DSM and Resource Planning

1

• DSM and Resource Planning
• Jayant Sathaye, Amol Phadke and Ranjit Bharvirkar
• Energy Analysis Program
• Lawrence Berkeley National Laboratory
• Berkeley, CA
• Bob Lieberman
• Regulatory Assistance Project
• Presented at the
• Forum of Indian Regulators
• 11 June 2009
• Work supported by the US Departments of State and
  Energy

2
Lawrence Berkeley National Laboratory

• Managed by the University of California for the
  US Dept of Energy
• Founded in 1931, about 4000 staff
• 12 Nobel Prizes IPCC (2008) Jayant Sathaye
• Utility programs
• Distribution loss reduction
• Demand-side management programs
• Load research and generation planning
• Transmission reliability
• Renewable energy

3
Regulatory Assistance Project (RAP)

• RAP is a non-profit organization providing
  technical and educational assistance to
  government officials on energy and environmental
  issues. RAP is funded by US Department of Energy,
  several foundations, and international agencies.
  We have worked in 40 states and 16 nations.
• Bob Lieberman
• Illinois utility regulator for the last five
  years. Term ended June 1st, 2009
• Ran Chicago-based NGO that developed and ran
  energy efficiency and demand response programs
• Implemented integrated resource planning in
  Illinois

4
Contents

• I Overview and Macro impacts
• Dr. Jayant Sathaye
• II. Demand Side Power Purchase
• -- Dr. Amol Phadke
• III ARR and Tariff Impact and Regulatory
  Treatment of DSM
• -- Dr. Amol Phadke
• IV Implementing DSM and Regulatory Perspective
• -- Ranjit Bharvirkar
• -- Bob Lieberman
• V. Next Steps

5
Asia Pacific Partnership (APP)

• 8 Participating Countries Australia, Canada,
  China, India, Japan, Republic of Korea and the
  United States
• Eight task forces including one on power
  generation, transmission, distribution and demand
  management
• Goal To develop, deploy and transfer cleaner,
  more efficient technologies and to meet national
  pollution reduction, energy security and climate
  change concerns consistent with the principles of
  the U.N. Framework Convention on Climate Change
  (UNFCCC).
• Assist partners to build human and institutional
  capacity to strengthen cooperative efforts, and
  to seek opportunities to engage the private
  sector.

6
Electricity Demand Savings Potential (Percentage,
2030)
7
(No Transcript)
8
(No Transcript)
9
Memoranda of Understanding (MOU)

• Maharashtra MOU signed in December 2007
• Maharashtra Electricity Regulatory Commission
• Former Chairman Dr. Pramod Deo
• California Energy Commission
• Commissioner Dr. Art Rosenfeld
• California Public Utilities Commission
• Commissioner Dian Grueneich
• Lawrence Berkeley National Laboratory
• Former Director Dr. Steve Chu (Current Energy
  Secretary)
• Similar MOUs signed with the Delhi Electricity
  Regulatory Commission (Shri Berjinder Singh) and
  the Forum of Regulators (Dr. Pramod Deo) in March
  2009

10
Maharashtra and Delhi MOU Scope of Cooperation

• The Parties will endeavor to promote information
  exchanges and future joint research activities in
  the following areas
• Energy efficiency and Demand Side Management
  policies and programs
• Regulatory policies for renewable energy
  development
• Integrated Resource Planning
• Electricity regulation and governance
• Transmission pricing framework
• Balancing market framework in Maharashtra
• Market development through open access and
  consumer choice

11
Demand-side Management of Efficiency Project
Motivation

• Reducing carbon emissions from electricity use
  DSM Programs (NAPCC, 11th Five Year Plan)
• Electricity shortage accompanied by blackouts and
  load shedding is common across India
• In Maharashtra, electricity deficit was 4800 MW
  in 2008 or more than 25 of available capacity

12
Maharashtra Electricity shortage
29 shortage
11/30/2020
Dr. Jayant Sathaye
12
13
Maharashtra Project Motivation

• Electricity shortage
• Affects industrial production quantity and
  quality,
• Lower production and sales lead to reduced sales
  tax payment
• Government loses sales tax revenue
• LBNL estimates sales tax loss of 20 cents/kWh
• Shortage met partially by extensive use of
  inefficient diesel and gasoline micro generators
  and hence high CO2 emissions
• Savings potential
• Energy savings potential of about 6,800 GWh/year
• CO2 savings potential of 3-5 Mt CO2/year

