Tag Archives: Energy efficiency

The Energy-Efficiency Option

When Virginians contemplate their energy future, they have two broad options for accommodating a growing population and economy: generate more electricity (increase supply) and conserve electricity (reduce demand). The debate over the supply side of the equation gets most of the attention — what’s the best mix of nuclear, gas, coal and renewable energy sources? Energy efficiency gets less ink. But  investments in energy efficiency, say environmentalists, can not only reduce the pollution and carbon-dioxide emissions associated with electricity generation, they can effectively pay for themselves by obviating the need to build expensive power plants in the future.

That’s a great theory. How’s it working out?

From a public policy perspective, Virginia has lots of leeway to become more energy efficient. The American Council for an Energy-Efficient Economy ranks Virginia only 29th nationally in an energy policy scorecard that takes into account utility programs and policies, transportation policies, building energy codes, Combined Heat and Power (CHP) policies, state-led energy-efficiency initiatives, and appliance and equipment standards. (Virginia did move up three notches in 2017, however, by adopting the 2015 IECC building energy code and partnering in an initiative to conduct a residential energy code field study.)

The McAuliffe administration has set a goal of reducing electricity consumption by 10% by 2020, according to the Richmond Times-Dispatch. The main tools for achieving that reduction are programs managed by Dominion Energy and Appalachian Power to foster conservation by businesses and homeowners. Trouble is, those programs don’t always pass muster with the State Corporation Commission.

“Utility programs make up about 90 percent of the progress toward our 10 percent reduction,” says Chelsea Harnish, executive director of the Virginia Energy Efficiency Council.

Here’s the hitch. When Dominion subsidizes, say, weatherization of a poor person’s house or a homeowner’s purchase of a new, energy-efficient heat pump, all Dominion payers chip in for a program that benefits only those customers who get the new heat pumps or the insulation in their attics. “A lot of utility programs are not passing, not able to get approval from the State Corporation Commission, says Harnish. The SCC, she explains, is “concerned about nonparticipant costs.”

Writes the Times-Dispatch:

In an order this year that rejected Dominion home-energy assessment and residential heat-pump upgrade programs, the commissioners said they could not find that the so-called demand-side management programs were in the public interest.

“We are sensitive to the impact of the proposed DSM (demand-side management) programs on customers’ bills, particularly the bills of customers not participating in the programs,” they wrote.

Part of the problem, Harnish said, is the challenge of calculating the value of such programs.

“What we hear from the SCC time and time again is they’re skeptical of deemed savings,” said Harnish, referring to industry-standard formulas that predict a certain benefit, such as the amount of energy use cut by installing LED light bulbs, for example. The SCC is currently receiving input on uniform standards for what the energy-efficiency industry calls evaluation, measurement and verification should look like, she said.

Another barrier to energy conservation is a price of electricity in Virginia that is below the national average. Explains Dominion spokesman David Botkins: “The costs of energy avoided for a given program is less than would be avoided in some other parts of the country, due to the higher cost of electricity elsewhere. This causes the economic value and cost-effectiveness of energy-efficiency programs in Virginia to be lower than in some other regions.”

By most peoples’ standards, lower electric rates are a good thing. Likewise, many electricity customers undoubtedly are pleased that the SCC is protecting their interests as rate payers from programs generating an uncertain payback. But there may be ways to promote energy efficiency that don’t go through the SCC. The Virginia Energy Efficiency Council is pushing stricter building codes  and performance-based contracting for state-owned buildings. Under performance-based contracting, government agencies repay energy service companies out of the savings generated through lower utility bills.

Bacon’s bottom line: In my observation, the biggest obstacle to energy-efficiency is that the state and local government budgets have time horizons too short to allow investing in conservation. A high-return energy-efficiency project might pay itself back in three to four years — a handsome return. But the Commonwealth operates on two-year budgets, while most local governments go year-to-year. If a project doesn’t recover its costs within the current fiscal year, it can’t be justified. That’s just crazy. Surely there is a work-around.

A Fourth Force in Virginia Energy Politics

The political economy of energy in Virginia used to be simple. Three main interest groups contended to formulate energy policy in the state: environmentalists, consumers, and electric utilities. Consumers, both homeowners and businesses, pressed for lower electric rates. Environmentalists fought for cleaner air and, more recently, lower CO2 emissions. And utilities — the only parties responsible for keeping the lights on — lobbied for reliability at a reasonable cost (within a framework that preserved profits).

In the last few years, a fourth force has entered the picture, and the political dynamic is changing. The Old Dominion has seen a surge in the number of small, independent solar- and wind-power developers. They have exercised limited political clout, but now large, national corporations embracing a green energy agenda have entered the fray.

Half the Fortune 500 companies have committed to green agendas, and they signaled their desire earlier this year to see policies in Virginia that were friendlier to wind power, solar power and energy efficiency. (See “Clean Energy Options and Economic Development.”) Their message: If Virginia wants to attract outside corporate investment, the state had better get on board the solar-powered electric train.

