Government’s Evolving Role in Resource Planning and Environmental Protection

Arthur H. Rosenfeld, CommissionerCalifornia Energy Commission

April 19, 2002

(916) 654-4930ARosenfe@Energy.State.CA.US

2

Percent of Air Emissions in the U.S. from Fossil Fuel Use

98%91%

97%

52%

85%

0%

20%

40%

60%

80%

100%

120%

CO2 SO2 NO2 VOC COSource: U.S. EPA 1998 Emissions Trends Report and U.S. DOE-EIA Emissions of Greenhouse Gases in the U.S.

3

Emission Rate for NOx from Selected Plants Less than 100 MW -- August 2001 Source: Federal EPA Acid Rain Program, Continuous Emissions Monitoring System

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

lbs

of N

Ox

per M

Wh

Subset of units in California, ranked in order of NOx emission rate

4

ISO Load Duration Curves for The Past Two Years

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Hours in the year

MW

2000

2001

5

The Cost of Meeting the Peak

15,000

20,000

25,000

30,000

35,000

40,000

45,000

All Hours in the year

MW

0

100

200

300

400

500

600

700

800

900

1000

$/M

Wh

Total Cost of Production per MWh (including debt service and operating cost)

ISO Load Duration Curve (MW)

Simple Cycle Combined Cycle

6

The Cost of Meeting the "Super Peak"

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Top 10% of Hours in the year

MW

0

200

400

600

800

1000

1200

1400

1600

1800

2000

$/M

Wh

Total Cost of Production per MWh (including debt service and operating cost) from Simple Cycle Turbine

ISO Load Duration Curve (MW)

7

Cal ISO Daily Peak LoadsJanuary 1, 2000 - December 31, 2000

20

25

30

35

40

45

50

Jan-00

Feb-00

Mar-00

Apr-00

May-00

Jun-00

Jul-0

0

Aug-00

Sep-00

Oct-00

Nov-00

Dec-00

GW

Peak Day August 16 - 43.5 GW

Commercial AC

Residential AC

8

Electricity Use in California

• 2/3 of all electricity (kWh) is used in buildings• 50% of buildings in PG&E are in “Block 50” (exempted

from rolling blackouts)• 40% of Peak Demand is due to Air Conditioning plus

Lighting

9

Top Ten Peak Energy Uses/Sectors

(assumes a 50,000 MW peak)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Com A

C

Res AC

Assembly

Indu

stry

Com Ligh

t

Com M

isc

Res Misc

TCU Buil

dings

Ag & W

ater P

umpin

g

Process

Indu

stry

Res Refr

igerat

or

End-Use/Sector

Meg

awat

ts

15% 14%

11% 11%

7% 6%

4% 4% 4% 4%

10

CEC has Two Types of Regulatory AuthorityRelated to Demand Response

• Building and Efficiency Standards– Title 20 and 24 Update with adoption in 2003 and implementation in 2005– Everything from efficient air conditioners to white roofs

• Load Management Powers– New buildings -- first priority– Then most existing buildings

• CEC feels responsible for the 23,000 interval meters installed with state funds– 16,000 meters are in; 7,000 more by summer– Covers 25% of the peak load of the state– However, only Time-of-Use tariffs in widespread use

• Concerns regarding non-specific nature of TOU – Same price in all summer afternoons regardless of system load,

system condition, or wholesale price

11

• Load Management Tools Are Increasingly Cost-Effective– Interval Meters and Communication– Price Responsive Thermostats– Lighting Controls– Other Process Modifications

• Hourly Electric Rates Are Still in Pilot Stage– For load with new meters (> 200 kW), CPUC requires TOU rates

and offers emergency load management incentives– But has yet to combine these into an hourly tariff– In other jurisdictions, hourly rates have

• reduced the cost to serve load and• enabled firms to reduce their costs of operation

Demand Response to Time-Dependent Prices

12

Critical Peak Pricing (CPP) -- My Visionbased on Gulf Power tariff

CPP varies empirically to reduce demand at critical locations and times

0

5

10

15

20

25

30

35

Pric

e (c

ents

/kW

h)

Standard TOUCritical Peak PriceStandard Rate

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

Curtailment Signal

Variable CPP

13

Gulf Power GoodCents Select Tariff

• Reduces need during critical or near critical periods (emergencies -- present or expected --, very high prices)– Summer Peak Load Reductions of 2.1 kW per house (1st hour)– Winter Peak Load Reduction of 2.7 kW per house (1st hour)

