Week #5 – Uncovering the Gross Up

Posted on by Kelly Yazdani

At Voltus, we talk to hundreds of energy decision makers every day from dozens of industries in every major energy market. Sometimes these organizations are learning about the benefits of demand response for the first time. At other times, we’re connecting with businesses long-steeped in demand response program participation. Our message, regardless of experience, is that it is possible for customers to double their demand response dollars, and one of the easiest ways to contribute to this goal is giving demand response customers their fair share of the “gross-up.”

What the heck is the gross-up!?! 

So glad you asked.

The gross-up is industry-speak for the transmission loss factor and operating reserve margin that is applied to electricity demand in wholesale power markets. These concepts impact the value of demand response resources in these same markets.

The bottom line: if you’re not being paid your portion of the gross-up you could be losing 5% to 40% of your demand response dollars depending on year and market.

Let’s look at an example to understand the concept clearly.

You have 1,000 kW of demand response capability at your facility. You contract with a demand response provider to get 65% of the revenue earned from enrolling your load curtailment in the ISO-NE market. At $7.03/kW-month you would expect the gross revenue from the 1,000 kW to be worth $84,360 for power year 2019, which at 65% nets your business $54,834. Pretty good, huh? Yet, your demand response capability is actually more valuable than 1,000 kWs and here’s why.

When power is generated by a natural gas power plant, 7% of that power is lost on average over transmission lines (a 100 MW generator only delivers about 93 MWs of usable electricity to the point of consumption). Additionally, that natural gas power plant isn’t 100% reliable throughout the year, which requires the grid operator to buy, on behalf of the market, what’s called “operating reserve.” Operating reserve averages about 15% of generation capacity (that 100 MW generator requires the grid operator to purchase 115 total MWs of generation). These transmission line losses and operating reserves add up, amounting to an additional 22% in this example. 

Demand response capacity behaves differently though since it’s created at the point of consumption. This capacity doesn’t experience transmission line losses and doesn’t require operating reserves. As a result, the grid operator in our example would “gross up” the value of your 1,000 kW demand response capacity by that same 22%. The demand response provider is actually credited with 1,220 kW (1,000 kW plus the 220 kW gross up). In many cases, demand response providers only pay the customer 65% of the “nameplate capacity” (the original 1,000 kW). The additional $18,559 of value that comes from the 220 kW gross-up goes entirely to the demand response provider. 

You can do the math to determine the true revenue share, but in this example it amounts to 53% to the customer, not the expected 65%.

Gross-up values can vary significantly by wholesale market, the particular power year, and the customer’s transmission level service. Regardless of the exact value, the gross up is money that shouldn’t be left on the table. If you’ve been doing demand response for a long time and you’re looking to maximize cash from your operational flexibility, ask your demand response provider for your share of the gross up.

At Voltus, we value transparency above all else. Interested in working with us or learning more about the many ways you can double your demand response dollars? Email us at info@voltus.co or chat with us below.

Week #4 – Flushing out Phantom Megawatts

Posted on by Kelly Yazdani

In the early days of demand response, as grid operators and utilities sought to unlock the potential of this resource, program requirements were understandably light. Advance notice was often day ahead, dispatch windows were Monday through Friday 9:00 p.m. to 5:00 p.m., hours of dispatch were limited to 20 hours per year, etc., and rarely was demand response dispatched for anything but an annual test. With such a low barrier of entry, customers signed up in droves. The net effect was quite remarkable as demand response became the fastest growing capacity resource in the US since 2000 with the exception of wind.

As demand response became a larger percentage of the resource stack, grid operators started dispatching these resources regularly, deliberately, and at increasing frequency to deliver very valuable capacity, energy, and ancillary services. A single annual test became a thing of the past. Customers are now being called on to curtail load or transfer demand to behind-the-meter assets many times during the year. Under-performing “phantom megawatts” that flew under the radar in the early days of demand response can no longer meet market requirements.