Then, in an unprecedented flexing of political muscle last week, a green industry group injected itself into the Virginia gubernatorial race. Advanced Energy Economy (AEE), an association of green industry companies, delivered a policy memo to the campaigns of GOP nominee Ed Gillespie and Democratic nominee Lt. Gov. Ralph S. Northam.

“Evolving consumer preferences, dynamic new technologies and aging infrastructure are causing the energy system as we have known it to modernize,” states the memo. AEE outlines four priorities:

  • Allow competitive procurement to attract investment and benefit consumers. Virginia energy policy should open up third-party market alternatives. “While current Virginia law allows competition in statute, more could be done to attract investment and benefit consumers.”
  • Expand access to advanced energy options. The ability to control energy costs is a factor in where many corporations choose to locate. But they’re not just looking for cheap energy — they want green energy.
  • Maximize energy efficiency and demand-response. Under Virginia regulatory regime, electric utilities lose money when customers reduce their electricity consumption, discouraging utilities from investing in energy efficiency programs and demand response. Virginia should “decouple” electricity sales from profitability so utilities don’t lose when they invest in energy efficiency and demand-response programs that cut sales.
  • Modernize the electric grid. Evolving consumer preferences, new technologies, and the need to replace aging infrastructure have created a need to modernize the electric grid. The regulatory system, which inadvertently stifles innovation, needs to be modernized.

AEE wants more wind and solar, more electric vehicles, more energy efficiency, more innovation, and more freedom for entrepreneurs to design solutions for customers. At the same time, the association acknowledges that the way to achieve these aims is not to browbeat electric utilities into submission but to change their incentives, which would take a major re-writing of regulatory law.

Bacon’s bottom line: To advance AEE’s vision, Virginia would need an upgraded electric grid flexible enough to accommodate a less centralized, more distributed grid while still maintaining system-wide reliability. In effect, the green businesses are calling for a deregulation of electric power production. But no one wants to build a competitive and redundant electric transmission-distribution system.

Any viable energy system of the future must allow electric utilities to continue investing in, and earning a profit on, their transmission-distribution systems. Also, deregulation of electricity generation would require grappling with the issue of “stranded” investments — investments in generating capacity that utilities made in good faith under the existing regulatory environment that might not be economical and must be scrapped in deregulated environment.

Like the environmental movement, this Fourth Force in energy politics wants to see a fundamental transformation of Virginia’s electric power system. Unlike the environmentalists, many of whom see Dominion and Appalachian Power as the enemy, the Fourth Force acknowledges the need for a healthy utility sector. This new interest group has plenty of money, which means it can afford to hire lobbyists and spread cash to political campaigns. Plus, these new voices will be more credible to Virginia’s pro-business legislators than the more strident environmentalists had been. 

The politics of electric power in Virginia has reached an inflection point. We are entering a new era.

Conservation Voltage Reduction: Dominion’s “Fifth Fuel”

Todd Headlee, director of Dominion Voltage Inc., shows off the in-house electric circuit the company uses to model upgrades to its conservation voltage reduction system.

Todd Headlee, director of Dominion Voltage Inc., shows off the in-house electric circuit the company uses to model upgrades to its conservation voltage reduction system.

  • Dominion Voltage Inc.’s Conservation Voltage Reduction (CVR) system has the potential to cut U.S. electricity consumption 2-4% for relatively little cost.
  • The EDGE technology eases integration of small-scale solar and wind energy sources into the electric distribution network.
  • Dominion expects the market for EDGE to take off as electric utilities invest heavily in grid modernization over the next decade.

Nine years ago the Commonwealth of Virginia produced a state energy plan that included among its objectives the cutting of electricity usage by 10% over ten years. That directive landed on the desk of Phil Powell, planning director for Dominion Virginia Power, Virginia’s largest electric utility.

After surveying a host of energy efficiency strategies, Powell focused on one called Conservation Voltage Reduction (CVR). The idea behind CVR is to save energy by reducing the voltage on electric lines.

Electric companies must maintain their tap lines between 114 volts and 126 volts. Keeping within the low side of that range saves electricity, but power companies err on the side of caution. Voltage varies by distance from the sub-station and local fluctuations in the electric load; dropping below 114 volts can cause damage to machines, appliances and other devices. If it were possible to measure voltage on the grid with greater precision, Powell knew, Dominion could eke out a meaningful reduction in electricity consumption.

Electric companies had experimented with conservation voltage reduction, but they relied upon guesswork that made them reluctant to reduce voltage aggressively. As it happened, Powell also was involved in a Dominion pilot project to deploy smart meters that could provide the very voltage information he needed. “I was looking at CVR and smart meters at the same time,” he says, “and I began thinking about how to use them together.”

