Federal Energy Policies on Smart Metering, Energy Efficiency and Demand Response

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1 Federal Energy Policies on Smart Metering, Energy Efficiency and Demand Response Larry Mansueti Permitting, Siting and Analysis Division Office of Electricity Delivery and Energy Reliability November 8, 2007

2 Electricity Grid Modernization A Presidential & Congressional Priority We have modern interstate grids for our phone lines and our highways. It's time for America to build a modern electricity grid. President George W. Bush April 27, And now a Congressional priority as well with the Energy Policy Act of 2005 federal law -- Means more electric infrastructure of all types: generation (central, distributed); efficiency/demand response; transmission; and smart grid

3 U.S. Congress Demand Response Policy Statement Federal Encouragement of Demand Response It is the policy of the United States that time based pricing and other forms of demand response.shall be encouraged, the deployment of such technology and devices.shall be facilitated, and unnecessary barriers to demand response participation in energy, capacity and ancillary service markets shall be eliminated. Energy Policy Act of 2005, Sec. 1252(f)

4 But Federal Law and Policy Defers to State Decision Making on Retail Electricity Reaffirmed by Energy Policy Act of 2005 EPACT has: several PURPA States Must Consider provisions on smart metering & demand response (can say no) DOE report to Congress on policy recommendations for states on DR FERC annual reports to Congress on advanced metering/dr DOE report to Congress on policy recommendations for states on utility-related energy efficiency Pending Congressional energy legislation smart grid provisions encourage states & have feds develop standards

5 DOE and FERC Reports to Congress on Demand Response

6 Not Just Generation & Transmission: National Action Plan for Energy Efficiency for Utilities Captures New Interest Released on July 31, 2006 at the National Association of Regulatory Utility Commissioners meeting by nation s utilities and regulators Goal: To create a sustainable, aggressive national commitment to energy efficiency through gas and electric utilities, utility regulators, and partner organizations Over 50 member public-private Leadership Group developed five recommendations and commit to take action DOE and EPA only facilitate!!! Additional commitments to energy efficiency exceeds 100 organizations National Action Plan for Energy Efficiency Recommendations 1. Recognize energy efficiency as a highpriority energy resource. 2. Make a strong, long-term commitment to implement cost-effective energy efficiency as a resource. 3. Broadly communicate the benefits of and opportunities for energy efficiency. 4. Provide sufficient, timely and stable program funding to deliver energy efficiency where cost-effective. 5. Modify policies to align utility incentives with the delivery of cost-effective energy efficiency and modify ratemaking practices to promote energy efficiency investments.

7 DOE Report to Congress on State Utility Efficiency Policies Energy Policy Act of 2005 required DOE to conduct a study and then report to Congress on efficiency state & regional policies for utilities DOE based its own ten recommendations partly on the Action Plan recommendations Action Plan executive summary included as an appendix to DOE report State and Regional Policies that Promote Energy Efficiency Programs Carried Out by Electric and Gas Utilities, March 2007,

8 The Need For Smart Meters Mike Oldak Sr. Dir., State Competitive & Regulatory Policies Edison Electric Institute November 2007

9 Demand for Electricity Is Increasing 6,000 Billion kilowatthours 5,000 4,000 3,000 2,000 1, Historical Projected 2030 Sources: U.S. Department of Energy, Energy Information Administration, Annual Energy Review 2005 and Annual Energy Outlook 2007 Early Release

10 Margins Projected to Fall Below Minimum Target Levels MRO 2009/2009 (US) RFC (MISO)* 2008/2008 RFC (PJM) 2012/2014 New York 2011/2016+ Rocky Mtn 2008/2011 New England 2009/2009 California 2009/2012 AZ/NM/SNV 2009/2011 SPP 2015/2016+ TRE (ERCOT) 2009/2016+ *Excludes MISO resources outside the RFC boundary 10

11 Infrastructure Affects Reliability Number one challenge facing reliability today (NERC s 2007 Survey of Reliability Issues) High likelihood reliability risk due to aging infrastructure and limited new construction

12 CEO Perspective Can We Meet Tomorrow s s Demand? Source: GF Energy 2007 Electricity Outlook Entering the Climate Zone June 18, 2007

13 Electric Infrastructure Investments For Regulated Utilities Current net regulated electric utility property in service ~ $ 400 Billion Generation ~$ 53 Billion US DOE Energy Information Administration projects ~$412 Billion for all generation sources Transmission ~$ 85 Billion Distribution ~$ 145 Billion Environmental ~$ Billion Excludes potential cost of climate legislation Other cost factors Critical infrastructure protection, RTOs, pension funds, health care, disaster recovery, end of rate freezes, RPS, fuel CapEx ~$750 Billion $1.2 Trillion

14 Raw Materials Price Indexes

15 Equipment Price Increases

16 Fuel Costs Increasing Dramatically Natural Gas percentage increase % 400% % Source: 0 Coal Residual Oil Natural Gas U.S. DOE/Energy Information Agency & U.S. DOL/Bureau of Labor Statistics (January 2006)

17 Transmission Congestion Dramatically Increasing Level 2 or higher TLRs Requests for transmission loading relief (TLRs) in the Eastern Interconnection Source: NERC Transmission Loading Relief Procedure Logs

