We’ve seen a lot happening on the grid edge this week, but first things first -- let’s examine the latest proposal for disrupting the country’s biggest energy markets in support of coal and nuclear power.
PJM, the grid operator serving 13 mid-Atlantic and Midwestern states, is facing the possibility of new rules for its 65-million-customer energy market under the Department of Energy’s notorious notice of proposed rulemaking, or NOPR, now under FERC review. Like the rest of the country’s interstate grid operators, PJM came out strongly against that proposal.
At the same time, on Wednesday, PJM published a paper, Proposed Enhancements to Energy Price Formation (PDF), that proposes for the first time to allow “inflexible” units -- largely coal and nuclear plants that can’t ramp up or down -- to “set price under certain circumstances.”
That’s never been done before, because for as long as PJM has been around, “flexible” units, i.e., natural gas power plants, have been the main resource during times of fast-increasing or falling energy demand that set marginal prices.
Inflexible plants have traditionally been able to get by, by selling their own power at the prices set by these generally higher-cost units, along with capacity and ancillary service revenues, PJM wrote. But in today’s market, PJM wants to explore the idea that “energy prices do not always accurately reflect the true cost to serve load because the cost of an inflexible unit needed to serve demand may not be included in the price.”
PJM’s proposal boils down to splitting its energy markets into “dispatch” and “pricing” runs, and using the resulting input to determine a new form of locational marginal price, or LMP -- the nodes that set prices across the pan-state region’s transmission grid. It would also alter PJM's shortage pricing methods, to “better align reserve pricing and the value of reserves by basing the operating reserve demand curves on how reserves enhance reliability.”
PJM says its goal is to “enable all units scheduled by PJM to compete to set energy market prices, provide incentives for flexibility and resource performance and reduce uplift payments.” The proposal tracks with an alternative plan that PJM filed with FERC as part of its broader critique of DOE's NOPR, which drew some negative attention from market monitors at the time.
But PJM also notes that “net impact of the proposed changes is estimated to be an increase in total energy and capacity market costs of between 2 percent and 5 percent,” or from $440 million to $1.4 billion, per year. That price tag has galvanized opposition from a broad swath of consumer advocates, clean energy supporters and economists.
The Natural Resources Defense Council had already written a counterargument to PJM’s proposal that it released on Thursday, including negative comments from energy market monitors for grid operators across the country, including PJM’s, in which the word "undermine" appeared frequently.
According to NRDC attorney Jennifer Chen, that’s because the plan abandons a “fundamental economic principle by departing from using marginal costs to set market prices. No one has done this before, and no one fully understands the consequences," she said.
PJM’s market monitor, Monitoring Analytics, noted in a November filing with FERC that the plan emerging from the grid operator seemed to aim for the same effects as the DOE proposal that it opposes. It also noted that Exelon, a multi-state utility with several nuclear power plants in PJM territory, has long been promoting the kind of changes to LMP that are now being proposed -- a nod to the linkage emerging between the DOE’s NOPR and lobbying from coal industry player Murray Energy and struggling Ohio utility FirstEnergy.
PJM has suggested fast-tracking the project, with first stakeholder review set for Dec. 21, and the potential for filing before FERC in the fall of 2018, Chen said. (It’s worth noting that a year qualifies as “fast-tracking” in this context, compared to the 60-day turnaround the DOE's NOPR asked for.)
For the market nerds, Potomac Economics laid out a critique of the academic theory of “convex hull pricing” that PJM uses in its proposal. Convex hull pricing “is not a widely accepted economic concept," and is “very difficult to fully and properly implement given current computational abilities.”
This seems to be a common refrain -- a 2015 paper from ISO New England economists on the topic started with the statement, “No one (including us) completely understands convex hull pricing,” adding that “poorly understood pricing methods can have unexpected consequences.”
Renewable energy and demand response are already smarting from the effects of PJM’s new seasonal capacity regime, which has reduced the opportunities for air conditioner load control programs and other summer-only demand response.
Buildings, the grid edge final frontier
Heating, cooling and ventilating buildings consumes about 13 percent of the U.S. energy supply, according to the Department of Energy, and a good portion of that is being wasted every day.
