National Conference of State Legislatures Energy Efficiency Institute Smart Grid and Demand Side Management

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1 National Conference of State Legislatures Energy Efficiency Institute Smart Grid and Demand Side Management Fred Stoffel June 24, 2008 Denver, Colorado

2 Xcel Energy Northern States Power Company- Minnesota Northern States Power Company- Wisconsin 2

3 Today s Electricity Grid 3

4 Smart Electricity Grid Energy storage devices Local power generation, distributed generation Digital sensors and controls Self-balancing and selfmonitoring system Real-time data, analytics and price signals Digital intelligence infused throughout the grid Two-way communication More green energy Smart homes and buildings Optimization of the entire grid and energy pathway Source: How Brand Attributes Drive Financial Performance, Marketing Science Institute, Natalie Mizik and Robert Jacobson 4

5 Xcel Energy s Smart Grid Vision Use technology to fundamentally change the way we create, deliver and use energy. Must be fully-integrated, and allow customers to make informed choices about energy use. Increase use of clean generating resources. End result? An improved system with environmental, financial and operational benefits. 5

6 Vision is Broad Not just a smart meter Horizontal integration: Generation, transmission, distribution, customer Leverages partner co-investment, collaborative model Boulder: An evolving project Not all components will be successful, testing many hypotheses Customer choice is key, providing more information 6

7 Benefits of Smart Grid Environmental Lowered carbon footprint Increased use of renewable energy Increased energy efficiency/conservation Financial Increased dispatch, mobile efficiencies Reduced billing and customer service costs Customers can manage their energy dollars Operational Ongoing grid reliability and stability Outage management, improved maintenance 7

8 SmartGridCity - Boulder, Colo. An international showcase of smart grid possibilities a comprehensive demonstration of an intelligent grid community Test technology Integrate smart grid portfolio of projects Prove benefits 8

9 Boulder s Key Strengths Ideal size (50,000 customers/meters) Ideal geographic location (easy access to needed grid components) Ideal smart grid customers: Web-savvy, early adopters Environmentally aware Collaborative opportunities with: University of Colorado National Center for Atmospheric Research National Institute of Standards and Technology City leaders 9

10 SmartGridCity Project Timeline Partner alignment, ongoing City selection, announced March 2008 Scope and design plan, announced May 2008 Build out, begin April 2008 Benefit assessment, Q Q

11 Phase I Full-system automation, monitoring and smart meters for first group of customers, upgrades to two substations, five feeders and 15,000 meters. Web portal for customers. Dedicated customer service phone number and address for SmartGridCity customers. Some customers can choose to have in-home automation tools. By mid-august 2008, initial capabilities demonstrated. 11

12 Phase II Complete installation of a distribution and communication network for remaining areas (an additional two substations, 20 feeders and smart meters). Expanded in-home automation installations. Enable Web portal access to all customers. Initial integration of plug-in hybrid electric vehicles, solar and wind co-generation sources. 12

13 Grid Components & Technology Metering and communications Begin installation of 15,000 Landis+Gyr smart meters in June Primary communications via broadband over power lines 90 percent of city connected Smart substations and feeders Smart substations upgraded to allow for increased reliability (NCAR included) Smart feeders communications enabled for more information and automated functions Smart distribution system real-time data on power consumption, outages, restorations and fault locations 13

14 Demand-Side Management (DSM) Energy Efficiency/ Energy Conservation Demand Response Installation of measures or changes in behavior that decrease consumption of energy. Voluntary reduction in demand by customers in response to economic or control signals. Examples: Efficient Lighting Efficient HVAC Lowering/Raising Thermostat Turn off Lights 14 Examples: Interruptible Rates Air Conditioning Cycling Time-based & Critical Peak Pricing

15 Energy Efficiency and Demand Response Programs Effects by Day Type - Residential Residential Lighting Typical Day Before DSM After DSM 1:00 3:00 5:00 7:00 9:00 11:00 13:00 15:00 17:00 19:00 21:00 23:00 Hour End Residential Saver's Switch Peak Day Before DSM After DSM 1:00 3:00 5:00 7:00 9:00 11:00 13:00 15:00 17:00 19:00 21:00 23:00 Hour End 15

16 Energy Efficiency and Demand Response Programs Effects by Day Type Commercial and Industrial Commercial Lighting Typical Day Before DSM After DSM Commercial Cooling Peak Day 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 0:00 2:00 Hour End Before DSM After DSM Industrial Process Typical Day 1:00 3:00 5:00 7:00 9:00 11:00 13:00 15:00 17:00 19:00 21:00 23:00 Hour End Before DSM After DSM 3:00 5:00 7:00 9:00 11:00 13:00 15:00 17:00 19:00 21:00 23:00 Hour End 16 1:00 1:00

17 DSM Objectives Are Changing Historical Objectives: Defer Building Power Plants Economics of DSM based on avoiding peaking generation plants. Focus on Demand Reduction vs. Energy Reduction Environmental groups have always focused on emission reduction, Commissions tended to focus on demand and cost reduction. MN shifted primary focus to energy reduction and secondary focus to demand reduction in CO added energy reduction focus to demand reduction focus in TX added energy reduction as a secondary focus in 2007 legislation. NM legislation is focused on energy reduction, but allows for demand response to be included as part of DSM portfolio. Emerging Objectives: Focus on Carbon Reduction 17