Demand response is needed more than ever to deliver on-peak capacity, to help tamp down energy prices during grid constraints, and to help balance the grid 24/7/365 in real-time through frequently dispatched operating reserves programs (e.g. PJM Sync Reserves). As a result of more stringent program requirements, the value of demand response is also on the rise. For the strongest-performing demand response resources, capable of adapting to increased demand response requirements, this means more cash for curtailment, often more than double what was available in the past.

Demand response has come of age. If your business is ready to truly offer up your operational flexibility to the grid (and make cash in the process), email us or chat with us by clicking below.

A Response to COVID-19.

Posted on by greggdixon@voltus.co

All,

Dealing with the reality of a global pandemic is new for all of us. We don’t know the full business impact of COVID-19, but we do know it’s negative, certainly in the short term and possibly the long-term.

A business downturn results in two things:

  1. Organizations look to save cash.
  2. Organizations have more operational flexibility as manufacturing lines aren’t running at full capacity, offices aren’t fully staffed as people stick closer to home, hotels aren’t filling up, etc.

At Voltus, we are in a unique position to help you prepare for this downturn. Demand response programs turn this unforeseen operational flexibility into cash for your business.

We make it incredibly simple to enroll and get started in these programs with a simple one-page agreement. There are no out of pocket costs. There are no risks. Our technology is installed by your own electricians, keeping your team working. The entire process is remote.

Demand response is a small but important part of the solution to the challenges ahead of us. Join us in keeping our economy strong by turning COVID-19 on its head.

Stay healthy and safe,

 

 

 

Gregg Dixon
Voltus, Inc.
CEO

 

 

 

Week #3 – Incremental Auction Sell-Off (Don’t Get Caught Holding an Empty Bag of Cash)

Posted on by Kelly Yazdani

Using a bit of provocation, last month we declared that PJM Demand Response is Dead! The caveat here is that PJM Demand Response (as you’ve known it) is Dead, with changes to the Emergency Load Response Program (ELRP) that make it much more difficult for customers to perform and, ultimately, earn cash (e.g., a 30 minute response with 365/24/7 availability doesn’t work for most). 

Our webinar, outlining these changes, and highlighting our out-of-market PeakSaver Program, occurred a few weeks before the close of PJM’s 3rd incremental auction (IA). These incremental auctions give capacity providers, who made commitments to provide capacity three years ago, the opportunity to sell their positions back to the market. Given the changes to ELRP, we had a company-wide hypothesis: curtailment service providers (CSPs) will offer thousands of megawatts back to the market during the 3rd IA, ultimately mitigating their risk of portfolio underperformance under stringent new “capacity performance” program requirements.

There is an important phrase in that last sentence though – mitigating their risk. If a demand response provider unloads their position, what happens to the customer who is expecting to get paid for ELRP program participation in 2020? When the CSP liquidates their position in an IA, the CSP is paid, but the customer’s obligation to perform, and their earning potential, is gone. 

Last week, the results were posted and our theory held true: 4,500 MWs of generation capacity, a large portion of which represents demand response, was sold back to the market, dumping many CSPs’ commitments to deliver for the first full “capacity performance” year (starting 6/1/2020). This capacity offloading is a clear sign that the new capacity performance rules prove too risky and costly for many in-market demand response MWs. Commercial and industrial customers who were expecting to generate revenue for the upcoming power year may find that their position was sold out. The CSP will pocket 100% of the profit, leaving the customer with nothing.

What now? Given these results, CSPs are scrambling to figure out exactly how to maximize the profitability of their portfolio and will only retain the best performing customers into the new power year. Don’t get caught holding the bag. All customers should contact their CSP and get a written confirmation of their position for the upcoming summer. 

Most importantly, sign up for out-of-market demand response. Voltus’s PeakSaver program can be stacked with in-market programs and provide a clear path to cash this summer. Because the program is market independent, you can enroll at any time, doubling your demand response dollars for the coming year. PeakSaver provides a no cost, no risk approach to demand response that proves far more reliable than many in-market programs.

