Last week, I was fortunate to see this article posted on EnergyCentral.com: Demand Flexibility Is No Longer Nice To Have.
“[Load flexibility] is increasingly becoming a “must have” as networks around the world are moving towards high levels of variable renewable generation resources. The increased variability of renewables, notably wind and solar, results in frequent episodes of feast and famine when supply exceeds demand and vice versa. The result is wide swings in wholesale prices, from near zero and negative to very high levels reflecting the imbalance in supply and demand. Storage and exporting/importing the surplus/deficit are invoked to the extent possible but are often not sufficient.”
That has been the theme of this blog for the past few weeks, and we conclude this week.
To achieve load flexibility, it must be financially worthwhile for the customer. To get there, we must remove barriers and add accelerants. Let’s start with rates, which we discussed last week in Electric Ratemaking and Load Flex. I’m declaring rate reform barrier removal because flat energy rates are dumb, and dumb equals barrier.
Rate reform includes three factors in my world: time of use energy, demand charges, and peak-time window. Go big or go home.
Time of Use Energy
Time of use (TOU) energy is the same as the old time-of-use long-distance phone rates from thirty years ago. Ten cent weekends, anyone? That was the rate-per-minute charge by Sprint back in the 1990s. On-peak rates (weekdays) may have been 50 cents. That is the sort of spread utilities need: at least a three-to-one ratio of energy cost from on-peak to off-peak.
Instead of or maybe in combination with stiff peak TOU energy rates, utilities should make demand charges available to all customers. See last week’s post. This would allow customers to manage energy costs and participate in the energy transition rather than sitting back and letting everyone else do it.
Finally, we have the peak window period, whether it applies to TOU rates or demand charges. The peak demand window must be something customers can work with. I can’t deal with a 12-hour window. Kudos to Xcel Energy for a 5:1 ratio of on-peak to off-peak energy charges, but I won’t manage my life around a 12-hour window.
I sum up these three factors and display them in the three-dimensional cube below. Some combination of TOU, demand charges, and a manageable demand window are needed to facilitate the flexibility required for the energy transition.
Xcel Energy’s TOU option for me includes 21 cents energy (kWh) from 9:00 to 9:00 on weekdays and 4 cents the rest of the time. How about this rate reform: 50 cents per kWh for four hours when it matters and 4 cents all other times? I might even nerd out on that and put a timer on my refrigerator and cut out my heat pump, of course.
See below for the “four hours when it matters” per the Midcontinent Independent System Operator in the last week of August – four hours, not twelve.
I get it. It takes some pilot work to see what works for customers while producing the revenue requirement for investors and operations.
Flex Load Leadership
Now that we’ve established the 12-hour window must go, Xcel Energy is launching an innovative Dynamic Thermal Storage (DTS) program. It is dynamic because the peak period is shorter, at four hours, when peaks are predictably set, and the peak period may change every quarter.
Not only is Xcel Energy removing the 12-hour barriers, but they are also adding an accelerant. Customers get a 10% first-cost incentive in year one and 5% every year after, provided the resource is shifting loads per the quarterly four-hour window. To my knowledge, the DTS program is the only one of its kind. This leadership will deserve awards, and we plan to contribute mightily to its inevitable success.
Xcel Energy also offers a Peak Flex Credit that allows customers a matrix of options, including the total number of event hours per year (more credit for agreeing to more curtailment potential) and notice window (more credit for a 10-minute notification versus an hour-ahead notification). Demand charge reductions vary from 25% to 40%. Xcel Energy provides added metering so customers have real-time visibility into their electric loads, so they are not left to fly blind.
Git R Done
Maybe the most popular “go away” phrase in energy efficiency ever is “We don’t have any budget for that.” That’s hard to pick apart. Even signs of wealth (stuff) and positive earnings reports do not mean the customer has cash. Xcel Energy is taking this canard to the woodchipper as well.
Introducing Empower Facilities – a turnkey energy efficiency solution that provides subscription financing, project design, and performance guarantees. What does it cover? All the loads and storage in a building that can provide grid flex to support a renewable-supply grid.
Even more innovative – earnings from the program are plowed back into Xcel Energy’s efficiency fund, known as CIP, or Conservation Improvement Program in Minnesota.
To learn more and ask questions, join our webinar, Avoid the Peak with Thermal Storage, Wednesday, September 27, featuring:
- Stan Nabozny, Director of Thermal Energy Consulting, Michaels Energy
- Josephine Metoyer, Sr. Strategic Energy Solutions Manager (Empower Facilities), Xcel Energy
- Amy Hollander, Product Manager, Commercial & Industrial (Dynamic Thermal Storage), Xcel Energy
With innovations like these, I have a feeling, although it depends on the regulators in Wisconsin, that I may see actionable residential TOU rates soon.
Git er done.