CWEB.046/OCTOBER.28.1999
The exorbitant costs of meeting peak electric demand offer substantial opportunities for energy conservation and renewable energy strategies that moderate high loads, such as more efficient heating of buildings.
So believes energy consultant Tom Foley, speaking to the Northwest Energy Coalition's Clean & Affordable Energy Conference Oct. 1 in Seattle.
"This industry is in a state of flux and we have to continually examine the role of conservation and renewables in it, and determine where we can do the best for the [electric] system and how we pay for them, both directly and indirectly," said Foley, a longtime regional energy figure and former manager of conservation and resource assessment at the Northwest Power Planning Council.
Higher wholesale power market prices are a major factor for conservation today, Foley noted, making efficiency generally more cost-effective than in the mid-1990s. Also at play is the growing disparity between peak and off-peak prices, ranging from a typical gap of .5 cents per kilowatt-hour to occasionally as high as 5 cents/KWh. In other areas of the country, the differences have been far more dramatic and could be a harbinger of things to come in this region. This offers "opportunities to focus conservation at high load hours and/or shift peak loads to low-load hours, to take advantage of dollar values."
Under these circumstances, "Levelized prices aren't as important as they used to be," Foley said. Energy efficiencies gained at 2 cents/KWh but only available at off-peak times may not be cost-effective, while efficiencies costing 4 cents/KWh, for example, and saving peak-time energy may be very cost-effective.
For a typical utility, Foley said, transmission and distribution systems are built to serve loads that seldom occur. Fully 25 percent of the T&D system is in place to serve loads that only occur perhaps 4-5 percent of the 8,760 hours in a year. For those peak periods, transmission costs alone are about 8 cents/KWh, assuming a cost for transmission capacity of $24 per kilowatt per year. Add distribution expenses of roughly 16 cents/KWh and energy costs of up to 10 cents/KWh, and total costs can soar to 34 cents/KWh to serve those loads. "There are ways to serve those loads cheaper than paying 34 cents per kilowatt-hour," he said. "Locally sited generation, targeted conservation and load management are three examples."
In another example, Foley projected a comprehensive program to install compact fluorescent lamps would cost about $18/year for each kilowatt of peak load conserved. That compares to $43 for a simple-cycle combustion turbine, which if not sited within the distribution system, would require transmission at $24 and distribution costs on top of the $43. The compact fluorescents could be easily financed by the foregone transmission costs. "It seems to be a no-brainer," he said.
Foley also cited "looming transmission constraints" and the "extremely high costs" charged in the restructuring world for peak generating capacity.
Load Management
"What I think we need to do is take this targeted conservation approach and combine it with load management, shifting loads, shedding loads when prices peak," said Foley. This could include demand-side bidding, as is proposed for California's Independent System Operator, as well as shared-peak-savings programs between utilities and their customers, as B.C. Hydro is doing in a pilot program.
Distributed generation also could play a role in reducing peaks as well as enhancing system reliability, since most outages are caused by failures in wires, not generating facilities, he said.
Building operations can be changed to make a difference, Foley believes, particularly in large commercial settings. "If you heat some of these buildings early, instead of waiting until just before they're occupied, the thermal mass of the building can carry that building before the peak, and the energy penalty in the morning is more than made up later in the day. They spike these buildings up and when people come in they have to start cooling, even in very cold weather.
"Can we shift loads away from the peak by using cheap, clean energy at night, typically marginally low-polluting . . . and stay away from high peak prices? Every dog and cat generator is running on peak, which are typically all of the dirty ones," he said.
Dollars saved through peak-shaving efforts could be directed to fund additional conservation and renewables, he suggested. "We can work with utilities to do that," Foley said. "In many cases it's in their best interests also."
Seattle city councilwoman Margeret Pageler, joining the question-and-answer session after Foley's talk, noted Seattle City Light is starting to see summer peak loads with the big growth in plug loads and electronic equipment. The utility historically has peaked in winter. "We're looking much more closely at how we can partner with building owners of big commercial buildings downtown to develop some load- and peak-management systems," she said, adding that City Light's proposed 10 percent annual increase in rates for medium and large downtown network customers would provide "some cost incentives for business owners to work with us on that."
Asked about the delivery of energy conservation services for this peak-savings approach, Foley offered, "If we really had retail competition, there would be a lot of stuff that would come out of the woodwork. Storage devices for heat would be on the market for residences because of the vast differences in price from hour to hour. Even in that scenario there's a lot of learning that needs to be done . . . Until we get there, it's basically still the utilities, I think."
He did foresee and advocate a role for efficiency businesses: "If I were a building owner in Seattle and a big user of electricity, I'd first hire a good engineer who knew my business and knew energy . . . I'd go pound on my utility's door and say, 'Look, I want to capture some of this value,' and work with them."
NWEC chair Deborah Smith asked Foley how investor-owned utilities without their own generation sources could be persuaded to invest in conservation and renewables. Foley noted that distribution utilities still pay for transmission. "If they cut loads and save on the need for transmission and distribution, they need to be assured it won't affect their rate of return," he acknowledged.--Mark Ohrenschall
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