Moving beyond Demand Response (DR) – Pricing Services

Utilities and Regulatory commissions are obsessed with demand response (DR). All want to know how to get more of it. I could, with little effort, attend a national conference on DR every week. A large share of the standards priorities of the National Institute of Standards and Technology (NIST) to support smart grids support DR. And yet, almost everyone recognizes that DR is a short-term solution. Plans are just now underway to move beyond DR.

The most expensive electricity comes from the dirtiest generating facilities used for only a few hours a year. If consumers would use less energy, i.e., reduce demand, in just those few periods, then those expensive dirty plants could be turned off permanently. To do this, electricity suppliers need to anticipate when those moments are coming and take steps to reduce demand. We call this Demand Response.

At its simplest, DR is just turning things off. Rolling black-outs are the simplest form of DR. They make consumers very unhappy. Utilities have worked for years to improve on this model through direct load control. They have been installing remote switches on home heat pumps since the ‘70s. Today, they are developing SEP to control homes device by device using software installed in smart meters. Consumers like it in off-months, when they get a bill reduction and the utilities do nothing. In summer months, when the utilities do something, things get turned off in the home. They make consumers very unhappy.

In the commercial building world, utilities pay per incident. The energy use is greater, the number and complexity of systems on the premises are bigger, and the possible DR per incident is larger. In the most expensive markets, this pays for the custom integrations needed to respond to price signals. This is probably good enough for today’s grid. Tomorrow’s grid will be much less predictable, and the need for more participants will be greater.

Just as there are times when there is a shortage of electricity, there are times when there is a superabundance. Buildings that take responsibility for storing energy in advance are better able to manage demand reductions when asked. If the markets offer fixed prices except for the peaks, then it will be cheaper to ignore storage and DR. Sooner or later Markets must follow availability. The most important feature of smart grids will be to recognize scarcity and abundance faster, and to thereby price better.

In the future, then, a Pricing Service will be the essential load management service that operates the grid. A grid pricing service must be able several questions:

1. What is the price of Electricity now?
2. What will it be in 5 minutes?
3. What was the highest price for electricity in the last day? Month? Year?
4. What was the lowest price for electricity in the last day? Month? Year?
5. What price will electricity have for each hour of the day tomorrow?
6. What was the high price for the day the last time it was this hot?

The answer to each of these questions has another component “How sure are you?” Those prices may be fixed tariffs absolutely locked down. Those prices may be fixed tariffs, “unless a DR event is called.” Those prices may be wild guesses about free markets.

At its core, OpenADR must have price services in the future.

Underpinnings for standardizing Demand Response (DR)

For decades, regulated electricity markets have struggled to deal with volatile energy markets providing to support un-caring customers. Customer’s real-time purchases, called load by the electricity industry, vary throughout the day, and more to the point, co-vary with external events. These issues are not limited to electricity. The “Super-Bowl flush”, which has reached the status of urban legend, names the stresses placed on urban waste water systems as external events synchronize demand.

Public Utilities Commissions defined tariffs to prevent the Super-Bowl flush for decades. Peak use can increase prices for a year. Tiered pricing increases the bill for any amount above a pre-set usage during a month. These approaches pre-date any discussion of smart grid—often they have effects contrary to those desired by the smart grid. The smart grid is smart in that it detects at any time whether there is too little or too much power available, and uses market signals to decrease or increase demand to match supply.

Early efforts at the smart grid focus solely on reduction. When the signal goes out to certain buildings, they reduce their load, or use of electricity, in a pre-defined way. We call this process demand response, and pre-eminent specification for this signal is called Open Automated Demand Response (OpenADR).

Demand response must be more than load reduction. The great wind farms of west Texas, the most successful farms in North America, are, I’m told, able to sell less than 40% of the electricity they generate. The wind generates electricity at times when no one is planning to use it. Even the most inefficient energy storage would be preferable to simply wasting the electricity.

The challenge now is to define signals that common across North America and the world, and that that handle energy surplus as well as deficit. This effort is underway in the OASIS Energy Interoperation Technical Committee.

