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DSM and Resource Planning Jayant Sathaye, Amol Phadke and Ranjit Bharvirkar

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

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DSM and Resource Planning Jayant Sathaye, Amol Phadke and Ranjit Bharvirkar

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  1. DSM and Resource Planning Jayant Sathaye, Amol Phadkeand 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 -- Dr. Amol Phadke 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. 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

  8. 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

  9. 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

  10. Maharashtra: Electricity shortage 29% shortage 12 9/16/2014 Dr. Jayant Sathaye

  11. 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

  12. India Power Supply Capacity and Peak DemandReference 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

  13. India Power Supply Capacity and Peak DemandEfficiency 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

  14. Efficiency Scenario with No Shortage: Efficiency Options

  15. 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% -- 20 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

  16. Demand Side Power Purchase

  17. 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.

  18. Will you Approve This Peak Load Power Purchase?

  19. 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 !

  20. 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

  21. Many Demand Side Power Purchase Options: Delhi Example

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

  23. 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”

  24. 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,

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

  26. 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!

  27. 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

  28. 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 !

  29. IV: Implementing Demand Side Power purchase

  30. 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

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

  32. 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

  33. 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.

  34. 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

  35. 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

  36. 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.

  37. Energy Efficiency Programs:Level of Involvement of Distribution Company

  38. 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

  39. 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

  40. 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

  41. 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

  42. 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

  43. 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.

  44. 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

  45. 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

  46. 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

  47. 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”

  48. 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

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