Loading...
HomeMy WebLinkAboutStaff Report 6864 City of Palo Alto (ID # 6864) City Council Staff Report Report Type: Informational Report Meeting Date: 6/27/2016 City of Palo Alto Page 1 Summary Title: Update on the Voluntary Summer Demand Response Program Title: Update on the Voluntary Summer Demand Response Program and Plans to Leverage Local Distributed Energy Resources From: City Manager Lead Department: Utilities This is an informational report, no action is requested. Executive Summary Palo Alto’s large and increasing number of communicating and controllable distributed energy resources (DERs) require the City to position itself to maximize the value of such systems for the benefit of the community and electric utility operations. DERs include technologies such as electric vehicles (EVs), EV charging stations, smart thermostats, controllable customer loads, distributed photovoltaics and storage systems, among others. Enabling these demand-side resources to respond to needs of the electrical grid is crucial to the state’s long-term pursuit of decarbonizing the electric grid as well as local interest in electrifying transportation, and certain needs such as space and water heating. Leveraging DERs within the service territory will enhance the City’s efforts to provide cost-effective, reliable, and decarbonized energy. The City began this effort in 2011 with the implementation of an innovative voluntary demand response (DR) program for large commercial customers. The program enabled large buildings to reduce their air-conditioning and lighting loads during critical periods on hot summer days. This in turn lowered utility and customer electricity purchase costs and reduced air pollution by limiting production from inefficient and polluting electric generation resources in the Bay Area. The total costs of the program, including administrative and customer compensation costs, have been approximately $10,000 to $15,000 per year over the past five years. The report outlines past performance of the voluntary DR program and the City of Palo Alto Utilities’ (CPAU’s) plans to leverage the value of additional DERs in the coming years. Staff is planning to continue the DR program and is seeking additional projects from vendors to leverage DERs within Palo Alto to participate in similar programs. Staff estimates that this effort will cost $60,000 in the first year, with resources expanding or contracting in subsequent years City of Palo Alto Page 2 depending on the value delivered. The resources required to implement and administer this program will be sought through the normal budgeting process. The progress and value of these programs will be reported to the Utilities Advisory Commission (UAC) and Council through the annual Demand Side Management (DSM) Program report. Background The Council approved a pilot summer DR program for large commercial customers in 2011 (Staff Report 1450) and extended it in 2013 (Staff Report 3454). The objective of the program was to reduce electrical loads during hot summer days in order to reduce electricity purchase cost and air pollution by limiting production from the most inefficient and heavily polluting electric generation resources in California. Commercial customers participating in the DR program reduce their air conditioning and lighting in response to a request made by the City during DR events in the summer. Under the program, participants are paid 50 cents per kilowatt-hour reduced during the period requested on DR days (approximately 4 times the average energy rate they pay for electricity consumed). This payment is made based on CPAU’s avoided cost for reduced electricity consumption during these peak times. Since 2013 CPAU’s electric supply has been carbon neutral on an annual basis. However, CPAU remains interconnected with, and dependent upon, the larger electricity grid that currently utilizes fossil fuel-based resources to balance generation and load in order to meet daily and hourly customer demand. In order to reduce the overall cost and reliance on fossil fuel generation, staff has begun exploring additional opportunities to maximize the value of DERs. Discussion The ability for large commercial customers to communicate and control their air conditioning and lighting loads is one example of a DER, and the voluntary DR program was designed to leverage this resource for the benefit of the customer and CPAU. Over the past 5 years, about 10 large commercial customers participated in the DR program and the City reduced its summertime peak electrical load by about 0.5%. The value of the peak- time demand reduction to CPAU is between $10,000 and $20,000 per year. For example, in 2015 the program resulted in a peak load reduction of 0.6 megawatts (MW), which saved CPAU about $12,000 while the corresponding customer payments and administrative costs totaled about $15,000. Although the City incurred some costs in connection with the DR pilot program, the pilot program was nevertheless important for beginning to understand the future potential for broader DERs in Palo Alto. Continuing to test and implement such programs to control DERs will be crucial for identifying least-cost pathways to decarbonize the electric grid and electrify transportation and fossil fuel fired appliances while maintaining—or even enhancing— reliability. As such, CPAU plans to continue to test and implement such systems