1. Battling Load Growth in NYC Chris Smith NYSERDA NARUC 2007 Summer Meeting

2. NYSERDA’s Role Administrator –Design and Implement Programs Support Regulators –State Appliance Standards and Energy Code –Green Building Tax Credit –Renewable Portfolio Standard Facilitator –Robust Network of Energy Service Providers –Leveraged Financing Policy Maker –Executive Order “Green & Clean” Innovator –R&D Technologies

3. New York State Policy Environment New York Energy $mart sm Program –By Regulatory Order of the NYS Public Service Commission –NYSERDA as the system-wide, non-utility administrator –8-year program (thru June 2006); $962 million –Public purpose goals of energy efficiency and cleaner environment –SBC Advisory Group: “Independent Evaluator” –SBC Renewed thru June 2011; $895 million

4. New York State Policy Environment (Cont’d) Utility Rate Settlement Cases –NYC gas efficiency program – NYSERDA $5m & $14m –NYC demand management – starting 2006 Offset load growth by 2008 – 300 MW $120m to NYSERDA for system wide program Directives/Laws –Executive Orders – EE goals & product purchasing standards –NY Green Building Tax Credit - $50 m –Appliance/Equipment Standards & codes Renewable Portfolio Standards Gov. Spitzer’s “15 by 15” Clean Energy Strategy

5. Need for Demand Based Programs NYC is required to have a majority of it’s generation in city Load growth has created the need for near term distribution upgrades in NYC NYC is an underground network distribution system High electricity demand days coincide with high ozone days

6. NYC Capacity Market NY has an administratively set demand curve –Capacity surplus results in lower prices –Capacity shortfall results in higher prices Summer 2006 Capacity Prices –Upstate – Roughly $2.50/kW per month –NYC – Roughly $12.50/kW per month Capacity prices significantly impact the social value of demand reduction measures

7. New York’s Energy Market Day Ahead hourly market accounts for +/- 50% of energy sold Bilateral contracts account for the other half Real Time Market is used for balancing Locational Marginal Pricing – The highest priced unit selected to run sets the price for all selected units in that geographic zone

8. New York’s DR Market DR is treated equal to generation Emergency Demand Response Program (EDRP) – Energy based and voluntary ICAP Special Case Resource Program (SCR) – Capacity based and mandatory – energy payments are also made for events Day Ahead Demand Response Program (DADRP) – Energy based and mandatory – DR competes with generators in day ahead market

9. NYISO’s ICAP SCR Program Provides “availability” payments for DR capacity resources to be available for deployment Capacity payments are made whether or not an event is called Energy payments are made for event performance Penalties and future deratings are assessed for underperformance A majority of resources are provided by third party Demand Response Providers

10. NYSERDA’s Role in DR NYSERDA encourages DR through either structured DR programs (ICAP/SCR) or dynamic rate options (Real Time Pricing) NYSERDA’s focus is on overcoming market barriers by providing enabling technologies, education/outreach

11. NYSDERDA’s Peak Load Reduction Program Reduces load by funding energy efficiency and demand response projects Incentives are kW based, not kWh Demand response funding is for technologies that enable customers to participate in ICAP/SCR Incentives available for controllable appliances Service Providers or end users may apply

12. Rockefeller Center Installation of Digital Energy Monitors that track the chillers, chiller water pumps, and condenser water pumps in real time Equipment installed increased reliability to curtail buildings load while maintaining tenant comfort 500+ kW reduction NYSERDA incentive $90,000 1211 Avenue of the Americas

13. 43 store participation Interval meters installed at each location along with upgrading its Energy Management System Average reduction for each store of 130kW Reduction for all stores totals 5.5 MW Technology allowed for direct control of all stores from a central office NYSERDA incentive approximately $300,000 Home Depot

14. Allows for prioritized load control during NYISO demand response events $18,962 incentive from NYSERDA Less than 3 year payback period New control system software to integrate variable frequency drives (VFDs) HVAC system renovation Macy’s Staten Island

15. The Social Value of DR In NY, DR capacity clears in the same auctions as generation capacity More DR = More Capacity Available More Capacity = Lower Prices For Ratepayers

16. NY’s Capacity Demand Curve DR has a price dampening effect

17. Results NYISO has roughly 1,800 MW in EDRP & SCR NYSERDA has provided technology that enabled over 500 MW of demand response NYSERDA has permanently reduced load by 562 MW through Energy Efficiency Annual Emissions Reductions (tons) –NOx – 2,430, SO 2 – 4,450, CO 2 – 1,900,000

18. Next Steps in DR Use Direct Load Control Technology to unlock smaller scattered resources – ie. retail chains Advance load control technology for use in appliances – ie. window & wall AC units Smart Grid – Smart appliances with standardized communication platform Expand the use of DR – ie. spinning reserves

19. Keys to Success Use all the tools in the toolbox – Energy Efficiency, Load Management, Demand Response, Combined Heat and Power Work to create markets with strong business cases – this will attract project developers Work with the middle market – ESCO’s, Demand Response Providers, etc. Value Demand Response equal to generation