This week, DOE’s energy research initiative, ARPA-E, focused its funding on new technology to help squeezing that waste out of the built environment, by solving the problem of knowing where people are in a building, and when empty rooms are being heated and cooled.
Dubbed SENSOR, or Saving Energy Nationwide in Structures with Occupancy Recognition, the $20.3 million funding will support 15 university and corporate research projects. The projects will cover four categories: Human presence sensors for residential use; occupant-counting sensors for commercial use; “low-cost, stable, easily deployable” carbon dioxide sensors for commercial use; and testing and validation for these newly developed technologies.
Several projects, including one at Duke University and another from United Technologies, are using a radar-based sensor to “detect movements as small as the respiration of individuals, enabling it to distinguish between humans, pets, or background objects,” UT noted. That’s something that might be useful for its home and fire security businesses. Another from Boston-based Endeveo aims to achieve a similar level of sensitivity using the existing Wi-Fi routers and access points, via “processing changes in wireless data called Channel State Information and using machine learning techniques.”
The privacy concerns with this kind of detailed detection are integrated into Syracuse University’s MicroCam project, which intentionally uses a very low-resolution camera to ensure that nobody’s face will be recorded as part of the device’s visual-infrared-sound data input. This visual data, plus an infrared sensor and microphone, are combined in a cheap, alkaline-battery-powered device that can wirelessly communicate with its kind across buildings to refine its occupancy sensing accuracy. Boston University’s project involves “data from panoramic cameras and low-resolution thermal door sensors using innovative fusion algorithms.”
Home energy outreach: Oracle (Opower) goes big in Japan, Centrica aims for European home automation
Behavioral energy efficiency startup Opower became quiet about its work after it was acquired by Oracle for $532 million last year, but the contracts continue to flow for its model of paper reports to get people involved in energy use, along with the more high-tech integrations with Oracle’s broader utility software and cloud computing suite.
On Monday, Oracle announced a big new project with Japan’s Ministry of Environment and five major Japanese utilities to deploy “Oracle Utilities Opower Energy Efficiency Cloud Service,” the new name for Oracle’s technology platform. Over the coming months, each utility will select 60,000 customers apiece to start receiving Opower’s personalized energy reports, along with personalized data comparing their energy spend to their neighbors' with similar homes to engage the competitive spirit, and tips to reduce energy waste.
Opower’s back-end customer data analytics has been integrating with Oracle’s broader world of utility customer information and billing software systems, and basing the whole thing in the cloud allows for faster implementation, the press release noted. Japan is under pressure to manage its energy use in a post-nuclear power environment, to hit its Paris Agreement greenhouse gas reduction commitments, and to shift to a more competitive energy market structure.
In other home energy news, Centrica’s British gas rolled out plans to bring its Hive smart thermostat and home device networking devices across Europe, with 8 million customers of Italian gas utility Eni eligible to start receiving them this winter, and other markets expected to open up in 2018. Hive, powered by Centrica acquisition AlertMe, is competing against leading European smart heating systems provider Tado, and of course, Google’s Nest smart thermostat and home automation gear.
Rural community energy storage in Colorado
Last month, SoCore Energy, the solar energy developer that’s part of Edison International’s struggling "new energy" business, Edison Energy, announced its first big battery-solar project with Colorado electricity cooperative United Power. The 4-megawatt, 16-megawatt-hour unit in Firestone, Colo. will be built from Tesla Powerpack lithium-ion battery systems, and is the biggest in the state to date.
In a case study released this week, United Power and SoCore explained how they plan to test the system as the first of several “community battery” projects, funded by on-bill financing. In simple terms, customers will be able to buy a share of each project’s capability to reduce peak demand, and earn the value back on that portion of their monthly utility bills.
Colorado had one of the earliest community solar programs in the country, simplifying the potential regulatory challenges that come when utilities seek to back a solar and storage project with ratepayer revenues. Rural cooperatives, which are owned by their customers, have more flexibility than investor-owned utilities on these kinds of innovations.
SoCore seeded its United Power win with the help of last year’s exclusive partnership between SoCore and the National Rural Telecommunications Cooperative, which works with rural co-ops across the country on solar project feasibility studies and other forms of support. Rural co-ops serve about 13 percent of the country, or about 42 million people, and own a combined $175 billion in distribution and transmission assets.