14
India Power Supply Capacity and Peak
DemandReference Scenario with Shortage

• Assuming that from 2009 onwards deficit is 10
  and12,500 MW of new capacity
• is constructed each year for three years
• Total investment for the 11th Five Year Plan
  would be Rs. 250 thousand crores

15
India Power Supply Capacity and Peak
DemandEfficiency Scenario with No Shortage

• Assuming that from 2007 onwards efficiency
  improvements (4300 MW/year) reduce deficit.
  Potential exists to eliminate
  deficit.
• Construction of new power plants is reduced to
  about 9400 MW/year
• Total investment for efficiency and supply power
  plants is still the same as that in the reference
  scenario Rs. 250 thousand crores

16
Efficiency Scenario with No Shortage Efficiency
Options
Energy Efficiency Measure Investment (Rs./kW) Daily Use (Hours/day) Peak Demand Savings (MW) 2008 Electricity Savings (TWh) 2008
Variable speed drives in industry 4,700 11 948 3.8
Ag. Pump Rectification 9,400 8 655 1.9
Motor rewinding and downsizing 10,810 10 914 3.3
High efficiency agricultural pump sets 8,460 8 715 2.1
Improved high efficiency refrigerators 14,100 12 320 1.4
CFL and Electronic Ballasts 9,400 4 821 1.2
Total Energy Efficiency Savings (MW)     4,372 13.7
Supply Capacity Additions (MW)  46,624   9,772
17
Macro-economic Results

• Assuming identical investment in each of the two
  scenarios for the 11th Plan Rs. 250 thousand
  crores
• Annual average electricity savings of efficiency
  scenario
• 41 TWh/year
• Assuming business use of saved electricity is 50
  -- 20 TWh/yr
• Total increase in business output
• Rs. 180 thousand crores/year
• Potential sales tax Rs. 12 thousand crores per
  year
• Assuming Rs. 6/kWh sales tax

18
Demand Side Power Purchase
19
Demand Side Power Purchase Basics

• Demand side Power Purchase is a bundled set of
  energy efficiency (EE) programs that are designed
  to deliver the energy and capacity equivalent of
  a power purchase on the supply side.
• purchase negawatts and negawatt-hours that
  are functionally equivalent to the kilowatts and
  kilowatt-hours procured
• Can resemble a conventional peaking power
  purchase by emphasizing efficiency measures (and
  demand response) that reduce electricity during
  periods of peak power consumption.
• Can resemble a base-load power purchase
  emphasizing measures to reduce consumption during
  all hours of the day.

20
Will you Approve This Peak Load Power Purchase?
One year contract 500 MW during the four hours of evening peak over the year 730 GWh 500 MW during the four hours of evening peak over the year 730 GWh
Mysterious Regular
Rs/Unit 1.2 5
Total Cost Rs Cr/ Year 88 Cr. 365 Cr.
21
What is this Mysterious Power Purchase?

• Saving 400 MW during the evening peak hours at
  the load end gt 500 MW generation at the bus bar
• What does it take to saving 400 MW at the load
  end
• Replacing 88 lakh incandescent with CFLs
• 45 Watt saving/replacement 88 lackh
  replacements 400 MW saving
• How much does it cost
• If the utility decides to give the CFLs at the
  price of incandescent lamps, 100 Rs subsidy
  needed/bulb
• Total expenditure 88 Cr less that one third of
  the expenditure of the supply side !

22
Comparing Supply and Demand Side Power Purchase

• Cost of demand side power purchase per unit
• (Annualized incremental capital cost)/(saving per
  year )
• CFL example (88 Cr)/(730 GWh) 1.2 Rs/Unit
• One important different Demand side power
  purchase appears happens at the consumer end
  (avoids losses)
• Power purchase cost of 5 Rs/Unit translates to
  more than 8 Rs/Unit when it lands at the
  consumers doorstep due to lossess

23
Many Demand Side Power Purchase Options Delhi
Example
CFL T5 LPG WH NG WH Solar WH AC Refrigerators
Peak power saving at bus bar (W) 49 29 2,647 2,647 2,647 233 13
Total Energy saving kWh/yr 79 46 529 529 529 565 133
Cost of Demand Side Power Purchase Rs/kWh 1.29 2.25 2.74 1.26 5.00 1.16 0.70
24
Demand Side Power Purchase Merit Order Stack
Utility Benefit
Average Tariff
Consumer Benefit
25
Least Cost Power Rationale DERC Example

