By: 2022 DC Fellow Abhishek Jain
“What if we could make energy do our work without working our undoing?” — Amory Lovins
Demand Side Management programs have been pivotal for the fulfillment of the utility’s service obligation, their “duty to serve” customers, and maintaining the status of being the trusted energy advisor. These programs have not only delivered cost-effective energy conservation measures to customers but also been a stimulus to the energy efficiency private sector. The previous two decades have seen the change in business objectives of the electric utility industry and the regulatory binding that comes along with it. Climate change mitigation and adaptation actions have triggered the aggressive adoption of renewable energy generation and distributed energy resources (DERs) into our energy paradigm. This article explores how utilities need to rethink the framework and performance metrics used to plan, perform, and evaluate their DSM portfolio.
DSM Programs can be classified into two by their intention: load-shaving and peak-shifting. The first type of program has promoted energy efficiency measures while the second type leverages demand response offerings. Collectively, they have serviced the business interests of the utilities, provided economic benefits to their customers, and reduced the environmental consequences of supply-side activities.
Shatter the Edifice of Traditional Programming
The status quo is challenged by the saturation of cost-effective energy efficiency solutions. Lighting measures are champions of cost-effectiveness and are often used along with other deep energy retrofit measures to ensure the overall cost-effectiveness of a program. Department of Energy’s (DOE) recent updates to lighting standards effectively eliminate LEDs as a viable measure and henceforth reduce the large benefits they could deliver to aggregate programs. Program planners across the country are now looking for innovative solutions to deliver savings and meet cost-effective standards.
Building and Transportation Electrification plans are ubiquitous across myriad climate action pathways and increasingly a strategic area for DSM programs to grow into. However, holistic electrification benefits cannot be often captured using traditional cost-effective tests. While electrification may lead to a decrease in “primary energy” consumption, it does increase electricity demand and its impact can be coincidental with the peak demand consumption. This does not bode well with the purpose of traditional testing meant to evaluate the effectiveness of load shaving and peak shifting.
These benefits extend beyond the system boundaries of an electric utility and engage other stakeholders like gas utilities, fuel providers, and manufacturers as well. Electrification under traditional DSM programming undergoes a well-deserved tough fight with state regulators. The fuel-switching nature of electrification programs de facto increases the monopolistic powers of the incumbent utility. Many states do not allow programs that enable customers to switch fuels and therefore face a regulatory battle before they can hit the litmus test of cost-effectiveness.
The electrification paradigm is about to make waves across the country and all stakeholders alike will be looking for solutions that do not fit in the box of traditional cost-effectiveness testing. The solutions can be unlocked by treating aligning DSM goals with overall integrated resource/distribution planning. KPIs set up along the least-cost methodology and reduction of overall greenhouse gas emissions can incentivize the utility and stakeholders alike to pursue electrification planning.
Hourly Data: Need before Greed
The ever-evolving energy supply mix presents an amalgam of challenges and opportunities for DSM activities. Programs that can provide non-coercive signals, unlike demand response, for demand to be in-phase with supply temporally can be valuable to the utility’s DSM portfolio. The design and modeling of such programs call for better and more data.
Unlike status quo modeling, to design these programs hourly load shapes avoided costs, and grid emission intensities are needed. The availability of this data is not a best practice across the industry. Standardization of data practices should be a top priority for regulators and planners to prepare for the next wave of DSM Programs. Such data can help us design better programs, which when coupled with sophisticated AMI analytics, can deliver a high impact for decarbonization efforts.
DER Cost-Effectiveness
The National Energy Screening Project (NESP) released the National Standard Practice Manual (NSPM), a framework to guide the development of cost-benefit analyses of DERs. It supports BCA practices that align with a jurisdiction’s policy goals and objectives. The framework of the Jurisdiction-Specific Test (JST) establishes DERs as a utility system resource and identifies all the possible value stacks they can deliver. Accounting for policy goal impacts, the test captures the impacts that the traditional tests do not account for. Some examples of these impacts include Environmental Compliance Costs, Market Price Effects, Increased Reliability, Increased Resiliency, and Public Health.
An increasing number of states like Michigan, Maine, and Colorado are looking at the NSPM requirements as a guiding methodology to update their cost-effectiveness tests used in applications like pilot proposals, distribution planning, and non-wire alternatives. The NSPM-based principles and the value streams it defines will unlock the next phase of analytics in program planning efforts.
Beyond Tradition
A Negawatt represents a watt of energy that you have not used through energy conservation or the use of energy-efficient products. To ensure an equitable and just transition to a clean energy economy, my call to action is: “Not all negawatts are created equal”. While cost-effectiveness and aggregate energy/capacity savings provide empirical performance results of DSM programs, they do not provide any insights into the distributional equity of benefits and costs. The Rate Impact Measure (RIM) test can assess the direction of the rate impact; however, it does not indicate the distributional impact on customers in the utility territory. Understanding the rate impacts and long-term bill impacts should be a part of the broader program planning process. The equitable distribution of DSM program benefits is of paramount importance and will help utilities set up for success in their transition journey.
While the incumbent utilities face a tumultuous and ever-evolving regulatory landscape, they are privy to a gift; the prerogative of engaging and bolstering the using and consuming public in the decarbonization journey. The next evolution in Demand Side Management is here, with business development opportunities galore and copious opportunities to develop deeper customer relationships. The utility can choose to unlock it all with the renaissance of DSM programs.