Powell assembled an ad hoc group to noodle the problem. Working on their own time, they tested their solution on an electric circuit where all the houses were equipped with smart meters. One of those houses, not entirely coincidentally, was Powell’s. From his home, he monitored the neighborhood voltage as people turned their HVAC, lights, TVs, dishwashers and dryers on and off. The technology worked like a charm. Not only did it conserve electricity, but Powell discovered that the system could give a heads-up when customers encountered voltage-related issues. The company could dispatch a crew to fix the problem almost before customers knew they had it.

Powell’s tinkering formed the basis of supervisory control and data acquisition product, EDGE, which Dominion hopes will help propel the electric grid into the 21st century. The company sees two vital applications. First, EDGE has the potential to shave electricity consumption by 2% to 4% globally if deployed across utilities’ entire service territories — equivalent to the output of dozens of utility-scale power plants. “This is a great environmental service to the world,” says Todd Headlee, executive director at Dominion Voltage Inc. (DVI), the non-regulated enterprise created to commercialize the product.

Second, the technology makes it easier to integrate rooftop solar into the distribution grid on a large scale. As a rule of thumb, a local distribution circuit cannot accommodate more than 20% solar capacity, due to rapidly changes in output, Headlee says. “With our product, we hope a circuit can get up to 80% capacity,”

DVI is doing business in Hawaii, California and other states where there are energy efficiency mandates and solar power is taking off.  The company also is pursuing business in Canada, Europe and Asia. where many of its patents have been approved.

Major regulatory barriers exist in many states, but the potential energy savings are so massive that Headlee is confident that conservation voltage reduction will take off. “Ten years from now,” he predicts, “every utility will be doing CVR, either with our technology or a competitor’ because the benefits are too big to ignore.” Continue reading

Measuring and Evaluating Energy Efficiency

Are air duct inspections a cost-effective energy efficiency measure? How do we even know?

Are air duct inspections a cost-effective energy efficiency measure? How do we even know?

Virginia’s investor-owned gas and electric utilities administer 38 programs between them that are designed to increase energy efficiency or shift consumption away from periods of peak demand. The question periodically arises: Are these programs worthwhile? Do they save rate payers money?

Those are questions that most Virginians can readily understand. But getting answers isn’t so easy.

The answers depend on how one goes about evaluating, measuring and verifying the programs (a set of issues referred to in the biz as EM&V). How does one calculate the “Levelized Cost of Saved Energy” (the present value per kilowatt-hour of an energy-efficiency program over its economic life)? How does one construct the Total Resource Cost Test (an indicator of total program costs, including those of ratepayers and utilities)? What is the methodology behind the Ratepayer Impact Measure Test (known as the RIM test, which ascertains the impact of energy-efficiency measures on gas and electric rates)?

For the layman, these arcane issues “surpasseth all understanding,” to borrow a phrase from Philippians. But Virginians can take some comfort in the fact that the SCC is on top of the job. Earlier this year, the commission held a hearing attended by 20 interested persons and entities (whose comments were supplemented by 23 written submissions) to discuss how the energy-efficiency programs should be evaluated.

After deliberating on these matters of great complexity and subtlety, the SCC issued a report today finding that the system can be fine-tuned. Accordingly the commission has directed its staff to draft proposed rules to be considered in a future proceeding.

Wrote the commissioners:

The goal of the proposed Rules is to achieve, to the extent, possible, reliable and consistent estimation of energy savings and related impacts at a reasonable and appropriate cost; to provide guidance to utilities in planning and offering energy efficiency programs, and to provide a transparent basis for assessing cost-effectiveness of proposed programs.

One issue I found interesting (mainly because I found it comprehensible, unlike much of the report) is how to estimate kilowatt-hours of electricity saved. Most approaches rely upon Technical Resource Manuals (TRMs) that provide “deemed values,” or industry assumptions derived from professional judgment and engineering calculations — not from direct measurement. The problem is that industry averages may not apply to Virginia. Opines the SCC: “These estimates can introduce considerable inaccuracy into estimates of  energy savings.”

Therefore, the commission declared that estimates of kilowatt or kilowatt-hour savings “should be, where possible, based upon Virginia-specific data so as to reflect as closely as possible the actual savings achieved.”

The hoped-for benefit: If your utility offers an air duct-testing program, an appliance-recycling program, or rebates on Wi-Fi programmable thermostats, the SCC has thoroughly vetted them as cost-effective.

Pay a Man’s Electric Bill, and You Keep Him Warm for a Month. Weatherstrip His Home, and…

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Governor Terry McAuliffe earned his pay Thursday the old-fashioned way, doing weatherization work in Northern Virginia, Hampton Roads and Central Virginia. Here, he applies plaster to an uninsulated vent at the home of Diane Hunter in Petersburg. (Sorry, folks, I couldn’t get a better shot because there was a mob all around him — and the state police blocked my best camera angle!)

Dominion Virginia Power is expanding its Energy Share program from the poor and elderly to veterans and the disabled.

by James A. Bacon

Mary Jones has lived in her house on Petersburg’s Warren Street for 36 years. Since the death of her husband three years, she’s lived there alone — “just me and the lord,” she says.

