Presentation on theme: "DSM and Resource Planning"— Presentation transcript:
1 DSM and Resource Planning Jayant Sathaye, Amol Phadke and Ranjit BharvirkarEnergy Analysis ProgramLawrence Berkeley National LaboratoryBerkeley, CABob LiebermanRegulatory Assistance ProjectPresented at theForum of Indian Regulators11 June 2009Work 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 EnergyFounded in 1931, about 4000 staff12 Nobel Prizes – IPCC (2008) – Jayant SathayeUtility programs –Distribution loss reductionDemand-side management programsLoad research and generation planningTransmission reliabilityRenewable 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 LiebermanIllinois utility regulator for the last five years. Term ended June 1st, 2009Ran Chicago-based NGO that developed and ran energy efficiency and demand response programsImplemented integrated resource planning in Illinois
4 ContentsI: 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 StatesEight task forces including one on power generation, transmission, distribution and demand managementGoal: 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.
9 Memoranda of Understanding (MOU) Maharashtra MOU signed in December 2007Maharashtra Electricity Regulatory CommissionFormer Chairman Dr. Pramod DeoCalifornia Energy CommissionCommissioner Dr. Art RosenfeldCalifornia Public Utilities CommissionCommissioner Dian GrueneichLawrence Berkeley National LaboratoryFormer 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 IndiaIn 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.123/31/2017Dr. Jayant Sathaye12
13 Maharashtra Project Motivation Electricity shortageAffects industrial production quantity and quality,Lower production and sales lead to reduced sales tax paymentGovernment loses sales tax revenueLBNL estimates sales tax loss of 20 cents/kWhShortage met partially by extensive use of inefficient diesel and gasoline micro generators and hence high CO2 emissionsSavings potentialEnergy savings potential of about 6,800 GWh/yearCO2 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 capacityis constructed each year for three yearsTotal 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/yearTotal 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 EfficiencyMeasureInvestment (Rs./kW)Daily Use (Hours/day)Peak Demand Savings (MW)2008Electricity Savings (TWh)Variable speed drives in industry4,700119483.8Ag. Pump Rectification9,40086551.9Motor rewinding and downsizing10,810109143.3High efficiency agricultural pump sets8,4607152.1Improved high efficiency refrigerators14,100123201.4CFL and Electronic Ballasts48211.2Total Energy Efficiency Savings (MW)4,37213.7Supply Capacity Additions (MW) 46,6249,772
17 Macro-economic Results Assuming identical investment in each of the two scenarios for the 11th Plan – Rs. 250 thousand croresAnnual average electricity savings of efficiency scenario41 TWh/yearAssuming business use of saved electricity is 50% TWh/yrTotal increase in business outputRs. 180 thousand crores/yearPotential sales tax Rs. 12 thousand crores per yearAssuming Rs. 6/kWh sales tax
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 procuredCan 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 contract500 MW during the four hours of evening peak over the year = 730 GWhMysteriousRegularRs/Unit1.25Total Cost Rs Cr/ Year88 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 barWhat does it take to saving 400 MW at the load endReplacing ~ 88 lakh incandescent with CFLs45 Watt saving/replacement ; 88 lackh replacements ~ 400 MW savingHow much does it costIf the utility decides to give the CFLs at the price of incandescent lamps, 100 Rs subsidy needed/bulbTotal 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 CFLT5LPG WHNGWHSolar WHACRefrigeratorsPeak power saving at bus bar (W)49292,64723313Total Energy saving kWh/yr7946529565133Cost of Demand Side Power Purchase Rs/kWh1.292.252.741.265.001.160.70
24 Demand Side Power Purchase: Merit Order Stack Utility BenefitAverage TariffConsumer 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 resourceCheaper than a conventional power purchase~ For e.g. Rs 350 Cr Savings/year for a 500 MW evening peak power purchase for the CFL exampleAdditional option to reduce power needsLarge economic benefits of reducing load shortagesEnvironmental benefitsReduced local pollutionReduced carbon emissionsReduced 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 ARRGoal: meet 1000 MW of demand increase during the four peak hours in the eveningSupply side power purchaseSign 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 CrDemand side optionFacilitate the replacement of 1.7 Cr incandescent by providing Rs 100/bulb rebate to the consumerAddition to ARR: 170 Cr
30 Impact on Tariff & Bills How is the increase in ARR typically is metTariff increaseIncrease in government subsidyImprovement in operationsIncrease sales to high paying consumersIf the increase in ARR is lower for demand side power purchaseTariff increase can be mitigatedNeed for government subsidy can be reducedIf 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 !
