Demand Response 2011

ComEd Rolls out CLR

What’s Best for You?

With January of each new year comes the roll out of ComEd’s demand response program – Rider CLR.  Although the basic structure is the same as previous years, there are some changes that may cause one to consider other demand response options.  The big changes in ComEd’s program are the magnitude of the payout, the enforcement of penalties and the timing of enrollment in their program.

The demand response programs all originate with PJM – our RTO (Regional Transmission Organization) if you are behind ComEd.  PJM determines the rules by which they conduct the capacity auction (that determines the value of the payout for demand response programs), along with the length and duration of curtailment periods.  Service providers for PJM’s curtailment programs are called CSP (Curtailment Service Providers).  The basic idea behind demand response programs is that PJM will pay CSPs who can aggregate electricity customers that will act in unison to curtail usage, thereby insuring integrity of the transmission system during times of stress.  The financial payout from PJM is basically equivalent to the amount each customer is charged per unit cost of capacity.  The curtailment season runs from June 1st to September 30th each year.

There are two basic programs that are offered by all CSPs (CSPs include third parties and ComEd):  Guaranteed Load Drop (GLD); and Firm Service Level (FSL).  For the GLD program the customer agrees to reduce demand for a predetermined quantity.  The basis used for the calculation datum is the average of the five preceding business days.  For the FSL program the customer commits to not exceeding a demand quantity during the curtailment period.

CSP Program Differences
There are three distinct differences between ComEd’s demand response programs and those typically offered by third party CSPs:

Curtailment Hours – ComEd’s programs have an eight-hour curtailment duration and they have more possible curtailments per season (up to 15 curtailments per year).  Total possible curtailment hours are 120 per season.  ComEd’s programs are designed to not only support the RTO system, but also maintain the integrity of ComEd’s distribution system, hence more possible curtailment hours.  PJM requires a maximum of 10 curtailments per season with a maximum duration of six hours.   Total possible curtailment hours are 60 per season (half of ComEd’s)

Penalties – Prior to the current year, PJM had no penalty provisions for non-performing entities.  As a result, many customers who had no intention of complying signed up for demand response programs, thereby getting a nice, undeserved payout.  Although ComEd formalized a penalty structure, they didn’t levy any penalties this past curtailment season as the group as a whole performed adequately.   This year, independent of the group’s performance, ComEd will be levying penalties on non-performing entities.  Third party CSPs have a wide variation in programs that range from insulating the customer from all penalties to those that are pretty punitive.

Payout – In return for longer curtailment hours along with the risk of stiff penalties, ComEd offers the highest payout.  It is 100% of the payment received from PJM.  Other CSPs offer a range of percentages of PJM’s payment starting with 50% or so.  This coming curtailment season (i.e., June 1, 2010 – September 30, 2011) the payout from PJM will be approximately $40/kW or $40,000/mW of demonstrated demand response.

There are some other differences beyond the three major ones cited above.  Third party CSPs will typically provide hardware and software that will assist the customer in achieving their highest level of performance.  With some third parties assuming full risk for non-performance, it is in their best interest that their customers perform to the highest level possible.  Also, the accounting for installed equipment varies among CSPs.  Some pay for everything out of their share of the payment, while others pay for the investment before anything is shared with the customer.

Making a Decision
If you have the ability to shed load, shut down operations or start a generator when requested, then you should consider joining a demand response program.  What actions you can reasonably take and the cost to your operations of taking said actions, will determine whether you sign up with ComEd for their high payout, punitive program or chose a third party CSP’s program.

If you can shut down your facility (and there isn’t a huge cost to your operation for stopping production) or you can start up a generator (that you can depend on starting when needed), then ComEd’s program should be seriously considered.  Even though you believe you can perform 100% of the time at the committed level, you should fully understand the penalty structure.  It will be worth the time invested.

On the other hand, if you think you can curtail load some of the time and/or you aren’t sure how much you could curtail on any particular day, you should consider a third party CSP.  The less sure you are in being able to curtail, the more you want to be insulated from penalties and the more help you’d want in performing.  Shopping around to see what some of the major CSPs have to offer would be wise.
This year ComEd has extended the open enrollment window through March 10th.  In past years, the program closed almost as soon as it opened (typically there was a four-week window in which to act).  Some third party CSPs will take customers through late spring.  Take advantage of the additional time allotted while all options are available for making a decision.  Start working on it today.


Mideast Unrest and Your Utility Budget

With political change sweeping the Arab world, you might be wondering what effect this may have on  your utility budget.  It’s obvious that things are going to change in Tunisia and Egypt, the most populous country in the Middle East, but at this time no one knows how things are going to turn out.  Will President Mubarak be able hang on to power, thereby providing stability to energy markets?  Or will the protestors prevail in overthrowing his dictatorship?  What would a new Egypt look like?
The majority of OPEC’s oil comes from the Persian Gulf.  Most countries in the Gulf with significant oil production manage to keep political opposition in check very effectively.  With the forces for change spreading to Jordan and Syria, could the Gulf nations be far behind?  The price of crude is nudging $100/bbl.  Will other energy commodities be caught in the upward flow?
While there isn’t a 1:1 correspondence between crude prices and the price of gas and electricity, there is a substantial correlation.  It may make sense to re-evaluate your current futures position in light of recent political unrest.