18 Is Global Warming Really Happening? Consumer Survey Yes 72% No 18% Don't Know 10% Source: EEI s National Public Opinion Monitor Q Results

19 Challenge: Technologies and Timeframes Clean coal technologies Not commercially available until 2015 Carbon capture and storage (CCS) technologies Not commercially available until Deployment of nuclear plants Not possible until 2015 at earliest

20 Demand Response and Advanced Metering Update on Policy Developments Dan Delurey Demand Response and Advanced Metering Coalition (DRAM) November 8, 2007

21 Demand Response and Advanced Metering Update on Policy Developments Dan Delurey Demand Response and Advanced Metering Coalition (DRAM) November 8, 2007

22 DRAM Members Cellnet+Hunt Comverge Echelon EKA Systems Elster Electricity emeter EnergySolve EnerNOC ESCO Technologies Ice Energy Itron Landis + Gyr Orion Energy Systems Sensus Metering Silver Spring Networks SmartSynch Trilliant Networks 22

23 DR Policy PURPA 1978 Load Control Restructuring FERC directives to ISOs/RTOs RTP for large customers Competitive metering Default service pricing System benefit funding Mega-mandates (CA, Ontario) Portfolio standards EPACT

24 EPACT 2005 Smart Metering More than the name implied Four main provisions, It is the policy of the U.S.. DOE Report to Congress FERC Report to Congress New PURPA Requirement States and other jurisdictional bodies must investigate whether or not to provide time-based pricing and advanced metering Flexible compliance All Sectors covered Decide by August

25 State Decisions on EPACT 1252 States Deciding to Adopt States Deciding Not to Adopt States Deferring Decision Ohio New Hampshire Delaware Florida Idaho Iowa Kentucky New York Tennessee Utah Vermont Virginia West Virginia Colorado Maryland Montana Vermont 25

26 EPACT Seeing the Forest instead of the Trees Everyone has been not only made aware but educated DR and AMI high on the NARUC agenda States that have issued a technical No have made other moves Utilities have begun to view things more opportunistically Other policy moves have been made, including in the legislatures A critical foundation of understanding and discussion has been established 26

27 Pending Congressional Energy Bill Accelerated Depreciation for Advanced Metering Creation of independent Grid Modernization Commission National Action Plan on Demand Response National Assessment of Grid with focus on barriers, constraints, technologies Interoperability Protocols and Model Standards Consideration of new information to customers on time- based usage and price and associated emissions Federal Matching Fund for Implementation Multiple Provisions on PHEV loan guarantees, demonstration funding, fleet incentives, research and studies 27

28 Pending Congressional Energy Bill Smart Grid Technology Deployment Program State Consideration of new requirements Prior consideration of alternative grid options Utility recovery of new and past investments Rate design and decoupling DOE Study on Grid Security Peak Demand Reduction Standards for Federal Facilities EPA Report on Environmental Attributes of DR Incorporation of DR into Energy Star and other programs Renewable Energy Standards (RES) 28

29 DRAM Members Cellnet+Hunt Comverge Echelon EKA Systems Elster Electricity emeter EnergySolve EnerNOC ESCO Technologies Ice Energy Itron Landis + Gyr Orion Energy Systems Sensus Metering Silver Spring Networks SmartSynch Trilliant Networks 29

30 DR Policy PURPA 1978 Load Control Restructuring FERC directives to ISOs/RTOs RTP for large customers Competitive metering Default service pricing System benefit funding Mega-mandates (CA, Ontario) Portfolio standards EPACT

31 EPACT 2005 Smart Metering More than the name implied Four main provisions, It is the policy of the U.S.. DOE Report to Congress FERC Report to Congress New PURPA Requirement States and other jurisdictional bodies must investigate whether or not to provide time-based pricing and advanced metering Flexible compliance All Sectors covered Decide by August

32 State Decisions on EPACT 1252 States Deciding to Adopt States Deciding Not to Adopt States Deferring Decision Ohio New Hampshire Delaware Florida Idaho Iowa Kentucky New York Tennessee Utah Vermont Virginia West Virginia Colorado Maryland Montana Vermont 32

33 EPACT Seeing the Forest instead of the Trees Everyone has been not only made aware but educated DR and AMI high on the NARUC agenda States that have issued a technical No have made other moves Utilities have begun to view things more opportunistically Other policy moves have been made, including in the legislatures A critical foundation of understanding and discussion has been established 33

34 Pending Congressional Energy Bill Accelerated Depreciation for Advanced Metering Creation of independent Grid Modernization Commission National Action Plan on Demand Response National Assessment of Grid with focus on barriers, constraints, technologies Interoperability Protocols and Model Standards Consideration of new information to customers on time- based usage and price and associated emissions Federal Matching Fund for Implementation Multiple Provisions on PHEV loan guarantees, demonstration funding, fleet incentives, research and studies 34

35 Pending Congressional Energy Bill Smart Grid Technology Deployment Program State Consideration of new requirements Prior consideration of alternative grid options Utility recovery of new and past investments Rate design and decoupling DOE Study on Grid Security Peak Demand Reduction Standards for Federal Facilities EPA Report on Environmental Attributes of DR Incorporation of DR into Energy Star and other programs Renewable Energy Standards (RES) 35