• The Commission is keen to see that
  distribution licensees undertake DSM initiatives,
  not only because DSM initiatives provides an
  opportunity for conservation of power use but
  also because these initiatives when integrated
  with supply, provides a least cost solution for
  distribution licensees to meet their power
  demand

26
Advantages of Demand Side Power Purchase

• Cost-effective resource
• Cheaper than a conventional power purchase
• For e.g. Rs 350 Cr Savings/year for a 500 MW
  evening peak power purchase for the CFL example
• Additional option to reduce power needs
• Large economic benefits of reducing load
  shortages
• Environmental benefits
• Reduced local pollution
• Reduced carbon emissions
• Reduced resource requirements land, water,

27
Session III ARR and Tariff Impact of Demand Side
Power purchase
28
ARR and Impact on Consumer

• One line summary
• If the demand side power purchase cheaper than
  the supply side, impacts on the consumer are
  going to be positive!

29
Impact on ARR

• Goal meet 1000 MW of demand increase during the
  four peak hours in the evening
• Supply side power purchase
• Sign a bilateral contract of 1000 MW for evening
  peak delivery (1460 GWh delivered during the
  evening peak hours over the years)
• Addition to the ARR 730 Cr
• Demand side option
• Facilitate the replacement of 1.7 Cr incandescent
  by providing Rs 100/bulb rebate to the consumer
• Addition to ARR 170 Cr

30
Impact on Tariff Bills

• How is the increase in ARR typically is met
• Tariff increase
• Increase in government subsidy
• Improvement in operations
• Increase sales to high paying consumers
• If the increase in ARR is lower for demand side
  power purchase
• Tariff increase can be mitigated
• Need for government subsidy can be reduced
• If the Rs 730 Cr of power purchase cost on the
  supply side is used for demand side power
  purchase, more than three times the units can be
  purchased and could potentially eliminate
  shortages !

31
IV Implementing Demand Side Power purchase
32
Barriers to Reducing Electricity Consumption A
Customers Perspective

• Lack of information about electricity savings
  opportunities
• Lack of ability and/or technical assistance for
  analyzing electricity consumption patterns
• Lack of financial resources to invest in
  electricity savings options (e.g. technology,
  etc.)
• Lack of appropriate technological options to
  reduce electricity consumption

33
What is a DSM Program?

• Mechanism to influence customers CAPABILITY and
  WILLINGNESS to reduce electricity consumption

34
How to Influence Customer CAPABILITY to Reduce
Electricity Consumption?

• Availability of tools to understand electricity
  consumption patterns (e.g. plug-in power meters
  to measure appliance-level electricity
  consumption, software to analyze and identify
  electricity savings opportunities, etc.)
• Availability of technology to reduce electricity
  consumption (e.g. high efficiency T-5 tube-light
  to replace inefficient T-12)
• RD for developing new technology

35
How to Influence Customer WILLINGNESS to Reduce
Electricity Consumption?

• Awareness
• Marketing, promotion, education, etc.
• Technical assistance
• Audits, analysis, equipment installation,
  facilitating financing of projects, etc.
• Financial incentives
• Rebates, loans at low interest rates, shared
  savings, electricity pricing schemes, etc.

36
DSM Program Design - Principles

• Systematic road-map for overcoming barriers faced
  by customers in their goal of reducing
  electricity consumption (and bills)
• BOTH in short-term and long-term
• Must be cost-effective i.e. program costs must
  be lower than benefits from program
• Ensure customer satisfaction

37
Types of DSM Programs

• All three reduce energy consumption (kWh) and
  peak demand (kW), however, emphasis differs
• Energy Efficiency emphasis is on reducing
  overall energy consumption and also peak demand
  over several years
• Peak Load Management emphasis is on reducing
  peak demand consistently over a season
• Demand Response emphasis is on reducing peak
  demand for short periods of time for a few days
  during the year

38
Energy Efficiency

• Permanent energy (kWh) reduction
• Permanent peak demand (kW) reduction
• Size of impact is predictable
• No reduction or shift in customer value, comfort,
  or output
• Not dispatchable by distribution company
• Examples rebates on efficient appliances,
  energy savings performance contracting, etc.