She worked most of her life, first at Central State in food service and later as home care worker, but the 85-year-old is retired now. Although she owns her house, she hasn’t paid off the mortgage, and she counts every penny. She doesn’t run the air-conditioning when she’s alone, and she doesn’t leave a lot of lights on. Still, her electric bill runs about $70 per month on average — and that doesn’t include the gas bill for her stove and hot water heater.

Working through the Crater District Agency on the Aging, Jones qualified for an energy-efficiency makeover from Dominion Virginia Power’s Energy Share program. A team of volunteers swooped in to insulate her attic and hot water pump, install LED light bulbs, and apply caulking and weatherstripping. According to Dominion’s estimates, she should save about $20 monthly on her electricity bill. That’s enough to make a difference in her life, she says.

Jones told her story Thursday as part of an annual P.R. blitz Dominion puts on to promote the program. This year, the power company received a big hand from Governor Terry McAuliffe, who spent the better part of his day visiting homes in Northern Virginia, Norfolk and Petersburg, making a show of doing weatherization work, and touting the program. Dominion used the excitement generated by the governor’s visit to hand out energy-efficiency kits (retail value $12) and pass out literature to curious neighbors.

Energy Share started in 1982 as a program in which Dominion employees, customers and friends donated money to help the poor and elderly who had trouble paying their gas and electricity bills. Last year, Dominion expanded the program to include weatherization, committing $57 million to the effort over five years.

“It’s one thing to help people pay their bills,” said Ed Baine, senior vice president-distribution. “It’s another to help them reduce their bills over time.”

Terrence Moore, a customer project designer for Dominion, was one of a half dozen volunteers who took the day Thursday to weatherize Mary Jones's House. Here, Moore installs a carbon-monoxide monitor.

Terrence Moore, a customer project designer for Dominion, was one of a half dozen volunteers who worked Thursday to weatherize Mary Jones’s House. Here, he installs a carbon-monoxide monitor.

Last year Dominion employees donated 100,000 hours of time doing home weatherization, attended 200 events and talked to 120,000 people. This year McAuliffe, who has emphasized energy efficiency in his energy plan for Virginia, challenged the company to extend the program to veterans and people with disabilities, which the company has agreed to do.

The program helps the needy and protects the environment, McAuliffe said in Petersburg. Energy consumption releases C02 emissions into the atmosphere, which warms the climate, which causes icecaps to melt, which causes the sea level to rise. “Sea level rise is real. It’s happening,” said McAuliffe. After New Orleans, Norfolk is more vulnerable to sea level rise than any other U.S. city, and it’s a concern of the U.S. Navy, which bases the world’s largest naval base there. “The Secretary of the Navy wants to know that we’re taking these issues seriously,” he said. Fighting global warming is an environmental issue and a pocketbook issue.

It’s obvious why McAuliffe promotes energy efficiency. But why would Dominion? After all, the utility makes money by selling electricity. Isn’t it undercutting its own business by investing in programs like Energy Share that reduce consumption?

Here’s how spokesman Bob Richardson responded: “The purpose is to encourage customers to reduce their energy consumption which reduces stress on the electrical grid at specific times when demand on the system is high. Dominion uses financial incentives (typically rebates) to customers to reduce consumption or make it financially easier to install measures to save energy.”

Besides Energy Share, Dominion has six energy-efficiency programs aimed at residential customers, including a $40 rebate for cycling air-conditioning on high-use days, energy audits, heat pump tune-ups, heat pump upgrades, duct sealing, and replacement of old, inefficient appliances with energy-efficient ones. The company offers comparable programs for non-residentual customers, as well as incentives for users to shed load during peak demand by operating customer-owned backup generators.

Dominion has proposed other energy conservation programs but they have not passed muster with the State Corporation Commission. One program would have installed WiFi-connected, programmable thermostats in houses and tracked how customers used them so Dominion could design future programs around the technology. The SCC disagreed with assumptions in Dominion’s cost-benefit analysis and said the cost of the program was too high, says Richardson.

The SCC has rejected other programs, but later approved them after Dominion went back to the drawing boards. For example, says Richardson, the SCC denied a small business improvement program due to concerns about eligibility; Dominion revised the program design, and the SCC accepted it. Another program encouraged non-residential customers to upgrade to higher-efficiency lighting. In rejecting that program, the commission indicated that additional cost-benefit justification was needed. Dominion addressed the concerns, says Richardson, and the commission gave its OK.

Ultimately, the decision for funding utility-sponsored energy-efficiency programs is up to the SCC, which is charged with balancing cost, reliability and environmental considerations. Critics say Virginia lags other states in embracing energy efficiency, bu it harder to justify charging energy-efficiency programs to ratepayers in Virginia than in many other states because rates are lower than the national average, which offers a lower payback for the same investment. However, environmentalists argue that well-executed investments are cheaper than building new gas-fired gas plants, while programs that shift electricity demand would make it easier to integrate carbon-free solar and wind electricity into the electric grid.

