Learn to navigate the DR waters in California with impartial advice from Gridium

This was a well-attended and very dense session, so for teams in California, it’s worth pulling out a few nuggets from the conversation, as well as thoughts from follow-up conversations with many of you.

A natural fear of PDP/CPP

Among the program options we covered was price response (e.g., PG&E’s Peak Day Pricing or Southern California Edison’s Critical Peak Pricing). This program continues to gain traction across a broad range of customers. Advanced customers that also participate in demand response use PDP/CPP as a day-ahead option. For smaller customers, PDP/CPP makes a great starter program.

Many teams are understandably turned off by price response programs. The idea of paying $1.20 or more per kWh for electricity immediately sends participants running for the opt-out forms. But dig a little deeper, and you’ll see a basic tradeoff that makes as a lot of sense: a 40% discount on your on-peak and part-peak demand charges in exchange for a $1.00 per kWh surcharge that only affects you 36-60 hours a year.

The added hidden feature of PDP/CPP that many Gridium customers take advantage of is the capacity reservation level, a mechanism for only partially opting into the program. Although a bit complex, the CRL is a great tool for adjusting the tradeoff between risk and reward, especially in office environments

Baselines and counterfactuals

What baseline should be used to measure savings in demand response? This is not an easy question to answer and has been the subject of much debate in the energy management community. In the webinar we used the example of a San Francisco building to highlight the difference that baseline calculations make to program payout.

What electric energy use baselines for a building should be used to judge Demand Response?
Gridium

How much did you curtail? Here a 10-in-10 baseline lowers payout by 55%.

As shown at left, we compared the 10-in-10 baseline for a typical commercial building participating in a demand response program with our predicted model (shown here with a 2% error rate). The result is stunning. Our model shows savings of 197 kW, but the building only received credit for 85 kW. In short, 10-in-10 only credits you for energy use reductions from a typical day, while a proper baseline approach also includes avoided consumption increases from a hot day.

For those comparing price response options with other programs, this is another reason to focus on total dollar savings rather than dollar per kW — it’s apples and oranges depending on what baseline is used.

Bidder Q&As

We received the most praise for our helpful set of 10 questions for every DR program. I’ve included the list below, and for those of you who like your bids nicely organized, I have published an excel template. Good luck on your quest to maximize payments this summer.

  1. Payments: How is the facility compensated for both capacity and energy resources? Do the payments cover any incidental costs (overtime, programming)? What caps are placed on the payments? How are payments issued?
  2. Performance and Penalties: What are the impacts of non-performance? What risks do I have?
  3. Nomination and Baseline: How are capacity nominations and reductions calculated? What baseline is used? Who controls the nomination process?
  4. Curtailment Window: The hours in which you are expected to curtail. Varies by program and by aggregator.
  5. Operating Months: The months in which the program operates (typically either year round or summer)
  6. Notification: How much advance notice will I receive? How will I receive notification?
  7. Event Limits: How many events or event-hours will I have in a season? Are their limits to events in month or continuous events?
  8. Event History: What is the event history in this program?
  9. Equipment: What do I have to do onsite? Who else in my organization needs to be involved?
  10. Extras: What are the other benefits of enrolling in your program? Why do I pick you?
About Tom Arnold

Tom Arnold is co-founder and CEO of Gridium. Prior to Gridium, Tom Arnold was the Vice President of Energy Efficiency at EnerNOC, and cofounder at TerraPass. Tom has an MBA from the Wharton School of Business at the University of Pennsylvania and a BA in Economics from Dartmouth College. When he isn't thinking about the future of buildings, he enjoys riding his bike and chasing after his two daughters.

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