The only bag you should be holding is the one filled with money. Contact us at info@voltus.co or chat with us by clicking on the icon on the bottom right of your screen to get yours.

This post is part of multi-week series dedicated to “Getting the Most Cheese from Demand Response.” Check out Week 1 on Eliminating Capacity Charges and Week 2 on In-Market versus Out-of-Market Demand Response.

One Woman’s Journey to Bright, Gritty, and Good

Posted on by Kelly Yazdani

This post is in honor of International Women’s Day, as the women of the world find their passions, strike the balance, and write their own stories. This is my story.

Last month I joined Voltus as the Director of Marketing. Just like the virtual power plants Voltus manages, the Voltus team is entirely virtual, meaning we #workfromanywhere. The result is a surprisingly close-knit group of Voltans and a company culture ruled by trust and flexibility. As a result, I’m living my dream, working hard at a job I love in a fast-paced environment with the smartest people I’ve ever met, while balancing equally demanding personal roles of wife and mother. Last week, I popped over to my daughter’s school and read a book to her class before jumping back on a work call to plan a conference in NYC. I work until dinnertime and then walk upstairs to eat with my family. I can easily sign online seconds after putting my kids to bed to finish a task.

Although this position is my current state, my professional journey has been atypical to say the least. After graduating top of my class with a degree in Chemistry from Dartmouth at 21, I rolled out of college with a six figure, 80+ hour per week job in the male dominated energy trading industry. I had the proverbial world at my feet, one of three women in an otherwise all male company. I worked hard. I did not play hard. I worked harder. Then the unthinkable happened. At 24, I got pregnant with my first child. 

The backlash was intense to say the least. Like out of a Mad Men clip, I had a male colleague say to 6 month pregnant me: 

Shouldn’t you be home, barefoot and pregnant, where you belong?

I’d like to say that the comments stopped with one chauvinistic co-worker, but the comments were not limited to the often cold corporate world, nor were they limited to men. Well meaning female family members and friends lamented my lost potential and how my life would never be the same. 

Successful women I knew looked at me with pity, like I had violated an oath I made to my generation, to educated women everywhere. It quickly became clear that balance would not be achieved at my 80 hour per week job. I opted to take some time off and reevaluate. A month later my son was born and the next unthinkable thing happened: I didn’t want to go back to work. 

The sweetness of motherhood didn’t stop the aching insecurity that I was doing things backwards, misallocating the prime of my life. Despite these feelings, I dove into momming full force. Four and a half years and three kids later, my home and heart were full, but my brain was ready for a change.

There is no way you are going to find a good job after taking time off.

Wary of needing to explain the gap in my resume, I started a business with a friend and jumped into the world of entrepreneurship, e-commerce, and marketing and eventually landed at a more established start-up doing similar work. Something was still missing though. I was the only person at my company with kids and, to be frank, I yearned to work with other parents. Sometimes school gets canceled. Sometimes children get sick. I always felt awkward needing to explain those things to a group of thirty somethings that, despite good intentions, couldn’t always relate. 

In October 2019, a solution fell out of the sky in the form of a LinkedIn message from Dana Guernsey, VP of Product and Energy Markets at Voltus. Dana and I had been introduced by a mutual friend several years back. We shared an interest in energy and a college alma mater. Dana’s message was clear: Voltus was hiring. As I learned more about the company, such as their commitment to bringing more women into Cleantech (women currently constitute 40% of Voltus’s workforce and rising), applying and ultimately accepting the position was a no brainer. Voltus is an incredible group of bright, gritty, and good women and men and includes the strongest group of kick butt working moms and single parents that I’ve ever met. The values that brought Voltus to life have created a system where people, regardless of personal circumstance, can thrive. My only hope is that other organizations can emulate Voltus’s model, allowing people to make a positive impact on our planet while continuing to prioritize the things they hold dear. I’m proud to be part of the #womenofvoltus. Who else wants to join us?