32 Barriers to Reducing Electricity Consumption: A Customer’s Perspective Lack of information about electricity savings opportunitiesLack of ability and/or technical assistance for analyzing electricity consumption patternsLack 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? AwarenessMarketing, promotion, education, etc.Technical assistanceAudits, analysis, equipment installation, facilitating financing of projects, etc.Financial incentivesRebates, 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-termMust be cost-effective – i.e. program costs must be lower than benefits from programEnsure customer satisfaction
37 Types of DSM ProgramsAll three reduce energy consumption (kWh) and peak demand (kW), however, emphasis differsEnergy Efficiency – emphasis is on reducing overall energy consumption and also peak demand over several yearsPeak Load Management– emphasis is on reducing peak demand consistently over a seasonDemand Response – emphasis is on reducing peak demand for short periods of time for a few days during the year37
38 Energy Efficiency Permanent energy (kWh) reduction Permanent peak demand (kW) reductionSize of impact is predictableNo reduction or shift in customer value, comfort, or outputNot dispatchable by distribution companyExamples – rebates on efficient appliances, energy savings performance contracting, etc.Other types of demand-side resources could be:Peak Load ManagementLong or short-term impact: Peak shift or reduction as a regular featureChange in customer load profileShift or transfer of customer value or output38
39 Energy Efficiency Programs: Level of Involvement of Distribution Company Source: Katherine Johnson (Market Development Group) and AESP39
40 Peak Load Management Overall energy consumption likely to stay same Focus is on changing customer load profileSize of impact fixedFixed duration (4 - 6 hours daily) demand (kW) reductionChange/transfer in customer value, comfort, or outputNot dispatchable by distribution companyExamples – tariffs for agricultural pumpsOther types of demand-side resources could be:Peak Load ManagementLong or short-term impact: Peak shift or reduction as a regular featureChange in customer load profileShift or transfer of customer value or output40
41 Demand ResponseOverall energy consumption may vary based on customer load curtailment strategyFocus is on changing customer load profileSize of impact may vary from event to eventSmall duration (15 min – 6 hours) demand (kW) reductionMay involve a reduction in customer value, comfort, or outputDispatchable by distribution companyExamples – “cycling” of air conditioners, critical peak pricing tariffs sChanges 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 ManagementLong or short-term impact: Peak shift or reduction as a regular featureChange in customer load profileShift or transfer of customer value or output41
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 objectivesData-driven, systematic, and comprehensive DSM program planning processes“you can’t manage what you don’t measure”Stable program funding sources and levelsBased on “Best Practices” study conducted in the U.S. – see42
43 Best Practices – Planning Solicit stakeholder inputFormal interview process or a collaborative planning process involving key stakeholdersConduct market analyses around information gaps and key issues in order to understand existing conditionsTarget resources toward the very largest markets, and those that are least understoodEstablish 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 programsOffer one “bundle” that may consist of energy efficiency, measures from several different organizations but is seamless to the customerE.g. BLY and other lighting program bundled together; Ag DSM and HVDS improvement bundled together44
45 Best Practices – Program Design (cont.) Efficiently deliver integrated programs to all end-users regardless of their sizeUpstream Vs downstream incentivesLarger customers, should be assigned a single point of contact that represents all related programsSmaller 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 technologyCoordinate with BEE and FORNetwork with peers; stay connected to developments in this fieldE.g. FOR/FOIR meetings, interactions with international expertsFoster close relationships with market actors; rely on them for market intelligenceE.g. attending conferences to exchange ideas
47 Best Practices - Staffing Clearly define responsibilities and clarify roles to minimize confusionStreamlining/facilitating stakeholder interactionReward high performing staff and contractorsDSM is a new activity and in the initial phases staff will strong motivation to explore this fieldEncourage and facilitate development of energy efficiency expertise of staffDSM training workshop at NPTI – June 15-18, 2009
48 What can be learned from the US experience? UsefulIdentification of the DSM value proposition and the understanding that “saved” energy was cheaper and cleaner than energy consumedEvolving understanding that customer engagement and behavior are key drivers in achieving and sustaining cost-effective energy efficiencyBroad experience (successes and failures) related to delivering, measuring and valuing energy efficiency
49 What can be learned from the US experience? Cont. Not so usefulPattern of utility by utility DSM implementation an accident of institutional history and politics30 year focus on technology as the sole DSM driverthe “no-behavior change” strategyCorollary 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 DSMSwimming in electricityReserve margins as high as 40%Concern about raising ratesUtilities uninterestedCustomers uninterested
51 The Illinois experience, cont. By 2005Volatile energy pricesConcern about emissionsShrinking reserve marginsNo State control over generation (restructured)
52 Commission concerns Concern of raising rates to pay for DSM Concern of political backlashConcerns 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 energyPublic Education/key messages“helping customers”Commission staff and utility capacityTraining and capacity buildingCost recovery
55 Need for Co-ordination Efficient tube light program is applicable in almost every stateSERCs should explore coordinating programs
56 Role of RegulatorsEstablish clear goals for DSM power purchase based on potential estimatesAllocate resources from ARR for DSM power purchaseProvide guidance/regulation to facilitate implementation of DSM power purchaseTariff 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 experienceIn the long run, the achievable potential for cost effective power purchase should determine the goals set for utilitiesCalifornia Loading Order: Buy all cost effective demand side power purchase before any supply side options are consideredLoad research and technology assessment is critical for potential estimates and target settingWhat 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 purchaseStable funding mechanisms - allows utilities and ESCOs to expand in the area of DSM Power purchase5 paise/kWh charge 75 Cr of DSM funds in DelhiRecovery through ARR/power procurement accountsTreat 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/consultantsDedicated one or two staff or consultants to begin with at the SERCWork with FOR to develop and issue a standard set of guidelines on to facilitate demand side power purchaseAllocate resources for demand side power purchaseFirm approval of resources for utilities to create a DSM cell, hire DSM consultants (if needed), conduct load research, and prepare programsConditional 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 processConduct/facilitate a potential studyGoals and strategy by sectorRole played various stakeholdersCo-ordination with other programs
63 Efficiency Programs Two types of efficiency programs Standards and labels –Bureau of Energy EfficiencyDSM through financial and other incentives --Regulatory and utility incentivesMERC, DERC and FOR