble a conventional peaking power purchase by emphasizing efficiency measures (and demand response) that reduce electricity during periods of peak power consumption. Can resemble a base-load power purchase emphasizing measures to reduce consumption during all hours of the day.

20 Will you Approve This Peak Load Power Purchase?
One year contract 500 MW during the four hours of evening peak over the year = 730 GWh Mysterious Regular Rs/Unit 1.2 5 Total Cost Rs Cr/ Year 88 Cr. 365 Cr.

21 What is this Mysterious Power Purchase?
Saving 400 MW during the evening peak hours at the load end > 500 MW generation at the bus bar What does it take to saving 400 MW at the load end Replacing ~ 88 lakh incandescent with CFLs 45 Watt saving/replacement ; 88 lackh replacements ~ 400 MW saving How much does it cost If the utility decides to give the CFLs at the price of incandescent lamps, 100 Rs subsidy needed/bulb Total expenditure 88 Cr: less that one third of the expenditure of the supply side !

22 Comparing Supply and Demand Side Power Purchase
Cost of demand side power purchase per unit = (Annualized incremental capital cost)/(saving per year ) CFL example = (88 Cr)/(730 GWh) = 1.2 Rs/Unit One important different: Demand side power purchase appears happens at the consumer end (avoids losses) Power purchase cost of 5 Rs/Unit translates to more than 8 Rs/Unit when it lands at the consumers doorstep due to lossess

23 Many Demand Side Power Purchase Options: Delhi Example
CFL T5 LPG WH NG WH Solar WH AC Refrigerators Peak power saving at bus bar (W) 49 29 2,647 233 13 Total Energy saving kWh/yr 79 46 529 565 133 Cost of Demand Side Power Purchase Rs/kWh 1.29 2.25 2.74 1.26 5.00 1.16 0.70

24 Demand Side Power Purchase: Merit Order Stack
Utility Benefit Average Tariff Consumer Benefit

25 Least Cost Power Rationale: DERC Example
“ The Commission is keen to see that distribution licensees undertake DSM initiatives, not only because DSM initiatives provides an opportunity for conservation of power use but also because these initiatives when integrated with supply, provides a least cost solution for distribution licensees to meet their power demand”

26 Advantages of Demand Side Power Purchase
Cost-effective resource Cheaper than a conventional power purchase ~ For e.g. Rs 350 Cr Savings/year for a 500 MW evening peak power purchase for the CFL example Additional option to reduce power needs Large economic benefits of reducing load shortages Environmental benefits Reduced local pollution Reduced carbon emissions Reduced resource requirements – land, water,

27 Session III: ARR and Tariff Impact of Demand Side Power purchase

28 ARR and Impact on Consumer
One line summary If the demand side power purchase cheaper than the supply side, impacts on the consumer are going to be positive!

29 Impact on ARR Goal: meet 1000 MW of demand increase during the four peak hours in the evening Supply side power purchase Sign a bilateral contract of 1000 MW for evening peak delivery (1460 GWh delivered during the evening peak hours over the years) Addition to the ARR: 730 Cr Demand side option Facilitate the replacement of 1.7 Cr incandescent by providing Rs 100/bulb rebate to the consumer Addition to ARR: 170 Cr

30 Impact on Tariff & Bills
How is the increase in ARR typically is met Tariff increase Increase in government subsidy Improvement in operations Increase sales to high paying consumers If the increase in ARR is lower for demand side power purchase Tariff increase can be mitigated Need for government subsidy can be reduced If the Rs 730 Cr of power purchase cost on the supply side is used for demand side power purchase, more than three times the units can be purchased and could potentially eliminate shortages !

31 IV: Implementing Demand Side Power purchase

32 Barriers to Reducing Electricity Consumption: A Customer’s Perspective
Lack of information about electricity savings opportunities Lack of ability and/or technical assistance for analyzing electricity consumption patterns Lack of financial resources to invest in electricity savings options (e.g. technology, etc.) Lack of appropriate technological options to reduce electricity consumption

33 What is a DSM Program? Mechanism to influence customer’s CAPABILITY and WILLINGNESS to reduce electricity consumption

34 How to Influence Customer CAPABILITY to Reduce Electricity Consumption?
Availability of tools to understand electricity consumption patterns (e.g. plug-in power meters to measure appliance-level electricity consumption, software to analyze and identify electricity savings opportunities, etc.) Availability of technology to reduce electricity consumption (e.g. high efficiency T-5 tube-light to replace inefficient T-12) R&D for developing new technology

35 How to Influence Customer WILLINGNESS to Reduce Electricity Consumption?
Awareness Marketing, promotion, education, etc. Technical assistance Audits, analysis, equipment installation, facilitating financing of projects, etc. Financial incentives Rebates, loans at low interest rates, shared savings, electricity pricing schemes, etc.

