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DSM and Resource Planning Jayant Sathaye, Amol Phadke and Ranjit Bharvirkar Energy Analysis Program Lawrence Berkeley National Laboratory Berkeley, CA.

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Presentation on theme: "DSM and Resource Planning Jayant Sathaye, Amol Phadke and Ranjit Bharvirkar Energy Analysis Program Lawrence Berkeley National Laboratory Berkeley, CA."— Presentation transcript:

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 1 st, 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 -- Dr. Amol Phadke IV: Implementing DSM and Regulatory Perspective -- Ranjit Bharvirkar -- Bob Lieberman V. Next Steps

5 Asia Pacific Partnership (APP) 1. 8 Participating Countries: Australia, Canada, China, India, Japan, Republic of Korea and the United States 2. Eight task forces including one on power generation, transmission, distribution and demand management 3. 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). l 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)



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

12 Maharashtra: Electricity shortage 5/31/2014Dr. Jayant Sathaye12 29% shortage

13 Maharashtra Project Motivation l Electricity shortage l Affects industrial production quantity and quality, l Lower production and sales lead to reduced sales tax payment l Government loses sales tax revenue l LBNL estimates sales tax loss of 20 cents/kWh l Shortage met partially by extensive use of inefficient diesel and gasoline micro generators and hence high CO2 emissions l Savings potential l Energy savings potential of about 6,800 GWh/year l 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 11 th 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) 2008 Variable speed drives in industry4, Ag. Pump Rectification9, Motor rewinding and downsizing10, High efficiency agricultural pump sets 8, Improved high efficiency refrigerators 14, CFL and Electronic Ballasts9, Total Energy Efficiency Savings (MW) 4, Supply Capacity Additions (MW) 46,624 9,772

17 Macro-economic Results Assuming identical investment in each of the two scenarios for the 11 th 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 MysteriousRegular Rs/Unit1.25 Total 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 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 CFLT5LPG WH NG WH Solar WH AC Refrigerat ors Peak power saving at bus bar (W) 49292, Total Energy saving kWh/yr Cost of Demand Side Power Purchase Rs/kWh

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

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.

39 Energy Efficiency Programs: Level of Involvement of Distribution Company

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

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

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 cant manage what you dont measure Stable program funding sources and levels

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

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 TypePlanned Capacity Addition (11 th Plan)Cost Estimates MWRs crore/MW Coal and natural gas Large hydro Small hydro Wind power Nuclear power Overall

66 Energy Supply with Deficit Reference Scenario -- Annual Capacity and Deficit YearActual and Projected Capacity (MW) 10 th Plan: Actual Capacity Additions (MW) 11 th 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) ,0462, , ,8774, , ,6845, , ,4265, , ,2878, , ,329 10, ,96710, ,061 5, ,0245, ,265 12, ,82712, ,771 12, ,07712, ,276 12, ,32812, , ,578 Total 27,28353,453 53,036 Planned Additional Capacity 44,18592,577

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) 2008 Variable speed drives in industry4, Ag. Pump Rectification9, Motor rewinding and downsizing10, High efficiency agricultural pump sets 8, Improved high efficiency refrigerators 14, CFL and Electronic Ballasts9, Total Energy Efficiency Savings (MW) 4, Supply Capacity Additions (MW) 9,772

68 India Multipliers and Direct Coefficients



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