39
Energy Efficiency ProgramsLevel of Involvement
of Distribution Company
40
Peak Load Management

• Overall energy consumption likely to stay same
• Focus is on changing customer load profile
• Size of impact fixed
• Fixed duration (4 - 6 hours daily) demand (kW)
  reduction
• Change/transfer in customer value, comfort, or
  output
• Not dispatchable by distribution company
• Examples tariffs for agricultural pumps

41
Demand Response

• Overall energy consumption may vary based on
  customer load curtailment strategy
• Focus is on changing customer load profile
• Size of impact may vary from event to event
• Small duration (15 min 6 hours) demand (kW)
  reduction
• May involve a reduction in customer value,
  comfort, or output
• Dispatchable by distribution company
• Examples cycling of air conditioners,
  critical peak pricing tariffs s

42
Characteristics of Successful DSM Initiatives

• Deeply committed senior management and program
  staff at both State Electricity Regulatory
  Commission and distribution company (or
  implementing agency)
• Clearly defined goals and objectives
• Data-driven, systematic, and comprehensive DSM
  program planning processes
• you cant manage what you dont measure
• Stable program funding sources and levels

43
Best Practices Planning

• Solicit stakeholder input
• Formal interview process or a collaborative
  planning process involving key stakeholders
• Conduct market analyses around information gaps
  and key issues in order to understand existing
  conditions
• Target resources toward the very largest markets,
  and those that are least understood
• Establish baseline for tracking program
  expenditure and impact

44
Best Practices Program Design

• Seek to include programs with related and
  complementary goals,
• for example, electricity conservation, water
  conservation, and renewables (e.g. rooftop solar)
• Simplify participation in multiple programs
• Offer one bundle that may consist of energy
  efficiency, measures from several different
  organizations but is seamless to the customer

45
Best Practices Program Design (cont.)

• Efficiently deliver integrated programs to all
  end-users regardless of their size
• Upstream Vs downstream incentives
• Larger customers, should be assigned a single
  point of contact that represents all related
  programs
• Smaller customers should be offered a whole
  building strategy that incorporate measures from
  multiple programs.

46
Best Practices Adapting to Changes

• Keep abreast of new developments in energy
  efficiency technology
• Coordinate with BEE and FOR
• Network with peers stay connected to
  developments in this field
• E.g. FOR/FOIR meetings, interactions with
  international experts
• Foster close relationships with market actors
  rely on them for market intelligence
• E.g. attending conferences to exchange ideas

47
Best Practices - Staffing

• Clearly define responsibilities and clarify roles
  to minimize confusion
• Streamlining/facilitating stakeholder interaction
• Reward high performing staff and contractors
• DSM is a new activity and in the initial phases
  staff will strong motivation to explore this
  field
• Encourage and facilitate development of energy
  efficiency expertise of staff
• DSM training workshop at NPTI June 15-18, 2009

48
What can be learned from the US experience?

• Useful
• Identification of the DSM value proposition and
  the understanding that saved energy was cheaper
  and cleaner than energy consumed
• Evolving understanding that customer engagement
  and behavior are key drivers in achieving and
  sustaining cost-effective energy efficiency
• Broad experience (successes and failures) related
  to delivering, measuring and valuing energy
  efficiency

49
What can be learned from the US experience? Cont.

• Not so useful
• Pattern of utility by utility DSM implementation
  an accident of institutional history and politics
• 30 year focus on technology as the sole DSM
  driver
• the no-behavior change strategy
• Corollary to above
• 30 year refusal to engage with customers
• revenue enhancement units

50
Tales from the frontThe Illinois experience
with DSM

• For nearly 30 years, Illinois regulators and
  policymakers refused to implement DSM
• Swimming in electricity
• Reserve margins as high as 40
• Concern about raising rates
• Utilities uninterested
• Customers uninterested

51
The Illinois experience, cont.

• By 2005
• Volatile energy prices
• Concern about emissions
• Shrinking reserve margins
• No State control over generation (restructured)

52
Commission concerns

• Concern of raising rates to pay for DSM
• Concern of political backlash
• Concerns about lack of capacity to manage DSM
  initiatives

53
Relearning

• Its not as if we are not going to spend the
  money. The only question is
• What are we going to spend the money on?