36 DSM Program Design - Principles
Systematic road-map for overcoming barriers faced by customers in their goal of reducing electricity consumption (and bills) BOTH in short-term and long-term Must be cost-effective – i.e. program costs must be lower than benefits from program Ensure customer satisfaction

37 Types of DSM Programs All three reduce energy consumption (kWh) and peak demand (kW), however, emphasis differs Energy Efficiency – emphasis is on reducing overall energy consumption and also peak demand over several years Peak Load Management– emphasis is on reducing peak demand consistently over a season Demand Response – emphasis is on reducing peak demand for short periods of time for a few days during the year 37

38 Energy Efficiency Permanent energy (kWh) reduction
Permanent peak demand (kW) reduction Size of impact is predictable No reduction or shift in customer value, comfort, or output Not dispatchable by distribution company Examples – rebates on efficient appliances, energy savings performance contracting, etc. Other types of demand-side resources could be: Peak Load Management Long or short-term impact: Peak shift or reduction as a regular feature Change in customer load profile Shift or transfer of customer value or output 38

39 Energy Efficiency Programs: Level of Involvement of Distribution Company
Source: Katherine Johnson (Market Development Group) and AESP 39

40 Peak Load Management Overall energy consumption likely to stay same
Focus is on changing customer load profile Size of impact fixed Fixed duration (4 - 6 hours daily) demand (kW) reduction Change/transfer in customer value, comfort, or output Not dispatchable by distribution company Examples – tariffs for agricultural pumps Other types of demand-side resources could be: Peak Load Management Long or short-term impact: Peak shift or reduction as a regular feature Change in customer load profile Shift or transfer of customer value or output 40

41 Demand Response Overall energy consumption may vary based on customer load curtailment strategy Focus is on changing customer load profile Size of impact may vary from event to event Small duration (15 min – 6 hours) demand (kW) reduction May involve a reduction in customer value, comfort, or output Dispatchable by distribution company Examples – “cycling” of air conditioners, critical peak pricing tariffs s Changes in electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized. Other types of demand-side resources could be: Peak Load Management Long or short-term impact: Peak shift or reduction as a regular feature Change in customer load profile Shift or transfer of customer value or output 41

42 Characteristics of Successful DSM Initiatives
Deeply committed senior management and program staff – at both State Electricity Regulatory Commission and distribution company (or implementing agency) Clearly defined goals and objectives Data-driven, systematic, and comprehensive DSM program planning processes “you can’t manage what you don’t measure” Stable program funding sources and levels Based on “Best Practices” study conducted in the U.S. – see 42

43 Best Practices – Planning
Solicit stakeholder input Formal interview process or a collaborative planning process involving key stakeholders Conduct market analyses around information gaps and key issues in order to understand existing conditions Target resources toward the very largest markets, and those that are least understood Establish baseline for tracking program expenditure and impact

44 Best Practices – Program Design
Seek to include programs with related and complementary goals, for example, electricity conservation, water conservation, and renewables (e.g. rooftop solar) Simplify participation in multiple programs Offer one “bundle” that may consist of energy efficiency, measures from several different organizations but is seamless to the customer E.g. BLY and other lighting program bundled together; Ag DSM and HVDS improvement bundled together 44

45 Best Practices – Program Design (cont.)
Efficiently deliver integrated programs to all end-users regardless of their size Upstream Vs downstream incentives Larger customers, should be assigned a single point of contact that represents all related programs Smaller customers should be offered a whole building strategy that incorporate measures from multiple programs.

46 Best Practices – Adapting to Changes
Keep abreast of new developments in energy efficiency technology Coordinate with BEE and FOR Network with peers; stay connected to developments in this field E.g. FOR/FOIR meetings, interactions with international experts Foster close relationships with market actors; rely on them for market intelligence E.g. attending conferences to exchange ideas

47 Best Practices - Staffing
Clearly define responsibilities and clarify roles to minimize confusion Streamlining/facilitating stakeholder interaction Reward high performing staff and contractors DSM is a new activity and in the initial phases staff will strong motivation to explore this field Encourage and facilitate development of energy efficiency expertise of staff DSM training workshop at NPTI – June 15-18, 2009

48 What can be learned from the US experience?
Useful Identification of the DSM value proposition and the understanding that “saved” energy was cheaper and cleaner than energy consumed Evolving understanding that customer engagement and behavior are key drivers in achieving and sustaining cost-effective energy efficiency Broad experience (successes and failures) related to delivering, measuring and valuing energy efficiency

49 What can be learned from the US experience? Cont.
Not so useful Pattern of utility by utility DSM implementation an accident of institutional history and politics 30 year focus on technology as the sole DSM driver the “no-behavior change” strategy Corollary to above: 30 year refusal to engage with customers “revenue enhancement units”

50 Tales from the front: The Illinois experience with DSM
For nearly 30 years, Illinois regulators and policymakers refused to implement DSM Swimming in electricity Reserve margins as high as 40% Concern about raising rates Utilities uninterested Customers uninterested

51 The Illinois experience, cont.
By 2005 Volatile energy prices Concern about emissions Shrinking reserve margins No State control over generation (restructured)

52 Commission concerns Concern of raising rates to pay for DSM
Concern of political backlash Concerns about lack of capacity to manage DSM initiatives

53 Relearning “Its not as if we are not going to spend the money. The only question is: What are we going to spend the money on?”