18 Impact of Changing DSM Objectives Impact of Energy Reduction Focus Valuation of avoided generation costs shifting away from single cycle peaking generation to more intermediate (combined cycle) plants. Increase in programs rich in energy reduction but lower demand reduction (CFL s, refrigerator recycling, outdoor lighting, recommissioning). Demand response and load shifting measures which are rich in demand reduction but little energy reduction will not drive goal achievements. Impact of Carbon Reduction Focus Sensitive to the generation mix and plant loading in order to value carbon reduction resulting from DSM portfolio. Currently weighted on generation mix. Shift to calculation based on fuel we would actively conserve. Including value of carbon as an avoided cost. Impact of carbon in the prioritization of DSM programs. Fuel conversion. Shifting use intra-day. 18

19 Customer Barriers to be Overcome For Growth in DSM Primary Barriers to Participation Awareness of energy efficiency options Awareness of Xcel Energy programs Equipment not at end of useful life Financial investment and access to capital Low energy costs / energy costs low percent of total costs Quality of energy efficiency equipment Time, knowledge or labor resources Don t want to disrupt business or production line Mismatch between owner of building/equipment and responsibility for energy bills 19

20 State Mandates for Energy Efficiency 1.1% of Sales beginning Average Average Demand Savings (MW) Demand Savings (MW) % system load MW 0.49% 1.04% 1.06% 1.02% 1.02% % system load MW 0.49% 1.18% 1.13% 1.20% 1.24% Energy Savings (GWh) Energy Savings (GWh) % system load GWh 0.79% 0.97% 0.97% 0.97% 0.98% % system load GWh 0.79% 1.45% 1.46% 1.46% 1.47% Total Budget $48.4M $91.5M $95.2M $98.9M $102.7M $105.4M Total Budget $48.4M $219.3M $238.2M $242.0M $244.5M $268.8M COLORADO October 2007 DSM Enhanced Plan Filing MINNESOTA % of Sales beginning 2010 PUC Recommendation Average Average Demand Savings (MW) Demand Savings (MW) % system load MW 0.54% 0.74% 0.73% 0.75% 0.73% % system load MW 0.54% 0.81% 0.92% 1.02% 1.07% Energy Savings (GWh) Energy Savings (GWh) % system load GWh 0.43% 0.59% 0.59% 0.61% 0.60% % system load GWh 0.53% 0.76% 0.80% 0.85% 0.90% Total Budget $42.3M $56.4M $56.5M $56.5M $56.5M $55.3M Total Budget $42.3M $56.4M $146.1M $148.7M $151.3M $141.3M * Estimates based on PUC deliberations. Waiting Final Order due May 30th

21 State Mandates for Energy Efficiency (cont.) New Mexico Achieve 5% of 2005 total retail sales in calendar year 2014 and 10% of 2005 total retail sales in calendar year 2020 as a result of energy efficiency and load management programs. Texas Achieve 15% of 5 year average demand growth in 2008 and 20% in 2009 and beyond. Converts demand savings into a minimum energy savings goal by applying a 20% capacity factor. 21

22 DSM Goal Setting in MN & CO Resource Plans Market Potential Assessment Studies Technical, economic and achievable potential estimates. MN and national goals historically based on achievable potential. MN and CO resource plan goals based on 50% of economic potential. Limitations of Market Potential Assessments Factor in only known changes in codes and standards. Include only current technologies in the market. 50% of Economic Potential Reasonable Yet Stretching It is not a reasonable assumption that Xcel Energy can drive 50% of all economic potential identified in the studies with known measures. The expectation is that emerging technology opportunities will be larger than reductions based on changes in codes and standards. Currently market transformation including customer behavior modifications are not included in the estimates. 22

23 Resource Requirements for DSM Growth: External Sales Equipment vendors & distributors Installation contractors Engineering consultants, ESCO s New construction: architects, designers, engineers, home builders Program Implementation Home auditors, business energy assessment auditors and engineering study providers Other study vendors including recommissioning and compressed air Third party program implementation contractors (i.e. One-Stop-Shop, Energy Design Assistance, Commercial Real-Estate, Industrial Process Efficiency) Other Infrastructure Support Market research/program evaluation contractors Measurement and verification contractors Product development and technical support contractors Advertising, promotion firms and community based marketers 23

24 Making Customer Efficiency a Profitable Business for Xcel Energy Timely Cost Recovery (eliminate disincentive) Recognition of Lost Margins (eliminate disincentive) Progressive positive incentives for utility programs Identification of EE and DR opportunities Customer segmentation and target marketing Social and affinity marketing (new channels) Streamlined and on-line application and rebate processing Linkage to new and emerging intelligence and technologies Smart Grid applications real time consumption, customer usage feedback mechanisms and controls Linkage to progressive rate designs (TOU, CCP, block rates) Integral to Xcel Energy s brand 24

25 Benchmarking DSM Look at Other Utilities' DSM Performance What % Economic Potential are their GWh goals targeted at? We should compare only to similar % economic potential utilities costs rise/kwh at higher % goals. Are they held to Gross(MN) or Net(CO) energy savings (freerider disallowed)? Are they held to passing TRC tests? What was their total cost $/kw and $/kwh? What was their administration cost $/kw and $/kwh? 25

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