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Reaching Clean Power Plan Goals at No Cost:
Securing the Smart Grid’s Potential
Compliance Online Webcast
Wednesday, September 30, 1pm ET/10 am PT
Unleashing Latent Value in Distribution Utility Businesses
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Preview
The 3 Capabilities w/Significant GHG Reduction Potential
Estimating Smart Grid GHG Reduction Potential
How to Deploy the Smart Grid at no Cost to Customers
Challenges to Maximizing the Smart Grid’s GHG Potential
4 Optional Solutions to Addressing Smart Grid Challenges
Using the Smart Grid in All 3 Types of Clean Power Plans
EM&V of Smart Grid Capabilities’ Conservation Impact
Conclusions
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Wired Group Overview Consultants on electric distribution grids/utilities/businesses
DSM program development, marketing, evaluation
RPS compliance/PV Solar incentive program design
Optional rate development and marketing; riders
SMEs in rate cases, cost allocation, stranded assets
Smart Technology: distribution, metering, communications
Clients: Regulators, Advocates, Associations, Utilities, Suppliers
Comprehensive & objective performance evaluations of smart grids SmartGridCity™ for Xcel Energy Duke Energy Ohio for the Ohio PUC
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Smart Grid Capabilities w/Significant Energy Efficiency (GHG Reduction) Potential
Integrated Volt/VAr Optimization (Conservation Voltage Reduction, Volt/VAr Optimization, etc.)
Time-varying Rates (TOU, CPP, PTR, etc.) Prepayment
• How does each save energy/reduce GHGs?• What are the ‘ideal case’ requirements for each?• How much GHG reduction can each really deliver?
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Integrated Volt/VAr Optimization (Volt)How It Works Some types of customer
equipment use less energy at lower voltages.
IVVO reduces average voltage
Research: each 1% reduction in voltage delivers a 0.5-0.7% reduction in energy use (CVRf) on a typical distribution line¹
Ideal Case Requirements Use it 24 hours a day, 365 days a
year to maximize benefit
Target installation on high-load lines to reduce cost
95
100
105
110
115
120
125
130Voltage Before IVVO
Original Voltage
2) Voltage adjusted higher at start of line to accommodate
Start of Line End of Line
1) Routine variation causes voltage to drop below 110 at end of line
95
100
105
110
115
120
125
130 Voltage After IVVO
Original VoltageAdjusted VoltageIVVC Voltage
Start of Line End of Line
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Integrated Volt/VAr Optimization (VAr)How It Works Power Factor (VAr) is the measure
of electric voltage able to do work (power equipment)
As Power Factor improves, line losses (distribution = 4-6%) fall²
Research indicates that each 1% improvement in Power Factor reduces line losses 1%²
Ideal Case Requirements Use it 24 hours a day, 365 days a
year to maximize benefit
Target installation on high-load lines to reduce cost
Before After0
0.2
0.4
0.6
0.8
1
1.2
0.94 0.99
Impact of IVVO on Power Factor
Real Power Reactive Power
Pow
er F
acto
r
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Time-Varying Rates (TOU, CPP, PTR)How It Works Survey of studies (24) indicate
customers on a TVR reduce energy use through the year
Energy use reductions of -5% (increase) to +26% found
Average use reduction = 4%³
Ideal Case Requirements High Customer Participation
Low Recruiting Costs
Customer Behavior Change
Enabling Technologies
Off-Peak rate On-Peak rate Critical Peak rate$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
Typical Summer CPP Rate Schedule
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Prepayment How It Works Research indicates customers
who pay in advance reduce energy use
Energy use reductions of 11% and 12% found (OK; AZ)⁴
Works for natural gas too!
