Shifting the air conditioning load can reduce peak power demand.
by Greg Tropsa
In the U.S., peak electricity demand is expected to increase 18 percent over the next decade, while generation capacity at peak times is expected to increase by only 8.4 percent, according to a North American Electric Reliability Corp. forecast. In response to this trend, utilities and energy consumers have a common goal: identify ways to reduce power consumption during peak times to avoid escalating costs and demand constraints that can lead to power interruptions.
The force driving our peak power demand is something that has become fundamental to both residential and commercial buildings—air conditioning. During peak summer hours, cooling can account for 50 percent to 70 percent of total electricity demand, making air conditioners the unquestionable culprits of the peaking problem.
Throughout the majority of the year, utilities have plenty of electricity. In fact, nearly half of the nation’s generation assets sit fallow most of the time. During heat storms, however, this reserve capacity is tested when daytime demand surges. In July 2006, the California ISO experienced a heat wave that produced new record peaks and temperatures across the state. The all-time high peak reached 50,270 MW on July 24, 2006, with operating reserves dropping below 5 percent, according to CAISO data, and spot market prices rose to $400/MWh. Demand was not projected to reach this level until 2011, but peak demand grew 10.7 percent from 2005 to 2006 alone.
As spikes in demand create immediate stress on the grid, reserve capacity must be there to call upon whenever demand spikes. The increasing imbalance between peak and baseline loads drives reductions in overall capacity utilization, as numerous peaking plants lie idle except for approximately 400 hours of summertime demand for which they are critical. In the New England area, annual capacity factors continue to drop from an average of 67 percent in the ’80s to just over 54 percent in 2007. If unchecked, asset utilization is expected to drop to about 52 percent.
As the imbalance between peak and off-peak demand continues to grow, peak generation capacity must outpace demand by as much as 12.5 percent to maintain safe operating margins. The cost of adding increasing amounts of peak capacity puts strong upward pressure on prices year round although resources are only utilized for a tiny fraction of the year. Higher prices are not, however, slowing peak demand. Even with time-of use-rates, commercial cooling is highly price inelastic due to its core role in customer comfort and employee productivity.
As a result, the market for energy efficiency and demand response has grown significantly over the past few years. Demand response, or curtailment, is a useful form of insurance for a few ultra critical hours per year, but it doesn’t mitigate the underlying problem driving peak load growth. Energy efficiency has proven to be a persistent and cost-effective measure that reduces overall energy consumption, but most measures aren’t necessarily coincident with the problematic peak demand associated with heat waves.
Perhaps the simplest route is to solve the problem at its core with energy storage technologies that permanently shift the air conditioning load of buildings. One such storage technology, thermal energy storage (TES), simply generates chilled water or ice at night and the ice is used to cool the building during the day.
While the market for TES is limited to about 2 percent of all buildings, these large city–center buildings and campuses consume a whopping 50 percent of all building cooling energy.
To address the cooling demand of the remaining 98 percent of all buildings, a number of utilities, including PG&E and Southern California Edison, have tapped into the technology for a solution that permanently shifts cooling loads of small- to mid-scale buildings, combining efficient energy storage with conventional rooftop air conditioning equipment.
The combined wide-scale deployment of thermal storage and hybrid cooling products has the potential to forever transform the peak electricity market by eliminating the problem at its source. It’s easy to see why cost–effective, energy efficient, distributed energy storage is a breakthrough approach that is gaining the favor of regulators nationwide.
In 2007, the California Public Utilities Commission found that permanent load–shifting technologies deliver a number of benefits to both utilities and energy consumers, including reduced transmission and distribution losses, improved reliability and reduced emissions from utilizing more efficient baseload generation. According to the CPUC, PG&E’s TES programs are expected to shift a total of 2.66 MW in 2008 and 4.75 MW in 2009.
Economics aside, there are environmental benefits associated with permanent load shifting. Studies in the New England area indicate that ozone exceedance days are most likely to occur when temperatures rise above 90 F, when air conditioning demand calls peak power plants online. An E3 Ventures study found that cooling energy storage has the potential to dramatically reduce air pollutant emissions by reducing overall electricity consumption and by reducing the use of relatively high–emitting generation sources that are called into service on the hottest summer days. Depending on the base generation mix, NOx emissions can be reduced by 56 percent and CO2 by 40 percent, according to the study.
Energy storage also has a role in helping utilities meet their mandated renewable energy portfolio goals, by improving the viability of intermittent solar and wind generation resources. Storage helps to sync intermittent generation with peak power demand, improving the economics and usefulness of renewable energy.
The combination of demand response, energy efficiency, and the permanent load shifting of building cooling energy is a trifecta that will deliver true ratepayer relief. It is good for the utility, good for the customer and good for the environment.
Greg Tropsa is the president of Ice Energy Inc. He more than 20 years of experience in domestic and international business. Before Ice Energy, he founded MegaEnergy Inc. and led strategic turnarounds at Honeywell’s Cincinnati industrial services branch and Fort Collins Asset management unit. Tropsa also served on the board of directors at Cutler Hammer/Eaton Corporation.