Holiday Gift for Food Pantries

Client Savings top $160K

Environmental Benefits Stay in the Chicago Area

Each year, to celebrate the season, we give holiday presents to associates and friends.  In the past we’ve given out pens, Kill-A-Watt meters and personal organizers.  This holiday we decided to take a different approach to gift giving – instead of giving presents to associates and friends, we decided to give out Compact Fluorescent Lamps (CFLs) at food pantries on the south side of Chicago and Oak Park/River Forest.  For those that don’t know, CFLs are the energy efficient replacements for incandescent light bulbs.  They save 75% of the energy and last 10 times as long as the incandescent light bulbs invented by Thomas Edison over 130 years ago.  Over the past few weeks we’ve given out over 3,500 CFLs to 849 families in need.  Over the operating life of the CFLs each family will save approximately $200 in electricity expense.  Total savings for this phase of the program exceed $160K and the environmental benefit of our actions is equal to that of 1,600 Renewable Energy Certificates.  And because the energy reduction is here in the Chicago area, the reduction in pollution is the same as building and operating renewable energy plants here.
When we were first developing the Holiday CFL plan we were given the option of shipping the CFLs to the central location of the Greater Chicago Food Depository, the organization that coordinates and supports the activities of most food pantries in the Chicago area.  They, in turn, would distribute CFLs to their food pantries.  While this option would have been easier and less time consuming for us, based on our experience with the lack of CFL acceptance by the general population, we decided to hand out CFLs to food pantry clients ourselves on the days they pick up food.  This process would allow us to not only “sell” the use of CFLs, but also take data on attitudes and the level of use of CFLs in these communities.  We set up a little demonstration with two desk lamps (one with a 14-Watt CFL and one with a 60-Watt incandescent bulb) connected to Watt meters to illustrate the energy-saving capabilities of CFLs.  Each family was given one four-pack of CFLs.  We also emphasized that throwing out a working incandescent light bulb made economic sense and that they should immediately install the CFLs as soon as they got home.  Under this phase of the program we visited five food pantries in Chicago and one in Oak Park/River Forest.

CFL Awareness
 – Approximately 99% of the clients knew about CFLs.  They were called “energy savers.”  People knew that CFLs save energy and money on their “light bill,” but most had no idea of how much a CFL saved.  The two-desk lamp set up illustrated the reduction in energy usage.

Most were impressed with how much less energy was being consumed by the CFL.  Having them touch the metal shade of each bulb made it clear how much more of the incandescent bulb’s energy consumption was converted to heat versus light.  With the light output being the same and the Watt meter reading 75% less for the CFL lamp, they could see how energy savers are also money savers.  In translating the energy savings into light-bill savings, we emphasized the 10-times longer life of CFLs.  The $50 potential savings per CFL was met with excitement.

CFL In-home Use – The median number of CFLs installed in homes was two to three.  The number of CFLs installed ranged from zero to maximum market penetration (i.e., all sockets were filled).  Approximately 5% of the client families had no CFLs installed in their homes.  Most clients lived in houses or large apartments, thereby exhibiting a large savings potential beyond current use level of two or three CFLs per home.

Resistance to Purchasing CFLs – While most knew that “energy savers” saved money, few went out of their way to purchase CFLs.  They said that the cost of buying CFLs was prohibitive.  In their communities they would spend up to $9 for two CFLs.  No one knew that CFLs were being subsidized through several retail channels by ComEd’s Energy Smart Program.  For many clients the big box stores that sell CFLs at reasonable prices are not readily accessible.  They were amazed that one could buy a four-pack for less than $2 at Home Depot.  At $2 for four, they quickly surmised that the cost for CFLs was approximately the same as that of incandescent light bulbs, thereby removing the price barrier – if they could get to the right store.

Mercury Content – About 1% of the clients brought up the mercury content in the lamps.  We discussed how they should be disposed of in a safe manner.  With each four-pack of CFLs we gave information on where best to use their CFLs in their homes along with information for safe disposal.  Unfortunately, if this group has problems getting access to reasonably-priced CFLs, the CFLs are probably getting tossed into the regular trash when they burn out.  A CFL contains 4 mg of mercury.  Coal contains mercury that is dispersed over the countryside when it is burned to generate electricity.  In Chicago, the amount of mercury not emitted into the air because of the use of a 60-Watt equivalent CFL is approximately 10 mg.  So the environment is better off by 6 mg through the use of a single CFL.  Safe disposal of CFLs is something we all have to work on going forward.

Our decision to visit the food pantries and participating in the distribution of the CFLs was the right one.  We spent 30 to 60 seconds talking to each client about CFLs and we’d extract a promise that they would immediately go home and use them.  While we really didn’t expect everyone to immediately go home and put the CFLs in an awaiting socket, the likelihood of that happening probably increased significantly because we took the time to talk with them.  The alternative of merely putting the CFLs in a grocery bag alongside the canned beans would have reduced the efficacy of our program significantly through breakage and lax implementation.  Most clients (90%) were extremely appreciative of the CFLs and said that “of course” they would use them, which made us feel that we were making a difference.
In the communities we visited there is a lack of access to reasonably-priced CFLs.  It is unfortunate that they are subsidizing programs through a line item on their “light bill,” and they are a segment of society that could very much use the savings CFLs generate, but they have little access to the retail outlets that participate in these programs.  So they are losing out on both ends.  Current utility-sponsored programs don’t seem to be reaching this market segment.


Energy Choices Expands CFL Program

Because of the success of our CFL Holiday Gift program, in which we gave Compact Fluorescent Lamps (CFLs) to clients of food pantries in the Chicago area, we will be continuing the program on a monthly basis throughout 2011.  Each month we will distribute CFLs to families in need at one food pantry in and around Chicago.

Based upon our experience with this program and others (e.g., our Halloween CFL Program), there remains a vast opportunity to help families in need reduce energy expenses through the expanded use of CFLs in their homes.  With one in eight Chicago area residents receiving help from the Greater Chicago Food Depository, we’ve only started on a long journey.

If you have any specific food pantry you’d like us to consider for this year’s program, please contact us through our website or phone (847) 418-3888.

The program will be carried out as a joint effort of Blue Planet Energy and Energy Choices.