$3.6 Billion in the Basement

Transcription

1 $3.6 Billion in the Basement Market potential of grid-interactive water heaters, how to tap it, and implications for the grid ACEEE Hot Water Forum, February 22, 2016 Mark Dyson, Manager Rocky Mountain

2 2 About RMI and our recent electricity work Rocky Mountain Institute, a Colorado nonprofit corporation, works across industries on challenging energy issues to drive the efficient and restorative use of resources using market-based approaches A REVIEW OF SOLAR PV BENEFIT & COST STUDIES 2nd Edition Contacts: Lena Hansen, Principal, lhansen@rmi.org Virginia Lacy, Senior Consultant, vlacy@rmi.org Devi Glick, Analyst, dglick@rmi.org 1820 Folsom Street Boulder, CO RMI.org Copyright Rocky Mountain Institute 2nd Edition, published September 2013 download at:

3 1 Context: The G in GIWH

4 Grid spending is rising, but demand is flat Utilities plan to invest $1.4 trillion in infrastructure upgrades through 2030, but sales have declined 5 out of the last 7 years, and growth forecasts have been systematically lowered. $"billion"!$1,800!!!$1,600!!!$1,400!!!$1,200!!!$1,000!! Grid infrastructure spending!$800!!!$600!!!$400!!!$200!!!$#!!!! Distribu4on! Transmission! Genera4on! 1989#2009! 2010#2030! Source: EEI/Bra7le Group; EIA EPM and AEO electricity sales TWh EIA electricity consump8on projec8ons Actual Year Forecasts

5 Retail rates are rising Across many states, retail electricity rates are rising for commercial and residential customers alike, and forecast to continue to do so STATE AVERAGE U.S. RESIDENTIAL RETAIL RATES [Y-Axis /kwh} HI-CA-TX-KY-NY 3% Increase ( ) HI-CA-TX-KY-NY Total Average ( ) STATE AVERAGE U.S. COMMERCIAL RETAIL RATES [Y-Axis /kwh} HI-CA-TX-KY-NY 3% Increase ( ) HI-CA-TX-KY-NY Total Average ( ) % % % % % % Source: RMI Economics of Grid DefecHon; EIA

6 Consumers have expanding options To meet demand for electricity, utility customers used to buy it. Now, it is increasingly easy for third parties or utilities to help them make it, avoid it, or shift it. 6 Grid Purchases Distributed Generation Energy Efficiency Demand Flexibility Buy kwh from the grid as and when needed. Generate electricity, changing the profile of net grid demand while reducing total grid demand. Reduce demand whenever load is operated, thus lowering the daily load curve. Shift eligible loads across the hours of a day to lower-cost times, reshaping the daily load curve kw hour hour hour hour Normal Load Normal Load PV Net Load Normal Load Efficient Load Normal Load Flexible Load Source: RMI The Economics of Demand Flexibility

7 $billion/year Demand flexibility can unlock $13 B/year Enabled by sophisticated rate design, utility programs, or third-party aggregators, the demand side can be a powerful source of flexibility for the grid $9 billion/y $3 billion/y lower $1 billion/y $16 avoided produchon costs ancillary services $14 $0.7 $0.4 $13.3 investment $3.3 $12 $10 $8 $6 $6.9 $2.1 7 $4 $2 $0 Generation Transmission & Distribution Capacity Source: RMI The Economics of Demand Flexibility Energy Arbitrage Regulation Spinning Reserve Total Ancillary Services

8 2 Why water heaters?

9 Water heaters are ubiquitous 9 There are ~50 million electric water heaters across the US, with several distinct geographic concentrations v The Northwest and the Southeast represent concentrated markets for GIWH technology v In other regions, electric water heahng is concentrated in rural areas Electric DHW % 10% 90% Source: EIA RECS

10 Water heaters are highly flexible 10 Electric water heaters have a low load factor, a tank heat capacity of 7 kwh, and thermal stratification and insulation that allow for many forms of grid value v Depending on the draw profile and grid use case, between 40-60% of kwh used for water heahng can be shi]ed v Le_ng average tank temperature dri] while keeping tank- top temperature within bounds keeps showers hot while flexing energy use v Energy arbitrage: Shi]ing kwh use to lower- cost hours of the day v Ancillary services: ModulaHng or cycling power use for a water heater fleet to balance grid supply with demand v Peak demand reduc8on: Briefly curtailing electricity use during the highest- demand periods for a home, feeder, or uhlity Source: Bra7le 2016; RMI The Economics of Demand Flexibility