Interested in learning more about current opportunities at Voltus? Click here.

Week #2 – Getting the Most Cheese from Demand Response: Unlocking the Value of In-Market and Out-of-Market DR Programs

Posted on by greggdixon@voltus.co

Last week we kicked off our multi-week Vlog series dedicated to unmasking some of the little known tips and tricks of the demand response market.

We started by explaining how easy it is to eliminate capacity charges through Voltus’s Peak Saver program. Peak Saver is an out-of-market, peak shaving program that leverages Voltus’s real-time, cloud-based technology platform. Peak Saver has the potential to more than double your demand response dollars when combined with traditional in-market programs. Who doesn’t like more cash?

But wait … in-market? Out-of-market? What is the difference between these approaches to turning operational flexibility into cash? Read on to learn more.

#2 – In-Market vs. Out-of-market Demand Response

When most people think demand response (DR), they think FERC-regulated programs that only exist in the wholesale energy markets of the US and Canada. ISO-NE, NYISO, PJM, MISO, ERCOT, SPP, and CAISO, as well as IESO and AESO in Canada, have demand response programs that focus on procuring reliable generation capacity, as well energy and ancillary services. Each market has its own variations, but all “in-market” demand response programs are subject to strict market-specific rules and a decent dose of regulatory risk. These programs are constantly evolving, but offer significant cash payments to market participants who commit their negawatts to meet program criteria.

Voltus has created “out-of-market” Peak Saver programs, bringing cash savings opportunities to every region in the US and Canada. Peak Saver leverages VoltApp, our real-time energy technology platform, to predict peak hours, eliminate capacity charges, and lower electric bills by up to 30%. Because there are no strictly defined market rules, there is also no barrier to entry for these programs. Commercial, industrial, and institutional customers can stack in-market and out-of-market demand response programs increasing their net earnings.

To demonstrate the relative value of in-market and out-of-market DR, let’s break it down by looking at the the value of 1 MW of curtailment in AEP Ohio. In the chart below, “in-market” opportunities – Emergency Load Response Program (ELRP), Synchronized Reserves Program (SRP), and the Gross-up (more on that in coming weeks) – represented in green, account for only 28% of the potential value of that MW of curtailment. Voltus’s “out-of-market” PJM program, represented in blue, allows consumers to not only reduce their generation capacity charges (the other side of the coin of in-market demand response revenue) but also transmission capacity charges. In this example, the out-of-market demand response opportunities account for 72% of the value, more than doubling this company’s net demand response dollars.

There are some important trade-offs to consider when optimizing the cash earned from these approaches. First, an energy consumer can benefit from implementing both of these approaches, but typically for only one season. In-market programs limit a customer’s ability to enroll by their peak load contribution value. The value of your peak load contribution is reduced when you participate in out-of-market peak shaving programs, eroding your ability to benefit from the in-market program.

Operationally speaking, in-market demand response programs have a different operational profile than out-of-market programs, summarized in the table below comparing PJM’s ELRP program with Peak Saver. In-market programs historically require fewer hours of annual response. However, with substantially more challenging performance requirements that are fully implemented in 2020, PJM’s ELRP program requires a 24/7/365 response requirement with advance notice of 30 minutes and an unlimited number of potential response hours. Of course, it’s very difficult to predict just how much PJM’s ELRP program will be called under new program requirements. On the other hand, out-of-market demand response in PJM likely requires more actual response hours each year, but the predictability of program requirements is clearer. With about 30 hours of highly predictable curtailment coupled with very clear and easy operational requirements, capturing out-of-market demand response value is often a better approach than in-market demand response alone.

There are additional nuances to comparing the two approaches (out-of-market vs. in-market) and stacking multiple demand response value streams (up to seven distinct programs in Pennsylvania, for instance) requires even deeper consideration. We can help you navigate the host of options. Chat with us below or email us at info@voltus.co

#3 – Incremental Auction Sell-Off

How to avoid absorbing the in-market risk from your demand response service provider … more to come on Thursday, 3/12.