Incubating Big Ideas

Wei Zhang in his lab.

Wei Zhang in his lab.

by James A. Bacon

Wei Zhang, a research scientist at the Virginia Commonwealth University School of Engineering, concluded that the polymer coatings he was studying had commercial potential. The chemical, when applied to power lines, aircraft wings or wind-turbine blades, would prevent ice from building up. By affecting the surface bonding at a molecular level, the coating would release the ice before it became too heavy.

The science was promising enough that he won a $150,000 Small Business Innovation Research (SBIR) grant to develop it further. He needed a business incubator with low overhead and business support that would allow him to pursue the technology. Fortunately, he found a suitable location — the Dominion Resources Innovation Center. The incubator, founded in a partnership between Dominion Resources, Hanover County and the Town of Ashland, specializes in the technology and energy sectors, providing early-stage companies with inexpensive office space, mentoring, guidance and business support.

“Scientists running a company don’t do well by themselves,” said Zhang yesterday at a re-launch of the innovation center at a new location in Ashland. But the board of directors gave him valuable advice, and he got a useful letter of support from Dominion stating that the electric power industry needs his product. Zhang even worked with Town of Ashland staff to develop applications for protecting landscaping from freezing.

The work went so well that Zhang’s company, Polymer Exploration Group (or PEG for short), won a second-phase, $750,000 SBIR grant take the product to the next stage, as well as a National Institutes of Health grant to use the polymer to develop an anti-microbial coating. At present, Zhang can produce only small volumes of the polymer — a half-liter at a time — and a major challenge is to ramp up his production capability. He sees huge markets anywhere ice is the enemy. At the moment, he says, the most immediate market appears to be fishing boats in the North Atlantic and North Pacific.

PEG, which now employs five, including Zhang, is only one of several promising enterprises to emerge from the incubator, which initially was housed in an old warehouse. The new facility, shared with town public works employees, is located in downtown Ashland in the old volunteer fire department building. The incubator provides nine single-room offices, including three wet labs. The mentoring and support is just as important as the space, if not more. The hands-on board provides a network of contacts and relationships that someone like Zhang, a Chinese national who has lived in Richmond since 2000, would find incredibly time consuming to replicate.

Mary Doswell, Dominion’s senior vice president for alternate energy solutions, said the company committed to support the incubator in 2009 to “send a signal to the community about our interest in innovation.” Now, she said, the incubator is being integrated with Virginia Commonwealth University, the Virginia Biotechnology Research Park and the Innovation Council to create “a regional innovation ecosystem.”

Although Dominion does not insist that tenants work on technologies that interest the power company, things have worked out that way. Dominion could be a customer eventually for Zhang’s ice-shedding polymer, and it could be a partner of Analytics Corp., to commercialize what founder Weston Johnson calls a high-efficiency, high-torque motor that operates at low speeds. That particular cluster of attributes, says Johnson, has applications ranging from industrial fans to wind turbines.

Johnson, who earned a Ph.D. in electrical engineering from the University of Kentucky, launched an earlier business — a hand-held spectrometer to be used by law enforcement — that didn’t turn out so well. But the experience taught him a lot and prompted him to move back to Richmond, where he started work on an idea he had developed in his Ph.D. dissertation. Johnson’s insight is that new materials invested by the semiconductor industry for use in microelectronic circuits make it possible to run motors with electric fields rather than magnetic fields. The process eliminates parts and drives down costs. He claims that the technology, if perfected, could drive down the installation cost of a wind turbine by 40%.

Johnson launched his business with $200,000 raised from family and friends. Locating in the Innovation Center was critical to his success, says Johnson. “The Center provided skill sets that I didn’t have to hire.” Zhang, he says, was an especially valuable sounding board. He has nearly completed his prototype, which he hopes will provide proof of concept ideas and win him another round of investment that will let him build a field-demonstration model.

Only a handful of enterprises emerging from incubators ever create enduring businesses. Zhang and Johnson, both of whom have acquired their own facilities, still have many obstacles to surmount before creating sustainable business models. Whatever their prospects, there is no denying that the Dominion Innovation Center succeeds in incubating big ideas.

When Dynamic Pricing Meets Energy Storage

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Will Gathright

Other states are targeting energy storage as an industry of the future but Virginia may have the most hospitable climate for it.

by James A. Bacon

Will Gathright was living in New York, where he had earned a Ph.D. from Renssalaer Polytechnic Institute, when he got fired up with the idea to use storage batteries to help business customers cut their electric bills. The idea was to buy electricity when it is cheap to charge the batteries, then draw down the batteries during periods of peak demand to offset consumption when electricity is expensive. For the business model to work, he needed to find a location where there was a wide differential in the cost of electricity.

Initially, he figured he might wind up in Hawaii, California or New York, states that are putting a high priority on energy storage. But after conducting a national search to see where his value proposition would fare best, Gathright moved to Northern Virginia.