11 Water heater innovation is scalable 11 Residential water heaters are manufactured at scale, with a few big companies dominating market share, and adding controls is potentially very inexpensive US annual water heater sales US water heater market share (2008) Source: NEEA 2012; US DOE ENERGY STAR

12 3 The system value of GIWH

13 We estimate a $3.6 billion/year value of a 100% grid-interactive electric water heater fleet Million $/year $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $1,397 Avoided generation capacity $419 Avoided T&D $1,760 $29 $36 $3,641 Energy arbitrage Energy savings Renewable integration Total 13 Source: RMI analysis

14 Avoided generation capacity: $1.4B/year This value is highly sensitive to the assumed peak-coincidence of baseline electric water heating load profile 14 v We eshmate that water heater load has a peak coincidence of approximately 5-12%, depending on region. v With 7% peak coincidence (i.e. 300 wa7s on- peak per unit), electric water heaters would make up 1.6% of peak load in the US. $million / year $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- Low Current High Avoided Genera8on Capacity Source: RMI analysis; NEEA RBSA

15 Avoided T&D capacity: $420M/year Lowered peak demand can lead to avoided investment in transmission & distribution infrastructure in addition to generation 15 v The value of avoided T&D investment has been calculated between $30- $100+/kW- yr; we assume the lowest value v This avoided cost potenhal is likely concentrated in congested areas and areas with significant growth expected Million $/year $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $1,397 Avoided generation capacity $419 Avoided T&D $1,760 $29 $36 $3,641 Energy arbitrage Energy savings Renewable integration Total Source: RMI analysis

16 Energy arbitrage: $1.8B/year Scheduling water heating load to coincide with low-cost hours in wholesale markets can reduce energy costs by 25-35% 16 v Using 2014 wholesale market prices, the average marginal energy cost to use an electric water heater across the US was $125. v Savings of 25-35% are possible while shll ensuring that hot water is available on demand. Million $/year $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $1,397 Avoided generation capacity $419 Avoided T&D $1,760 $29 $36 $3,641 Energy arbitrage Energy savings Renewable integration Total Source: RMI analysis

17 Other values: $65M/year, not including ancillaries 17 Reducing standby losses and avoiding current levels of renewable curtailment can provide additional value; avoided ancillary service costs in wholesale markets could add much more v Enabling vacahon mode can reduce standby losses and energy consumphon $4,000 $3,500 $1,760 $29 $36 $3,641 v Charging during windy, low- load hours can avoid renewable curtailment Million $/year $3,000 $2,500 $2,000 $1,500 $1,000 $1,397 $419 v The frequency regulahon market is currently on the order of $ M/ year, and GIWH can technically parhcipate, but the market is thin $500 $0 Avoided generation capacity Avoided T&D Energy arbitrage Energy savings Renewable integration Total Source: RMI analysis

18 4 The carbon impacts of GIWH

19 We estimate electric domestic hot water is 19 responsible for ~74 million tonnes/year of CO 2 Water heater-caused emissions are concentrated in the Midwest and Southeast due to grid composition and electric DHW adoption rates WECC& ERCOT& SPP& FRCC& SERC& MRO& RFC& NPCC& million#electric#dhw#units# 16! 14! 12! 10! 8! 6! 4! 2! Source: RMI analysis of: EIA RECS; Graff- Zivin et al (2014); NEEA RBSA 0! ERCOT! FRCC! MRO! NPCC! RFC! SERC! SPP! WECC!!20!!!15!!!10!!!5!!!"!!!! lb#co2#/#unit#/#day#

20 Low-cost versus low-emissions heating strategies have widely different CO 2 impacts If all water were heated at night, emissions increase by 13%. If all water were heated during the lowest-emission hours, emissions fall 25%, saving ~18 million tonnes CO 2 /year. 20 million&tonnes&co2/year&!30!!!25!!!20!!!15!!!10!!!5!!!"!!!! ERCOT! FRCC! MRO! NPCC! RFC! SERC! SPP! WECC! Source: RMI analysis of: EIA RECS; Graff- Zivin et al (2014); NEEA RBSA Nigh6me!hea:ng! Min!CO2!hea:ng!

21 5 Implications & opportunities

22 Many actors can capture this value Utilities, GIWH manufacturers, installers, solar companies, aggregators, and customers themselves can all capture a piece of this $3.6 billion/year prize 22 Successful business models will... v Capture more than one source of value from GIWH deployment Compe88on is not limited to tradi8onal players v Rely on standardizahon and scale to reduce costs v Provide customers things that they want, not just services that the grid values

23 Thank you Contact: Mark Dyson,