Week #1 – Getting the Most Cheese from Demand Response: Eliminating Capacity Charges

Posted on by greggdixon@voltus.co

A few weeks back we dropped somewhat of a bombshell by declaring that Demand Response in PJM, as You Know It, Is Dead. Of course, this was meant to be a bit provocative with the goal of drawing attention to a better way of capturing the value of demand response in the rapidly evolving and controversial PJM market. During our webinar we explained why demand response in PJM is, in fact, more valuable than ever for commercial and industrial loads that leverage Voltus’s out-of-market DR program – Peak Saver – in addition to traditional in-market programs. Our webinar stirred dozens of questions, many of which we didn’t have time to cover in full detail during the webinar.

This multi-week Vlog series is dedicated to answering those questions with a bit more detail, while extending many of the concepts covered in the webinar into other markets. The goal here, as always, is to help customers turn their operational flexibility into the most cash possible wherever they have operations.

#1 – Eliminating Capacity Charges

Did you know that about 30% of your annual electricity bill comes from the electricity you use during one to five peak hours of the year? Generation and transmission demand or capacity charges (dubbed – TransCap and GenCap) are not only on the rise, but are accounting for a larger portion of large energy consumers’ electric bills over time, which means there’s a growing opportunity to reduce expense.

If you could reduce or eliminate your load during those same peak hours, you can eliminate or reduce a significant portion of your annual electric bill. Put differently, would you be willing to reduce electricity demand for 0.5% of the hours of the year to potentially reduce your annual energy bill by 30%? If the answer is, “Yes!” then we can show you how.

Voltus’s Peak Saver technology platform (VoltApp) helps to eliminate capacity charges by predicting peak load hours, instructing customers to curtail during those hours, measuring your load reduction in real-time, and verifying the savings on your electricity bill to ensure that the savings are captured. We manage this program no differently than a typical demand response program that you may have part.

Peak shaving is often operationally better aligned with a customer’s ability to curtail load or use behind-the-meter assets like onsite generation. Combining traditional in-market demand response programs with our out-of-market Peak Saver program has been proven to more than double the dollars a customer gets from demand response.

Interested in learning more? Chat with us below or email us at info@voltus.co

#2 – In-Market vs. Out-of-Market Demand Response

We’ll delve deeper into these terms and provide clarity on what programs exist in different geographic regions . . . stay tuned for the details on Thursday, 3/5!

Webinar: PJM Demand Response (as you know it) is Dead. Now what?

Posted on by greggdixon@voltus.co

Demand Response in PJM, as you’ve known it, is dead.

Now that PJM requires DR resources to respond in 30 minutes on a 24/7/365 basis, customers are abandoning the program. So, where are these flexible loads going?

Join energy experts Dana Guernsey and Todd Krause, as well as a special guest message from Jon Wellinghoff, former FERC Chairman, in this lively replay of our popular webinar. Ready to double your demand response dollars in 2020 and beyond? Join us!

Register Now

PJM Demand Response is Dead. Now what?

Posted on by greggdixon@voltus.co

Demand Response in PJM, as you’ve known it, is dead.

Now that PJM requires DR resources to respond in 30 minutes on a 24/7/365 basis, customers are abandoning the program. So, where are these flexible loads going?

There’s a new, smart approach that doubles the cash earned for your operational flexibility in 2020 and beyond. Added bonus – there’s no risk or cost to access these financial benefits!

Join Todd Krause and Dana Guernsey, the leading PJM DR experts, as well as special guest Jon Wellinghoff, CEO, GridPolicy, Inc. & Former Chairman of the Federal Energy Regulatory Commission, and hundreds of the top commercial and industrial energy management practitioners in a lively discussion to learn more about new DR opportunities!

Register Now