“Virginia has the winning combination of three factors not present elsewhere in the country,” he explains. First, although Virginia’s peak-demand rates aren’t the highest in the country, they are relatively high. Second, while a few states have cheaper base rates, Virginia’s are significantly lower than the national average. The spread between low base rates and high demand charges creates a bigger potential for savings.

A third factor, Gathright says, is that Virginia electric utilities belong to PJM Interconnection, which manages the electric grid and wholesale markets for 60 million people in the Midwest and the Mid-Atlantic region. When his batteries aren’t helping shave a building’s peak demand charge, they can help PJM fine-tune short-term fluctuations in the supply and demand of electricity.

Welcome to the new world of electric load management. Power companies around the country are experimenting with novel rate structures that encourage customers to curtail their electricity consumption during periods of peak demand — typically summer afternoons when air conditioners are running flat-out. One of the most promising strategies for shifting electricity demand is energy storage, usually using batteries, and other states are targeting the sector as a strategic priority. California is requiring its utilities to purchase 1,325 megawatts of energy storage by 2020 and the state of New York state has invested $1.4 million in six battery and energy storage start-ups.

Gathright thinks Virginia may be the most promising location in the country to implement energy storage — not that the idea has gotten much attention here. What Virginia has done is experiment with dynamic pricing: using the price mechanism to encourage customers to shift electric consumption away from periods of peak demand when it is most costly to supply.

The results of Dominion Virginia Power’s dynamic pricing pilot program have been modest so far — positive enough to encourage Dominion to continue the project but not dramatic enough to persuade the company that a revolution in electric consumption is in the offing. But the outlook could change if entrepreneurs like Gathright figure out how to help customers capture the savings that the dynamic-pricing rate structures make possible.

With the encouragement of the State Corporation Commission, Dominion rolled out its dynamic pricing program in 2011, branding it as the Smart Pricing Plan. “The basic premise,” explains SCC spokesman Ken Schrad, “is that if customers are willing to modify behavior and use less electricity during high price periods, they will have the opportunity to save money, and the company in turn will be able to reduce the amount of energy it would otherwise have to generate or purchase during peak periods.”

The pilot was limited to 2,000 customers under a residential tariff and 1,000 small and midsized commercial customers under two commercial tariffs. Participation required having Advanced Metering Infrastructure (AMI) or Interval Data Recorder (IDR) meters that record energy usage every 30 minutes, thus allowing Dominion to measure consumption with greater precision.

Dominion provides customers at least 280 days a year with low-priced electric rates (“C” days), up to 30 days with high rates (“A” days), and the balance with medium rates (“B” days). Dominion communicates the classification to customers the day before to allow them to plan accordingly. Additionally, the company designates up to 25 five-hour blocks, or critical peak events, per year to commercial customers with two-hour notice. The rate differential for the critical peak hours could be literally dozens of times higher than the lowest rates.

For most customers, the jet savings have been minimal. Between October 2013 and October 2014, residential customers saved an average of $48 annually (3% of their electric bills), small commercial customers saved $92 annually (3%). However, larger customers saved $5,900 annually (14%), according to Dominion’s 2015 annual report on the program filed with the SCC. Continue reading

Conserving Energy, Helping the Poor

Marjorie_Wilson

Marjorie Wilson

by James A. Bacon

Marjorie Wilson has lived in the same 1,000-square-foot bungalow on Texas Street in the City of Richmond since 1953. Two sons and a grand-daughter share the residence with her but it isn’t easy keeping up with the bills, including the electric bill, which averages about $120 per month.

“We’d talked about insulating the attic years ago,” says daughter Diane Campbell, who helps look after her mother. But they never found the money to get the job done.

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Project:HOMES volunteers pump insulation into the walls of the Wilsons’ house.

The family hit an energy conservation bonanza this year, though, when it qualified for improvements by Project:HOMES, a non-profit enterprise that makes home improvements for the poor, elderly and disabled throughout Central Virginia. Combining federal weatherization money, Dominion Virginia Power EnergyShare funds and volunteer labor, Project:HOMES was able to insulate the attic and walls, plug air-infiltration gaps, wrap the hot water heater and pipes and install LED lights for about $4,000, says CEO Lee Householder.

The goal is to shave 30% off the Wilsons’ electric bill. If the project meets expectations, that will amount to savings of about $40 per month on average or $480 per year. That’s a pretty good return on a $4,000 investment.

The Wilsons’ house was featured yesterday in one of three events held around the state marking the re-launch of Dominion’s EnergyShare program. The Richmond event was attended by Dominion Virginia Power President Paul Koonce and Richmond Mayor Dwight Jones. Governor Terry McAuliffe was the headliner at the Northern Virginia event, while Lieutenant Governor Ralph Northam led off in Hampton Roads. The McAuliffe administration had pushed hard for an expansion of EnergyShare this spring when lawmakers crafted legislation in response to the Environmental Protection Agency’s crackdown on CO2 emissions from electric power plants.

