In January 2014, a weather front known as a “polar vortex” descended from Canada’s arctic north and brought frigid temperatures and heavy snow and ice as far south as Texas and eastward to the Mid-Atlantic and New England. Along with the cold came concerns that electricity supplies could run short, leaving millions without light or heat. Over the course of those several weeks, electricity-grid managers learned an important new truth: peak demand is no longer simply a summer phenomenon, and market practices need to change to reflect this reality.
The PJM Interconnection faced possibly the greatest reliability stress of any independent system operator (ISO). This organization manages interstate-grid operations, including bulk electricity auctions and purchasing, for a service territory that includes much of the Midwest and East Coast. The extreme conditions created havoc with operations, and the system only narrowly avoided brownouts or rolling blackouts.
As temperatures fell to –15°F in PJM’s territory, a number of natural gas and coal plants were forced out of service due to mechanical problems and frozen coal piles. At the same time, heating customers were placing their own exceptional demands on a limited natural gas supply. The lights stayed on, but at an enormous cost, with electricity prices on the spot market spiking to new highs.
Since this near-disaster, PJM has begun treating peak demand as a year-round occurrence, and it now requires suppliers bidding to participate in peak-period “capacity” markets to guarantee their availability year-round. The ruling is seen as a boon to operators of newer coal and natural gas plants capable of firing up on relatively short notice any time of year. However, the plan poses a threat for solar and wind plants along with aggregated demand-response (DR) suppliers. These resources each have a seasonal sweet spot but are challenged in year-round rapid response.
For example, solar and wind arrays only operate when their resources are available, but that availability is somewhat predictable. As a result, solar operators have been able to bid into summer capacity markets with strong confidence the sun will be shining during those peak periods. Conversely, wind blows strongest in winter but often drops out entirely during hot summer days.
Under PJM’s new requirements, each of these resources is only eligible to put forward the capacity it can deliver during its least productive time of year. For example, a solar-array owner can only promise 38 percent of its highest rated capacity and a wind-farm operator only 15 percent.
Now, a pilot program in Illinois seeks to address the potential loss of such carbon-free power resources by pooling them together for capacity-auction purposes. The effort, spearheaded by the Environmental Defense Fund (EDF) and the Accelerate Group consulting firm—with assistance from PJM and Citizens Utility Board—is first focusing on how various combinations of Chicago buildings can be pooled to provide maximum DR capabilities any time of year.
“Our fear is that about 80 percent of demand response could leave the market, unless they find a way to create combined assets and partner up,” said Andrew Barbeau, Accelerate Group’s president and a senior clean-energy consultant with EDF. Interest in participation is high, and the initial 5–10 building program has expanded significantly. “That quickly grew to 60 [buildings], and we’re on the way to reaching 150,” he said.
To help determine actual DR potential and develop business plans based on the resulting data, program managers are analyzing energy-use patterns of every building enrolled in the program. A mock emergency event in February will test how well buildings and building pools might respond to an actual call for winter demand reduction. Beginning in June, a year-long effort will monitor actual DR performance in real-world conditions.
Following analysis of those results, the next step could be partnering building-based DR with the solar and wind arrays, so those producers also have an opportunity to participate in the capacity market. For example, combining a wind farm’s potential output with a commercial building’s DR capabilities could mean a higher allowed combined bid, because wind potential is highest in winter, when heating needs might make load reduction more difficult for the building owner. Conversely, in summer, the building’s DR potential could make up for seasonally lower wind production.
The larger aim of this effort is to minimize the demand for new fossil-fuel-fired generation, but Barbeau also sees the plan as an opportunity for a facility’s electrical engineers and contractors to bring new value to an owner’s bottom line. Traditionally, building owners and managers have not seen energy use as something they could easily control, but this effort will give staff new tools to reverse this perception.
“Empowering engineers to become a revenue driver for a facility is a major shift in the industry,” he said.