• 4-hour reduction roughly 1 kW• 96% Customer Satisfaction Rating

– Cost savings, greater control and better information• Improves competitive position of Gulf Power in wholesale

markets

14

Critical Peak Pricing (CPP)e.g. Gulf Power residential GoodCents Select tariff

0

5

10

15

20

25

30

35

Pric

e (c

ents

/kW

h)

Standard TOUCritical Peak PriceStandard Rate

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

Curtailment Signal

15

Proposed System for Demand Response in New Homes & Small Commercial Buildings

Load Data1

Price/Proxy/

Curtailment Signal1

Interval Meter Δ$=$1001

Communicating Thermostat

Δ$=$502

Cost of Avoided Load: $100-200 per kW

1. Utility responsible for signal, communications, meter, and load data.2. Builder responsible for communicating thermostat.

16

Georgia Power’s Voluntary 2-part RTP Program

• Customer bill = Part 1 + Part 2– Part 1 based on historical load profile– Part 2 based on price responsive departures from load profile

• Historical load profile is from previous year– Called Customer Baseline Load (CBL)

• a list of hourly loads for entire year• Part 1 is the CBL x TOU tariff

– What you expect to pay if you don’t respond to real-time price• Part 2 is the hourly departures from CBL

– Enables customer to buy additional kWh when prices are low– And sell back kWh when prices are high

• Saves 17% at ~$1/kWh on hot afternoons

17

A High-Tech Firm and Real Time Prices

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24hour of the day

KW

load

0

10

20

30

40

50

60

70

80

90

100

Rea

l Tim

e Pr

ice

(cen

ts p

er K

Wh)

Actual KW

Baseline KW

TOUTOU

RTP

18

Summary of Time-of-Use (TOU), Critical Peak Pricing(CPP), and Real-Time (RTP) Prices

• Time-of-Use (TOU) is typically 3 time blocks published in advance for entire season– Peak, Shoulder, Off-Peak– Can’t foresee weather or equipment failures

• Critical Peak Pricing (CPP) is a high price imposed for a few days a year when system conditions are critical or near critical– A discount is given during off peak hours– Customer pays the critical peak price when invoked by the utility

• a day ahead forecast of CPP offers additional time for response

• Real-Time Pricing (RTP) is hourly real-time marginal cost of a kWh– Reflects hot weather, scarcity, or equipment failure

• a day ahead forecast of RTP offers additional time for response

19

Load Management with Time-Dependent (Dynamic) Pricing

• MICRO-Economic Benefits– Leads to lower costs– Lowers risk of market power– Treats supply and demand symmetrically– Independent of regulated, deregulated, or hybrid industry structure

• Issues– Understanding how loads will respond– Additional study regarding voluntary vs. mandatory

• Impact on customers– Stable industry structure; credit-worthy participants– Clear, consistent government regulation

20

My Vision of Tariff Options

• Residential and Small Commercial– Default = CPP– Hedge = TOU

• Industrial and Large Commercial– Default = CPP– Hedge = TOU– Option = RTP (voluntary)

21

4o F Thermostat Rise for a 10-ton Rooftop A/C

4-hour average saves one-third of A/C, ~1W/sq. ft.

22

59th Street Building - Hourly Averaged LoadsAll A/C Loads - 11 Tons

Curtailment = Setpoint + 4 Deg. (1 to 5 PM)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour

Load

(kW

/100

0 Sq

uare

Fee

t)

Curtailment Day kW Baseline Day kW

IMPACTS / 1000 sf:Avg. kW (1-5PM) = 1.0

Average Hourly Data -- All AC units

From: Ed Hamzawi, SMUD, Oct. 20, 2000

SMUD

23

59th. St. Building - 5 Minute Interval LoadsSecond Floor Lights

Curtailment = 30% Reduction In Lighting Level (1 to 5 PM)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

11:0

0

11:1

5

11:3

0

11:4

5

12:0

0

12:1

5

12:3

0

12:4

5

1:00

1:15

1:30

1:45

2:00

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2:30

2:45

3:00

3:15

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4:00

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4:30

4:45

5:00

5:15

5:30

5:45

6:00

Time

Loa

d (k

W)

Curtailment Day kW Baseline Day kW

5- Minute Data (Lights)

From: Ed Hamzawi, SMUD, Oct. 20, 2000

SMUD

24

E-20 T Average Load per CustomerMay to August 2000 and 2001

0

1,000

2,000

3,000

4,000

5,000

6,000

5/15 5/22 5/29 6/5 6/12 6/19 6/26 7/3 7/10 7/17 7/24 7/31 8/7 8/14 8/21

kWh

2000

2001