NV Energy, the largest utility in Nevada, has unveiled some compelling data on how energy efficiency and demand response benefit the grid.
In a recent filing with the public utilities commission, the utility outlined the cost and performance of its demand-side management programs. It reported that the avoided cost for transmission and distribution upgrades to meet peak demand was $12.23 per kilowatt -- one quarter the total cost-per-kilowatt of maintaining the grid.
According to Nevada Power, a subsidiary of NV Energy, the annual cost of maintaining transmission lines and distribution systems is $48.92 per kilowatt. The estimate of the savings brought by home weatherization, equipment retrofits and demand response is "conservative," according to the utility.
"Increasingly, energy efficiency is a contributing element of an integrated solution for ameliorating or avoiding T&D system capacity problems. By improving customer end-use energy efficiency, T&D system upgrades can be downsized, delayed, or in some cases avoided entirely," concluded Nevada Power.
Ben Kellison, a senior analyst with GTM Research, found the document while doing what analysts do best: "pleasure-reading" public utilities commission filings.
"In an often regulator-driven, demand-side-management market, it is rare that we come across such a succinct quantification of the benefit to a distributor's operations and aging infrastructure," said Kellison. "This quantification fits into a larger effort developing in the electric utility industry to utilize experience, data, and improved monitoring to justify investments in grid modernization, targeted maintenance, and new technologies."
NV Energy is in the process of developing a comprehensive demand-side management program that includes deploying HVAC optimization technologies, intelligent thermostats, smart plugs, real-time energy displays, and demand response programs for the commercial, industrial and residential sectors. These technology-based approaches will be used to complement commercial and residential retrofit programs.
With utilities around the country developing more robust efficiency, demand response, and distributed generation programs, regulators and power providers have been working to calculate their benefits to the grid. The typical cost-effectiveness analysis focuses on avoided costs of delivering energy and maintaining the grid -- the method that NV Energy used.
However, researchers at ACEEE have called for a more comprehensive "market valuation method" to determine the true value of demand-side management programs. Rather than simply focusing on average avoided costs, ACEEE recommends factoring energy prices, ancillary services and more detailed load profiles for customers to calculate the real-time value of demand reduction efforts.
"Cost-effectiveness analysis performed in most state regulatory settings is based on average avoided costs. Average values wash out critical attributes of IDSM [integrated demand side management] resources that are time-, site-, and situation-specific," concluded ACEEE. "Compared to avoided costs, time- and location-specific market values de-average cost-effectiveness results and incorporate the probabilistic value of market expectations."
However, because demand-management programs are just now scaling up to meaningful levels, the tools to gauge their impact are still evolving as well.
"Efforts to create straightforward, quantifiable benefit models can go a long way toward reducing the difficulty of getting approval for, purchasing and siting utility-owned distributed energy resources and demand-side management technologies," said GTM Research's Kellison.
Whatever calculations are used, this latest filing from NV Energy shows that demand reductions can bring major cost savings to utilities.