Dominion has committed to spend $57 million on the program over the next five years, including $15 million that will be recouped from rate payers and $42 million to be contributed by the company itself. The $42 million, in effect, will come from shareholders of parent company Dominion Resources, said Katharine M. Bond, director of public policy. Those sums do not include additional funds contributed by Dominion customers, employees and others.

The program, said Koonce in remarks at the Richmond event, is the result of “a bipartisan effort to expand energy efficiency.” There is a broad political consensus that Virginia will have to aggressively pursue energy conservation in order to meet the strict CO2 emission goals of the Clean Power Plan.

There has been considerable debate about the merits of weatherization programs since the Obama administration’s 2009 economic stimulus plan. Government auditors found the $5 billion lavished on weatherization was riddled with waste and fraud. And in Dominion’s own analysis of alternatives for CO2 reduction, the “Income and and Age Qualifying Home Improvement Program” was judged to have the second highest cost per megawatt hour, exceeded only by off-shore wind energy. The cost of $236 per megawatt hour compares to the voltage conservation program, costing $38 per megawatt hour, or the residential appliance recycling program, costing $55 per megawatt hour, according to Dominion’s 2015 Integrated Resource Plan.

However, EnergyShare is more than a conservation program. It is designed to help the poor, elderly and disabled pay their electric bills, which explains its broad political appeal.

In its earlier incarnation, EnergyShare helped Virginians keep the lights on and also paid for weatherization. The big design change in the program is linking financial assistance with weatherization. If a customer faces a choice between paying an electric bill or a medical bill, the problem likely is not a one-time event; it is probably a chronic one. Weatherization creates a permanent reduction in a poor family’s electric bill. “That linkage has not been part of the equation before,” says Bond. Continue reading

Grid Optimization: More Software, Less Hardware

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by James A. Bacon

Dominion Voltage, Inc., a subsidiary of Dominion Resources, has announced the deployment of its electric grid optimization platform to the Duck River Electric Membership Corporation served by the Tennessee Valley Authority. Duck River expects to generate energy savings of 2% to 4% annually and says the technology will accelerate the deployment of Advanced Metering Infrastructure, which should enable even greater energy conservation.

Dominion Voltage’s EDGE platform “leverages the smart grid network for Volt/VAR optimization and voltage stabilization, which leads to a more efficient grid,” stated Executive Director Todd Headlee in a press release today.

The most concise explanation of “voltage optimization” that I’ve seen comes from Dick Munson, director of the Environmental Defense Fund’s Midwest Clean Energy initiative, writing a week ago for the EDF blog:

Many appliances, including incandescent lighting, work just as effectively, yet consume less energy, when the flow of electricity to them is reduced. Put another way, higher voltages generally make individuals and businesses needlessly use more energy, driving up electricity bills and air pollution. Therefore, if voltage was “right-sized,” residents would get enough power to run their appliances efficiently, but not so much that they use more electricity than needed.

According to Munson, recent study by Commonwealth Edison Company (ConEd)  concluded that voltage optimization could reduce the need for almost 20,000 gigawatt hours of electricity yearly across its system, enough to power 180,000 homes, at the incredibly low cost of 2 cents per kilowatt-hour.

Bacon’s bottom line: Grid optimization technologies are a sub-set of a larger cluster of technologies including microprocessor controls, sensors and software algorithms collectively referred to as “smart grid” technologies that hold out the potential to improve energy efficiency and integrate variable power sources like wind and solar into the grid.

Richmond-based Dominion Resources is investing in some of these technologies through unregulated subsidiaries like Dominion Voltage. That makes an interesting business story. What makes it a Virginia public policy story is whether Dominion is applying these same technologies in its regulated subsidiary, Dominion Virginia Power. If not, why not. What are the hold-ups? Or has the story simply gone unnoticed?

If there’s one thing that rate payers, environmentalists, electric utilities, the Commonwealth of Virginia and just about everyone else should be able to agree upon, it’s that reducing energy consumption at the cost of 2 cents per kilowatt hour is a win-win for everyone. I will pursue this line of questioning as I have time.

Cutting CO2 One Refrigerator at a Time

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Energy efficiency is everybody’s favorite strategy for reducing carbon-dioxide emissions. But conservation programs are not always economical.

by James A. Bacon

Earlier this month Dominion Virginia Power launched an initiative to encourage residential customers  to turn in old refrigerators kept in the garage. If you have a clunker that is at least 10 years old and has a capacity of at least 10 cubic feet, Dominion will pick up the appliance, recycle it and pay you $50 in the bargain. By  swapping an old fridge for a new energy-efficient model, you could shave up to $100 per year off your electric bill.

Sounds so simple. But there is more to this story than meets the eye, and it provides a glimpse into an under-appreciated question — the extent to which energy efficiency can substitute for new electric power plants in achieving Virginia’s CO2 reduction targets under the Environmental Protection Agency’s Clean Power Plan.

