Clean power plans - the role of the smart grid

Wired Group
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
Copyright 2015 Wired Group. All Rights Reserved

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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
130
Voltage Before IVVO
Original Voltage
Adjusted 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 Voltage
Adjusted Voltage
IVVC 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
 Use it 24 hours a day, 365 days
a year to maximize benefit
 Target installation on high-load
lines to reduce cost
0.94 0.99
0
0.2
0.4
0.6
0.8
1
1.2
Before After
PowerFactor
Impact of IVVO on Power Factor
Real Power Reactive Power

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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
 High Customer Participation
 Low Recruiting Costs
 Customer Behavior Change
 Enabling Technologies
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
Off-Peak rate On-Peak rate Critical Peak rate
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!
 Customer Participation
 No extra cost to participants
 Engage Low-Income
Advocates

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Estimating Smart Grid GHG Potential
Capability/Savings Calculation Reduction in Energy Use
IVVO (Volt)
Voltage reduction % X CVRf
5% 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 Rates
Customer participation % X Usage Reduction %
50% participation X 4% Usage Reduction
2.00%
Prepayment
Customer participation % X Usage Reduction %
10% participation X 10% Usage Reduction
1.00%
TOTAL
Caveat: 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 CPPs
1. 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
palvarez@wiredgroup.net

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Bibliography
1. 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.

Clean power plans - the role of the smart grid

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