54
Four issues

• DSM increases rates in the short term
• Energy efficiency was less expensive than
  purchased energy
• Public Education/key messages
• helping customers
• Commission staff and utility capacity
• Training and capacity building
• Cost recovery

55
Need for Co-ordination

• Efficient tube light program is applicable in
  almost every state
• SERCs should explore coordinating programs

56
Role of Regulators

• Establish clear goals for DSM power purchase
  based on potential estimates
• Allocate resources from ARR for DSM power
  purchase
• Provide guidance/regulation to facilitate
  implementation of DSM power purchase
• Tariff options for promoting demand side power
  prucahse (can either viewed as pumped storage or
  peak power purchase)

57
Establish Clear Goals for Constructing Demand
Side Power purchase

• In the initial period, the goal should be to get
  a few small demand side power purchase/programs
  started to gain experience
• In the long run, the achievable potential for
  cost effective power purchase should determine
  the goals set for utilities
• California Loading Order Buy all cost effective
  demand side power purchase before any supply side
  options are considered
• Load research and technology assessment is
  critical for potential estimates and target
  setting
• What kind appliances consumers are using and
  how, what is the demand side power purchase
  potential and what is the cost

58
Allocate Resources for Demand Side Power purchase

• Public benefits charge small surcharge on tariff
  to create a fund for DSM Power purchase
• Stable funding mechanisms - allows utilities and
  ESCOs to expand in the area of DSM Power purchase
  
• 5 paise/kWh charge 75 Cr of DSM funds in Delhi
• Recovery through ARR/power procurement accounts
• Treat as a an expense (same as the cost of power
  purcahse)
• Amortize over the life the saving measure

59
Next Steps For Regulators

• Allocate staff/consultants
• Dedicated one or two staff or consultants to
  begin with at the SERC
• Work with FOR to develop and issue a standard set
  of guidelines on to facilitate demand side power
  purchase
• Allocate resources for demand side power purchase
  
• Firm approval of resources for utilities to
  create a DSM cell, hire DSM consultants (if
  needed), conduct load research, and prepare
  programs
• Conditional approval for funding for the first
  year (final approval provided after programs are
  submitted)
• Develop a roadmap for demand side power purchase
  via a stakeholder process
• Conduct/facilitate a potential study
• Goals and strategy by sector
• Role played various stakeholders
• Co-ordination with other programs

60
Questions for Discussion
61
Please check this website for LBNL India and
related publications http//ies.lbl.gov Thank
youJayant Sathaye 
62
Other Slides
63
Efficiency Programs

• Two types of efficiency programs
• Standards and labels
• Bureau of Energy Efficiency
• DSM through financial and other incentives --
• Regulatory and utility incentives
• MERC, DERC and FOR

64
Comparative Growth in the Power Sector
65
Construction Cost Estimates
Plant Type Planned Capacity Addition (11th Plan) Cost Estimates
  MW Rs crore/MW
Coal and natural gas 58644 4.51
Large hydro 16553 4.86
Small hydro 1400 5.50
Wind power 12600 4.50
Nuclear power 3380 6.58
Overall 92577 4.66
66
Energy Supply with Deficit Reference Scenario --
Annual Capacity and Deficit
Year Actual and Projected Capacity (MW) 10th Plan Actual Capacity Additions (MW) 11th Plan Actual and Estimated Capacity Additions (MW) Actual and Projected Capacity Deficit () Actual and Projected Capacity Deficit (MW) Investment for Projected Capacity _at_ 992 / kW (Million US )
(Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) (Col. 7)
2002 105,046 2,831   12.2 12,816  
2003 107,877 4,807   11.2 12,082  
2004 112,684 5,742   11.7 13,184  
2005 118,426 5,861   12.3 14,566  
2006 124,287 8,042   13.8 17,152  
2007 132,329   10,732 16.6 21,967 10,648
2008 143,061   5,204 11.9 17,024 5,163
2009 148,265   12,506 10 14,827 12,408
2010 160,771   12,506 10 16,077 12,408
2011 173,276   12,506 10 17,328 12,408
2012 185,782     10 18,578  
Total   27,283 53,453     53,036
Planned Additional Capacity   44,185 92,577      
67
Supply with Efficiency Scenario - 2
Characteristics of Efficiency measures, and
Efficiency Savings and Supply Capacity
Energy Efficiency Measure Investment (Rs./kW) Daily Use (Hours/day) Peak Demand Savings (MW) 2008 Annual Electricity Savings (TWh) 2008
Variable speed drives in industry 4,700 11 948 3.8
Ag. Pump Rectification 9,400 8 655 1.9
Motor rewinding and downsizing 10,810 10 914 3.3
High efficiency agricultural pump sets 8,460 8 715 2.1
Improved high efficiency refrigerators 14,100 12 320 1.4
CFL and Electronic Ballasts 9,400 4 821 1.2
Total Energy Efficiency Savings (MW)     4,372 13.7
Supply Capacity Additions (MW)     9,772
68
India Multipliers and Direct Coefficients
69
(No Transcript)
70
(No Transcript)