commensurate City of Palo Alto Page 3 with the size and resources available for a small utility like CPAU. CPAU’s effort in this innovative program has been recognized by State regulators and legislators. As a technology savvy community in the heart of Silicon Valley, Palo Alto has a high penetration of controllable and communicating DERs such as EVs, EV chargers, smart thermostats, solar photovoltaic (PV) systems, back-up generation, storage systems, and automated building energy management systems. The estimated penetration of such DER systems in Palo Alto at the end of 2015 is: 1. Nearly 800 solar PV systems with an aggregate capacity of over 7 MW; approximately 40% of this capacity is sited on residences 2. About 1,000 residential Wi-Fi thermostats 3. Between 100 and 200 automated building energy management systems in commercial buildings 4. About 1,300 EVs are registered in Palo Alto as of January 2016; close to 1,000 commuter EVs are driven into Palo Alto daily; about 300 EV chargers in town can be remotely monitored; and approximately 500 EVs with on board telematics are registered in Palo Alto 5. Approximately 12 commercial facilities within the City have back-up generation (fueled by natural gas or diesel) and the City owns 4 natural gas-fired generation units with a capacity of 4.6 MW In January 2016, CPAU issued a request for proposals (RFP) to leverage the value of existing and future DER systems within the City to provide electric grid services such as peak load reduction, load shifting, ancillary services, distribution system voltage support, and overall load reduction. Vendors were asked to propose services related to communicating and controllable (connected) devices, aggregation platforms, or other DER related services and equipment. The RFP recognized that some concepts may first have to be demonstrated at a pilot scale before it would be feasible to implement them at full commercial scale, and the RFP encouraged such proof-of-concept proposals. CPAU is evaluating the responses and may award contracts to proposing vendors that respond to the RFP, both in the area of proven and emerging technologies. Such commitments to leverage existing and future systems also complement CPAU’s Program for Emerging Technologies (PET)1. Role of Energy Storage Systems as a DER in Palo Alto Energy storage is another DER that is gaining popularity. There are number of energy storage systems in Palo Alto. These systems include battery energy storage systems in residential 1 PET provides an opportunity for nascent technologies to be tested and evaluated in Palo Alto. For more detail, see: http://www.cityofpaloalto.org/gov/depts/utl/projects/program_for_emerging_technologies/default.asp City of Palo Alto Page 4 homes (to serve higher reliability needs of some customers), and an ice storage system at a commercial customer site to shift operation of the chiller from on-peak to off-peak hours. Battery based energy storage systems are expected to become economically viable for customer and utility applications in the coming years as the cost of such systems continues to decrease. Palo Alto undertook an energy storage assessment in 2014 and found such systems to be too expensive and not cost effective in Palo Alto (Staff Report 4384). As such, CPAU currently does not provide monetary incentives for storage systems, but continues to facilitate the installation of such system at customer sites. Staff is in the process of reevaluating the cost- effectiveness of storage systems and may recommend undertaking small pilot scale storage projects in the 2017-18 time period. Staff expects that storage systems will take on greater significance as a DER in Palo Alto in the next decade. Programs to leverage emerging DERs will become part of the portfolio of CPAU’s customer DSM programs. While customer conservation, efficiency, and local solar PV programs will continue to be the central focus of CPAU’s DSM programs, efforts to maximize the value of emerging DERs take on increased importance in the coming years. As pilot programs mature and prove themselves, they will be folded into the regular DSM program offerings to customers. Resource Impact Resources required to leverage existing and planned DER in Palo Alto is estimated at $60,000 per year and has been included in the upcoming budget. The monetary value garnered from this investment is anticipated to initially be lower than the program’s cost, but is expected to be very valuable in the long run in a variety of ways, including compliance with state mandates to reduce peak load, a reduction in generation-based pollution, and in gathering knowledge on how best to encourage efficient energy use and improve grid reliability. Staff resources of about 0.5 FTE will be devoted to this effort in the first year and is expected to drop to 0.25 FTE in subsequent years. Existing staffing resources will be used to administer the program. Policy Implications This program meets CPAU’s strategic plan objectives of implementing environmentally sustainable program for efficient use of resources and to maximize the value of existing resources. Environmental Review Provision of this informational update on DR programs and plans to leverage DER resources does not meet the California Environmental Quality Act’s (CEQA’s) definition of “project” under California Public Resources Code Sec. 21065, thus no environmental review is required.