One problem is that energy market operations have been restricted and confined, both by technology limitations and by public policy decisions. We have discussed DR as a one-way interaction, from utilities to customers. We have tied DR to special tariffs and to direct control systems. Each of these restricts the participants and innovation in DR.

On the Committee, we tried to place electricity in a normal market context. We identified four essential market activities, or services:

1. There is an indication of interest (trying to flush out offers), when a market operator is seeking partners for a demand response or energy source.
2. There is an offer of a service whether megawatts or “nega-watts”
3. There is an execution of a contract (agreement to purchase / supply (b))
4. There is a call for performance of the contract (c) at the price agreed upon.

We are defining these services so they can be combined to meet today’s tariffs. For example, one of today’s tariffs for interruptible power may offer a lower price all year in return for the right to shed load automatically up to six times a year. Under the Energy Interoperation model, this would be standing contract with 6 time-limited pre-executed response contracts. Automated Demand Response is merely a call for performance on existing contracts at the agreed upon price.

Another model, coming into use, is Price-based ADR. If we assume the traditional utility-centric model, we would see the utility publishing an indication of interest in buying DR at a given price. Business and buildings willing to respond would simultaneously offer and execute a contract to shed load. The performance could be called at the same time or later as contracted.

Emergency or "Grid Reliability" events could look left out by this approach. Grid Reliability events require mandatory participation in today’s markets. These could be set up as standing pre-executed options. A grid operator then need merely call for performance as in any other demand-limiting event.

In this way, we can build all the tariffs and markets out of a few low-level services.

Sometime soon, I will write about the requirements for a pricing service.

Microgrids Big and Small

Last summer, we used the call “Every end node is a microgrid” to focus smart energy standards activities. Like the regional grids, a microgrid is responsible for running its own operations, and for supporting its own needs. Like the regional grids, a microgrid uses market operations to acquire what it cannot make itself, and what it can buy more economically than it can make itself. Like the regional grids, a microgrid can contain microgrids that are responsible for their own operations.

Last week, a board member of NAESB asked me to define microgrids. I was invited to speak to NAESB to explain what interest natural gas suppliers might have in smart grid standards. I was surprised that an idea so central to national smart grid efforts needed to be described to one of the most significant energy market and business practices groups. There is so much going on so fast right now, and the pressures to accelerate are so strong, that some of us get used to ideas before we ever have to explain them.

The list of end nodes that might be microgrids starts with homes, commercial buildings, and industrial sites. Within an end node, different subsystems can interact much as they do within the larger grid. Building systems could bid for access to site-based power. Microgrid events can trigger demand response (DR) behaviors from the building systems or building zones. Microgrids can contain and be contained by other microgrids.

Buildings and sites can be participants in local area microgrids. Campuses, and military bases present existing business models for microgrids. Rather than as integrated control systems, these contained building microgrids grids can participate collection of autonomous entities. Each building / microgrid could then bid for and obtain energy supply and reliability from larger microgrid.

The models propagated by the District Energy Association can inform microgrid thinking. The defining characteristic of District Energy is cogeneration, in which a single plant may make electricity, steam, and hot water. Because steam can be used to power cooling, cogeneration systems often produce chilled water was well. Each of these products can find a market within the microgrid. The district energy plant then becomes the market maker, shifting modes of energy delivery to match the bids from the autonomous buildings it contains.

Microgrids can opt to be more intimate, and to communicate more frequently than does the larger grid today. Buildings may choose to negotiate available load shapes, sharing planned energy use and backing-off of planned energy-using processes to maintain overall market conditions within the local microgrid. Microgrids can maintain their own cybersecurity regimes, tighter or looser than those in the wider grid as befits their needs.

These local area microgrids will require regulatory reform to flourish. Industrial parks must avoid these business models today lest they become regulated as a public utility. Commodity home builders are exploring providing turnkey district energy and management, turned over to the turnkey homeowner’s association (HOA) they provide today. When combined with the new package solar thermal systems, shipped in a single container, and installed on-site, neighborhood microgrids may be the future of distributed energy.