In its 2015 Integrated Resource Plan, Dominion predicated its options for investing in electricity generation and distribution upon the assumption that it will be able to achieve more than 3,000 Gigawatt hours of energy savings through Demand Side Management (DSM) programs by 2030. That savings will eliminate the need to build 611 Megawatts of generating capacity, equivalent to about 3.4% of the power company’s current generating capacity of 17,500 megawatts.

But some environmental groups contend that Dominion should invest more aggressively in energy efficiency to achieve the draft targets set by the Clean Power Plan. “Virginia has a large amount of untapped potential when it comes to energy efficiency,” contends the Natural Resources Defense Council in a 2014 issue brief. The state ranks 47th among the 50 states for energy efficiency. “Other states have been able to achieve significantly higher levels of low-cost efficiency, to accrue substantially more customer and energy benefits. Virginia can do the same.”

Power companies and environmentalists can argue back and forth over whose analysis is the most valid but in Virginia, the State Corporation Commission calls the shots. Power companies must make a business case for a particular energy efficiency initiative and persuade the SCC, which gives great weight to the impact of on rate payers, that the cost of implementing the plan is less than the cost of building new electric-generating capacity. In a recent ruling involving the garage-refrigerator program, the SCC took a harder line than either Dominion or the environmentalists.

A seemingly strong case can be made for recycling the old fridges.Refrigerator efficiency has improved dramatically in the past 20 years,” said Ken Barker, vice president of technical solutions at Dominion in a press release announcing the roll-out. “Homeowners oftentimes don’t realize how much their old refrigerators may be impacting their energy bills. We not only want to educate our customers on this lesser-known source of wasted energy, we want to help them do something about it.”

Roughly 60 million refrigerators are at least ten years old nationally, and Energy Star models are more than 15% more efficient than those built in conformance with 2009 regulations. The fact that refrigerators kept in garages are exposed to extreme heat makes energy efficiency an even more important consideration. Swapping an old fridge for a new one could save up to $100 per year.

Most studies of consumer behavior, says Dominion in its 2015 Integrated Resources Plan, indicate that consumers expect payback on their energy-efficient investments within 10 years or less. By handling the pick-up and recycling and paying the $50 incentive, Dominion hopes to improve the payback from making an upgrade.

Last August the company filed a petition with the SCC for approval to implement the garage-refrigerator initiative and two other demand-side management programs. A second was a home-improvement program for the poor and elderly, and a third targeted small businesses. In each case, Dominion sought approval to operate the programs for five years.

The SCC was not entirely cooperative. Ruling in April, the commissioners approved the refrigerator program but for only three years on the grounds that its cost-effectiveness was unproven. They said the program should be evaluated over three years before being extended. The SCC also limited the program budget to 50% of the original proposal, or about $4.8 million. The commissioners followed similar logic for the poor and elderly home-improvement program, limiting it to three years and $15.2 million.

The SCC nixed the small business program entirely, declaring that Dominion had not developed it sufficiently. “The lack of detail regarding important elements of the program,” stated the commissioners, “calls into question the accuracy of the Company’s cost/benefit analyses offered in support.”

“We are particularly sensitive to the impact on the bills of customers not participating in the programs, for whom the program costs represent net increases in their monthly bills,” explained the SCC in its final order. In a separate order on an Appalachian Power Co. request, the SCC elaborated: The conservation program “represents an involuntary wealth transfer (i.e., cross-subsidy) from one set of [the Company’s] customers to another.” Non-participants “will pay higher rates with no equal and offsetting monetary benefit.”

Energy efficiency programs vary widely in cost, just as different forms of electric generation do. According to Dominion’s 2015 IRP, costs range from nearly as low as $16 per megawatt hour for a non-residential energy audit program to $158 per megawatt hour for a residential home energy check-up program — and even more for other programs.

Under Virginia’s regulatory structure, energy efficiency programs have a high hurdle to overcome before the SCC will declare them to be in the “public interest.” Not only are Virginia power companies entitled to recover the cost of administering an energy-efficiency program, they normally are entitled to recover revenue lost from electricity not sold.

That helps explain why the SCC is skeptical that energy efficiency will contribute much toward Virginia’s attainment of the Clean Power Plan. In comments submitted to the EPA last fall, the SCC staff wrote: “The Virginia SCC Staff is unaware of any electric energy efficiency resource deployable in Virginia that both (1) has a cost less than its associated avoided variable operating costs, and (2) is scalable to a level that would meet the Proposed Regulation.”

The refrigerator recycling program is a case in point. The program is expected to save about 2,700 megawatt hours of electricity annually, according to Dominion spokesperson Daisy Pridgen. That’s about 7.4 megawatt hours daily, less than one megawatt per hour — a tiny fraction of the total energy-efficiency savings that Dominion is aiming for, and an even smaller percentage of what environmentalists say is possible. It would take dozens of such programs to avoid the cost of building even a single power plant.