Greentech Media: How Smart Grid and Demand Response Could Fit Into the Clean Power Plan

Pathway to credits for CO2-cutting grid and demand-side tech—and a boost to solar-wind integration enablers

by Jeff St. John

Less dirty energy, more clean energy. These are the fundamental drivers of the Clean Power Plan’s push to reduce greenhouse gas (GHG) emissions, and while that’s a potential boon to wind and solar power, it could also provide a boost to technologies that can help integrate that renewable energy into the grid as a means to its end.

But tucked inside the Obama administration’s groundbreaking greenhouse gas reduction scheme are some even more significant opportunities for smart grid technologies, not just to indirectly boost the grid’s green power capacity, but to actively serve as a compliance tool for states’ carbon-cutting and carbon-trading plans.

Unlike previous draft versions of the plan, the final plan released by the Environmental Protection Agency last week specifically calls out technologies like energy storage and demand response, which can help “facilitate” the big boost in intermittent wind and solar power that’s likely to be a part of many states’ compliance plans.

But the current version of the CPP also designates a specific role for grid technologies that can help reduce the net amount of power being generated from carbon-emitting, fossil-fuel-fired power plants. And under certain compliance options available to states, those reductions could translate into “emission rate credits,” or ERCs, that power plant operators could implement themselves or buy to offset their GHG reduction burdens.

“There are these technologies and services that can specifically be part of a plan as a compliance measure,” Matt Stanberry, vice president of market development at business advocacy group Advanced Energy Economy, said in an interview this week. “The basic rule of thumb is, they’ve got to reduce net megawatt-hours of generation at affected units,” that is, coal- and natural-gas-fired power plants.

ERCs come up in multiple places throughout the final rule and proposed federal plan, he said. (For readers interested in delving into the subject in detail, a good place to start is on page 1,260 of the CPP [PDF], which explains how ERCs are used for compliance, and on page 1,268, which begins the discussion of ERCs for renewable energy, energy efficiency, and other advanced energy technologies, he said.)

Broadly speaking, these technologies fall into two main classes, he said. The first are those that directly affect the transmission and distribution portion of the grid. “EPA explicitly recognizes as compliance measures any T&D options that reduce line losses, like volt/VAR optimization (VVO), or that reduce end-use demand, like conservation voltage reduction (CVR),” he said.

VVO and CVR are technologies that fine-tune voltages to save energy and reduce peak-driven strains on the grid. They’ve been around for decades, but in recent years have been boosted by technology advances, whether it’s the proliferation of smart meters that can deliver pinpoint voltage information at the edges of the grid, or power electronics that can directly control voltages on individual circuits.

CVR providers have made note of this new opportunity under the CPP. Scott DePasquale, CEO of Utilidata, a company that’s providing CVR technology for utilities such as AEP and National Grid, noted in a recent blog post that a study found that VVO could save Michigan about $110 million in CPP compliance costs, for example. At the transmission grid scale, startup Smart Wires is deploying devices that can help utilities constrict or redirect power flows in grid congestion conditions, to increase the amount of power that can be delivered from far-off wind and solar farms to where it’s needed.

On the demand side of the equation, the CPP does “talk about demand response as a reliability tool,” Stanberry said. “They don’t talk about demand response explicitly as a compliance mechanism, but under the demand-side management discussion, to the extent that demand response produces that reduction in net megawatt-hours, it can qualify.”

That’s a significant change from draft versions of the CPP, which considered demand response as merely shifting energy consumption, rather than directly reducing it as energy efficiency does, he noted. Even so, just how today’s panoply of demand-response activities might end up translating into verifiable reductions in carbon emissions is still very much an open question.

Of course, all of this is dependent on how individual states decide to create their CPP compliance programs — whether they choose mass-based or rate-based options, whether they decide to join multi-state compliance regimes or go it on their own, and other choices outlined in the 1,560-page final rule.

As Dan Delurey, CEO of the Association for Demand Response and Smart Grid, noted, “This is not to say that demand response and smart grid get any kind of preferential treatment in the CPP. All options will have to compete against each other to get into a state compliance plan.”

“But it does clearly put those options on the menu for states, and that is good for those in the DR and smart grid community.  And, through the new value that is created via credits for CO2 reductions, it also puts one more benefit on the pile when DR and smart grid projects are being evaluated for cost-effectiveness,” he added.

It could also open up a wide array of opportunities for investing in demand-side management programs and smart-grid technologies, Stanberry noted. That could come from utilities trying to reduce the compliance burden for their fossil-fuel-fired power plants. Or it could come from third parties investing in technologies that can provide emission reduction credits to those power plants.

“A utility might decide, ‘I want to do T&D work on my system,’” he said. “Or they might decide, ‘I want to take advantage of all the emission-reduction opportunities out there; I’m going to buy from the ERC market.’”

Original article.