Ideal Case Requirements Customer Participation
No extra cost to participants
Engage Low-Income Advocates
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Estimating Smart Grid GHG PotentialCapability/Savings Calculation Reduction in Energy UseIVVO (Volt)
Voltage reduction % X CVRf5% voltage reduction X 0.6% CVRf
3.00%
IVVO (VAr)VAr improvement % X line loss %5% VAr improvement x 5% line loss
0.25%
Time-Varying RatesCustomer participation % X Usage Reduction %50% participation X 4% Usage Reduction
2.00%
PrepaymentCustomer participation % X Usage Reduction %10% participation X 10% Usage Reduction
1.00%
TOTALCaveat: CO2/kWh likely to fall over time
6.25%
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How to Reduce GHG at No Cost: IVVO NPV of cost to install & maintain IVVO on one circuit over 10
years: $316,000 NPV of energy benefits, ideal case, voltage: $349,000
(5% V reduction; 0.6 CVRf; 20,000 MWh/circuit/yr; $0.06/kWh)
NPV of energy benefits, ideal case, VAr: $29,000(5% VAr improvement, 5% line loss, same MWh/circuit/yr & $/kWh)
Estimated Benefit to Cost ratio, ideal case: 1.2 to 1*
Note: NPV calculated using 3% Discount Rate and 3% Inflation Rate* Does not include economic, environmental benefits from increased DG accommodation
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How to Reduce GHG at No Cost: TVR & Prepay NPV of cost to install and maintain smart meters per 1,000
customers, 10% w/prepay displays, 10 years: $301,000 NPV of energy benefits, ideal case, TVR: $140,000
(1,000 customers, 50% participation, 12 MWh/cust/yr, 4% conservation, $0.06/kWh)
NPV of capacity benefits, ideal case, TVR: $121,000(1,000 customers; 50% participation; 2.5 peak kW/customer; 20% reduction; $50/MW day)
NPV of energy benefits, ideal case, Prepay: $47,000*(1,0000 customers; 10% participation; 8 MWh/cust/yr; 10% conservation; $0.06/kWh)
Estimated Benefit to Cost ratio, ideal case: 1 to 1
Note: NPV calculated using 3% Discount Rate and 3% Inflation Rate* Does not include reductions in cost of bad debt, working capital, or peak demand
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The Biggest Challenge to Securing Smart Grid GHG Potential: “The Throughput Incentive”
Ratemaking 101 Utility Distribution Costs = $100 Million per year* kWh Sales = 2 Billion per year Distribution Price/kWh = 5.0¢
What happens if kWh sales are only 1.9 Billion? What happens if kWh sales are 2.1 Billion?
* If an Investor-Owned Utility, this figure includes authorized profits on capital
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4 Potential Solutions to Throughput Incentive
Make a one-time distribution rate adjustment to account for anticipated sales volume reductions
Allow utilities to count smart grid-related use reductions towards energy efficiency goals and incentives (goal increases required, of course)
Use “decoupling” to set distribution rates* Transition to performance-based ratemaking
(UK, New York)* Regulators use decoupled ratemaking for electric IOUs in 16 states and DC;
a handful of non-profit utilities also calculate distribution rates in this manner
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Using the Smart Grid in Clean Power Plans
In Rate-Based (CO2 lbs./kWh) Clean Power Plans In Mass-Based (CO2 lbs.) Clean Power Plans In Emissions Allowance Trading Clean Power
Plans
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Using the Smart Grid in Rate-Based CPPs
Adjust carbon intensity by adding MWh of electricity saved at 0 lbs/MWh to CO2lbs./MWh calculation
Actual Carbon
Intensity, Year Y
Electricity Saved @ 0 lbs. CO2 per MWh
Adjusted Carbon
Intensity, Year Y
+ =
+ =1,300 million lbs.
1 million MWh
0 lbs.
50,000* MWh
1,238 lbs.
MWh
* How do we know electricity saved was 50,000 MWh? EM&V!
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Using the Smart Grid in Mass-Based CPPs1. Starting with actual dispatch
record for year Y, add kWh savings profile by hour (8,760 hours in a year)
2. Re-run dispatch software, identifying how plant dispatch would have been different without the energy efficiency savings
3. The difference in GHG emissions from generating plants on the system between actual dispatch and hypothetical dispatch represents reductions due to energy efficiency/smart grid efforts.
How do we know the size of the red area? EM&V!