Today, in many states, an energy supplier becomes a regulated utility when the energy delivery crosses a public road. In new neighborhoods, the homebuilder finishes a neighborhood and turns the rods over to the city. Green builders are already considering turning title for the roads over to the HOA instead, to avoid such regulation. Future regulatory changes could open up existing neighborhoods to this kind of energy management.

Microgrids can extend down as well. Each tenant in a commercial building could operate its own microgrid, existing within the environment of the buildings microgrid. One could argue that green leases are beginning to move in this direction. I find it fascinating to think of intra-building market opportunities. Can we use intra-building markets to re-use what is today waste energy? Does the data center in the basement defray costs by selling its waste heat to the other tenants? Would some tenants pay a premium for site-generated energy? By hiding the complexity of interoperation behind an economic veneer, can we improve performance and reduce integration costs?

Microgrids, whether virtual or real, are an important organizing concept of smart energy.

Smart Operations are a necessary part of Smart Energy. Maybe GBXML is, too.

It is easy to think we are playing the end game, but we are really working on the early stages of smart energy.

Smart grids may end at the edges of the grid, they may know no bounds, i.e., ZigBee and SEP, or they may end at the meter. Beyond the meter may be a collection of dumb systems, a minimal collection of defined systems with defined responses, or a micro-grid with its own economy, and own dynamics. I think that every node a microgrid is the future.

I was pulled back to thinking about buildings as I prepared to speak at the AHR show in Orlando next week, and by an announcement about an upcoming seminar on GBXML (GB = Green Building). GBXML is a format designed for the exchange of engineering information, particularly that related to energy use and energy efficiency, during the design process. GBXML may be the key to understanding microgrids in buildings.

The challenge when we treat the end nodes as micro-grids is categorizing and measuring the services they provide. These may be relatively clear in the data center, but even there, understanding HVAC support services is relatively obscure to the IT operator. Going a step further and treating the data center as the district energy center for thermal distribution is hard to understand, harder to account for, and therefore difficult for most enterprises to work with. What are the services in the end nodes?

So, after a building has been partially renovated a few times, and has three EMS (energy management systems), each managing a dozen zones, what effect is there on which part of the business when load is shed in a particular way? Which departments, or tenants, are even affected? Do tenants have QOS agreements, and if so, how are they affected.

Full-fledged BIM (Building Information Model), as defined in NBIMS and BuildingSmart, is too fat, too heavy to use in everyday operations. GBXML is a light-weight one-off of the IFCs in BuildingSmart. It was developed to model energy use, and to exchange energy models within buildings. GBXML includes formal definitions of geometries and spaces, and common models for the components of the energy using systems in buildings. It might just be the map between the design, the operations, and the services. GBXML might just be BIM-Light.

Somewhere between the intriguing, but not yet all that useful Microsoft Hohm and Google Energy, there needs to be a path for buildings as service providers. Understanding services in buildings requires understanding tenants, and their purposes. Perhaps Building Service Profiles link to the spaces in the light-weight BIM (GBXML) and therefore to the tenant services.

Energy profiles linked to the Building Service Profiles, then, become the links between Demand Response and graphical, tenant aware interfaces for building operations.

Last week, I received an announcement of a GBXML seminar in building design (http://www.gbxml.org/events.php). So far, efforts such as LEEDS have not yet delivered on the vision of sustainable energy-efficient high-performance buildings. The unhappy truth today is that most "green" buildings are poor energy performers within a couple years of delivery. Commissioning is a one-time act with no visible links to ongoing operations. Maybe using GBXML to both define the services of buildings and to operate/visualize their operations will not only enable stronger DR, but will lead to better every-day operations.

I am convinced that long term models for distributed energy, and for rapid innovations in energy use, come in this area. All the early incentives of DR, and the early visualizations of Google Energy and Hohm, are merely the tip of wedge for DER and smart energy in the end nodes. We need an interface between design, construction, operations, and smart energy. GBXML may be the most important enabler of net zero, near grid, and off-grid facilities. It may be what we need to apply the facilities capability management approaches pioneered by the Coast Guard to the policy-based net zero security and survivability of the NZ Army base.

I recommend that you check out the seminar on GBXML if you are interested in the real potential of smart energy.

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