54 Four issues DSM increases rates in the short term
Energy efficiency was less expensive than purchased energy Public Education/key messages “helping customers” Commission staff and utility capacity Training and capacity building Cost recovery

55 Need for Co-ordination
Efficient tube light program is applicable in almost every state SERCs should explore coordinating programs

56 Role of Regulators Establish clear goals for DSM power purchase based on potential estimates Allocate resources from ARR for DSM power purchase Provide guidance/regulation to facilitate implementation of DSM power purchase Tariff options for promoting demand side power prucahse (can either viewed as pumped storage or peak power purchase)

57 Establish Clear Goals for Constructing Demand Side Power purchase
In the initial period, the goal should be to get a few small demand side power purchase/programs started to gain experience In the long run, the achievable potential for cost effective power purchase should determine the goals set for utilities California Loading Order: Buy all cost effective demand side power purchase before any supply side options are considered Load research and technology assessment is critical for potential estimates and target setting What kind appliances consumers are using and how, what is the demand side power purchase potential and what is the cost

58 Allocate Resources for Demand Side Power purchase
Public benefits charge: small surcharge on tariff to create a fund for DSM Power purchase Stable funding mechanisms - allows utilities and ESCOs to expand in the area of DSM Power purchase 5 paise/kWh charge 75 Cr of DSM funds in Delhi Recovery through ARR/power procurement accounts Treat as a an expense (same as the cost of power purcahse) Amortize over the life the saving measure

59 Next Steps For Regulators
Allocate staff/consultants Dedicated one or two staff or consultants to begin with at the SERC Work with FOR to develop and issue a standard set of guidelines on to facilitate demand side power purchase Allocate resources for demand side power purchase Firm approval of resources for utilities to create a DSM cell, hire DSM consultants (if needed), conduct load research, and prepare programs Conditional approval for funding for the first year (final approval provided after programs are submitted) Develop a roadmap for demand side power purchase via a stakeholder process Conduct/facilitate a potential study Goals and strategy by sector Role played various stakeholders Co-ordination with other programs

60 Questions for Discussion

61 Please check this website for LBNL India and related publications Thank you Jayant Sathaye  

62 Other Slides

63 Efficiency Programs Two types of efficiency programs
Standards and labels – Bureau of Energy Efficiency DSM through financial and other incentives -- Regulatory and utility incentives MERC, DERC and FOR

64 Comparative Growth in the Power Sector

65 Construction Cost Estimates
Plant Type Planned Capacity Addition (11th Plan) Cost Estimates MW Rs crore/MW Coal and natural gas 58644 4.51 Large hydro 16553 4.86 Small hydro 1400 5.50 Wind power 12600 4.50 Nuclear power 3380 6.58 Overall 92577 4.66

66 Energy Supply with Deficit Reference Scenario -- Annual Capacity and Deficit
Year Actual and Projected Capacity (MW) 10th Plan: Actual Capacity Additions (MW) 11th Plan: Actual and Estimated Capacity Additions (MW) Actual and Projected Capacity Deficit (%) Actual and Projected Capacity Deficit (MW) Investment for Projected $ 992 / kW (Million US $) (Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) (Col. 7) 2002 105,046 2,831 12.2 12,816 2003 107,877 4,807 11.2 12,082 2004 112,684 5,742 11.7 13,184 2005 118,426 5,861 12.3 14,566 2006 124,287 8,042 13.8 17,152 2007 132,329 10,732 16.6 21,967 10,648 2008 143,061 5,204 11.9 17,024 5,163 2009 148,265 12,506 10 14,827 12,408 2010 160,771 16,077 2011 173,276 17,328 2012 185,782 18,578 Total 27,283 53,453 53,036 Planned Additional Capacity 44,185 92,577

67 Supply with Efficiency Scenario - 2: Characteristics of Efficiency measures, and Efficiency Savings and Supply Capacity Energy Efficiency Measure Investment (Rs./kW) Daily Use (Hours/day) Peak Demand Savings (MW) 2008 Annual Electricity Savings (TWh) Variable speed drives in industry 4,700 11 948 3.8 Ag. Pump Rectification 9,400 8 655 1.9 Motor rewinding and downsizing 10,810 10 914 3.3 High efficiency agricultural pump sets 8,460 715 2.1 Improved high efficiency refrigerators 14,100 12 320 1.4 CFL and Electronic Ballasts 4 821 1.2 Total Energy Efficiency Savings (MW) 4,372 13.7 Supply Capacity Additions (MW) 9,772

68 India Multipliers and Direct Coefficients

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