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Using the Smart Grid in Allowance Trading CPPs
Issue Emission Reduction Credits to distribution utilities based on: the Rate-Based calculation approach or the Mass-Based calculation approach
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EM&V: How Much Actual Conservation? Every state CPP must include EM&V plans EM&V reports 2022-2030 must measure actual
conservation as specified in the EM&V plan EM&V should utilize best practices that:
Establish a baseline for comparative purposes Show results independent of outside factors
(weather, economic conditions, etc.) Take permanence (or lack thereof) into account
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IVVO EM&V: How Much Actual Conservation? Establish an annual average voltage and VAr
baseline for each distribution line (before IVVO) Measure actual average voltage and VAr over year
“x” (2022-2030) for each distribution line (after IVVO) Multiply for each distribution line, then sum up all:
(Change in Voltageₓ) X (MWh distributedₓ) X (CVRf*) (Change in VArₓ) X (MWh distributedₓ) X (Line Loss %*)
Conduct random audits of utility data, equipment * What the EPA will require for these values is not known; national estimates my suffice
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TVR & Prepay EM&V: How Much Actual Conservation?“Difference in Differences” Approach
Baseline Post Intervention Year X % Change
Non-participants 10.2 GWh 10.9 GWh + 6.8%Participants 75.0 GWh 78.8 GWh + 5.0%
Conservation Impact
Change in non Participants Over Time
Change in Participants Over Time
= --
Conservation Impact
Participant GWh
GWh ConservedX =
1.8% 78.8 GWh 1.42 GWhX =
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Conclusions In ideal cases, the smart grid can achieve as much as 1/5 of
GHG goals through conservation* at no cost to consumers IVVO (3.25% conservation if utilized 24 x 365) Time-based rates (2% conservation at 50% participation) Prepayment (1% conservation at 10% participation)
Without regulatory and ratemaking changes, ideal case achievement is highly unlikely as conservation economically penalizes almost all distribution utilities
Several regulatory and ratemaking solutions are available to address the throughput incentive/conservation penalties
With rigorous EM&V, smart grid capabilities are appropriate for use in all types of Clean Power Plans
* Does not reflect changes in CO2/kWh intensity over time
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Questions?
Paul Alvarez, President
303-997-0317, x-801
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Bibliography1. Integrated Volt/VAr Optimization (Voltage)
Proess, R.G. and Warnock, V. J. “Impact of Voltage Reduction on Energy and Demand”. IEEE Transactions on Power Systems, volume PAS-97, number 5, pages 1665-71. Sept./Oct., 1978
Kennedy, B.W. and Fletcher, RH. “CVR at Snohomish County PUD”. IEEE Transactions on Power Systems, volume 6, number 3, pages 986-998. August, 1991.
Wilson, T.L. “Energy Conservation with Voltage Reduction – Fact or Fantasy”. PCS UtilitData. April 4, 2004.
Leidos. “Distribution Efficiency Initiative Project Final Report”. Northwest Energy Efficiency Alliance. Page 7. December, 2007
Schneider et al. “Evaluation of Conservation Voltage Reduction on a National Level”. Pacific Northwest National Labs, pages 30 & 33. July, 2010
Alvarez, et al. “SmarGridCity® Demonstration Project Evaluation and Summary”. Report to the Colorado Public Utilities Commission in Case 11A-1001E, Exhibit MGL-1, Pages 61, 62. December 14, 2011.
Wakefield, M and Horst, G. “Smart Grid Demonstration Initiative 5-year Update”. Electric Power Research Institute. Page 5. Undated.
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Bibliography (Continued)2. Integrated Volt/VAr Optimization (VAr)
The US Energy Information Administration estimates T&D line losses in the US average 6% annually
The International Energy Agency estimates T&D line losses in the US average 6% annually
The Industrial Power Factor Analysis Guidebook (Bonneville Power Administration, 1995) concludes that distributing capacitors throughout and industrial facility can reduce facility electric demand from 0.5% to 1.5%
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Bibliography (Continued)3. Time-Varying Rates
King, C. and Delurey, D. Efficiency and Demand Response: Twins, Siblings, or Cousins? Public Utilities Fortnightly. March, 2005. Pages 54-61
Faruqui, A and Palmer, J. The Discovery of Price Responsiveness -- A survey of Experiments Involving Dynamic Pricing of Electricity. March 14, 2012. Available from the Social Science Research Network at www.papers.ssrn.com.
4. Prepayment Ozog, M, “The Effect of Prepayment on Energy Use.” Integral Analytics, Inc.
research commissioned by the DEFG Prepayment Working Group. March, 2013.
“Salt River Project: Delivering Leadership on Smarter Technology and Rates”. Institute for Energy and the Environment, Vermont Law School. June, 2012. Page 18.
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