Originally published in Texas Tribune here.
Legislation Aims to Boost Electricity Conservation
by Jim Malewitz
March 31, 2015
In January of 2014, a bone-chilling “polar vortex” swept across much of the country and knocked two North Texas power plants off-line just as residents were turning on their lights and cranking up the heat. The simultaneous surge in electricity demand and drop in supply put Texas on the brink of rolling blackouts.
But grid operators leaned on a number of tools to avoid that last-ditch option. That included tapping demand response — programs under which utilities reward customers who agree to power down air conditioners, heaters, pool pumps or other electricity guzzlers when demand peaks. In a 40-minute period, the strategy – pooling those voluntary power cuts – saved more than 600 megawatts of electricity, according to the Electric Reliability Council of Texas (ERCOT).
It wasn’t the first time demand response helped keep the lights on during a cold winter day or in the scorching summer, and the strategy's use is growing. But experts say Texas hasn’t yet come close to realizing the tool’s full ability to cut electricity use and consumer utility bills.
Some state lawmakers are trying to speed up that timeline.
“It’s a way of saving electricity and saving a great deal in terms of cost,” Rep. Sylvester Turner, D-Houston, said last week at a hearing on House Bill 3343, his proposal to reduce hurdles for demand response.
Sen. Kirk Watson, D-Austin, has sponsored a companion bill in the Senate.
But those proposals face opposition from several industry groups, including those representing electric generators and retail electric providers. Those companies – some of which stand to lose money when Texans use less power – say demand response doesn’t need a kick-start from the legislature to flourish.
“The market is driving this, and it really doesn’t need any intervention,” said John Fainter, executive director of the Association of Electric Companies of Texas.
The most recently circulated version of Turner’s bill would declare the Legislature’s intent to “eliminate unnecessary barriers to demand response participation” and maximize its use throughout the state. The legislation would also require regulators to study the programs every two years.
“Demand response is part of the energy portfolio, and we need all of these resources as we move forward,” said Suzanne Bertin, director of regulatory affairs for EnerNOC, a demand response service provider and member of a recently formed coalition that supports the proposals. “Let us all avoid involuntary blackouts across the grid.”
Such programs – which typically rely on high-tech thermostats and meters – are gaining momentum, particularly with industrial power users. But the programs have yet to reach their potential amid struggles to break into the large residential market.
About 12 percent of ERCOT’s retail electric market has some kind of demand response incentive, according to Paul Wattles, a senior analyst for the grid operator. Just a few years ago that percentage was near zero.
But some experts say use could be far higher.
“I think Texas could double or triple how much it saves through demand response fairly easily,” said Jon Wellinghoff, former chairman of the Federal Energy Regulatory Commission.
In 2013, demand response reduced just 2.9 percent of peak electricity demands on the ERCOT grid, which covers about 85 percent of the state, according a recent federal report, the lowest among U.S. grids and less than half the average nationwide.
A 2012 report by the Brattle Group, a consulting firm, said Texas, if it took steps to remove barriers to expansion, could shave as much as 15 percent of its peak energy demands.
One of the largest obstacles to the tool’s widespread growth, advocates say, is that ERCOT does not allow demand response companies to trade in its day-ahead electricity market.
“It’s good for consumers in two ways,” Wellinghoff said of opening up the market. “It allows them to participate and get money for that. And then by doing that, it lowers wholesale prices for everybody.”
Generators, retail electric providers and other industry groups say they support bolstering demand response — but not through widespread market changes.
“Customers will want it and be given the opportunity to participate,” Elizabeth Killinger, president of NRG Retail and Reliant Energy Retail Holdings, said in an interview. “I think the market will fulfill what we need.”
Disclosure: The Association of Electric Companies of Texas is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.