Efficiency and demand flexibility: the newest energy sources on the block

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With electricity bills in Australia on the rise, the supply side of the energy market – and how to particularly measure that to drive down energy prices – has dominated public debate. However, there has been relatively little focus on how to drive down bills by better managing energy demand.

Traditional energy efficiency – driving down bills by using less energy to deliver the same or better outcome is well understood. But it is also possible to drive down energy prices by treating energy efficiency and demand flexibility as capacity, which means consumers can benefit from the reduced need to expand our energy networks and generation capacity.

We spoke to Matt Golden, CEO of Open Energy Efficiency, to learn more about some of his groundbreaking work in this space.

Treating demand flexibility as a resource

There is a revolution underway in the way that energy efficiency is being talked about globally. In places like California and Germany, it is being seen as a crucial tool to deliver energy to services to consumers at least cost. Indeed California native Matt Golden argues that energy efficiency and demand flexibility should be treated the same way we treat our other resources, like generators and batteries.

“We don’t want to change energy markets, we just want to enable demand flexibility to enter those markets on an equal footing as other resources. The effect it should have is that we can balance the grid and achieve our removal goals and de-carbonisation goals at lower costs.”

when we talk about demand flexibility, we are looking at the systematic process of moving energy demand away from periods when power is expensive, dirty or constrained, and moving it to periods when energy is abundant, particularly low peak times and times when renewable sources are generating considerable power.

The result is that the grid is optimised, and prices are kept down. According to Mr Golden, this is exactly the kind of behaviour we should be rewarding in the grid, and the best way to do this is by viewing this “shifted” demand as a resource in it’s own right.

“When you measure demand on an hourly basis, and locationally, it starts to behave like a power plant, or a battery bank, or a solar farm, or a dispatchable demand response program,” said Mr Golden.

And if it can be measured like the input from a solar farm or any other resource, why not monetise that contribution in a similar way?

Accurate measurement is key

Mr Golden said the key thing that enables demand flexibility to act as a resource is the ability to use electricity market information to measure not just the kilowatt hour savings by month or by year, but to measure the hourly impact of shifting demand.

“The first step toward energy efficiency as a market is agreement on how to measure a standard unit of savings. While it can be complex to measure efficiency gains on individual buildings, by metering portfolios of similar project assets, it’s possible to calculate aggregated savings with a very high degree of confidence,” Mr Golden said.

“Investing in efficiency as a portfolio of assets, rather than as individual projects, results in consistent returns, washing out outliers and managing the uncertainty of the individual building counterfactuals.”

According to Mr Golden, central to the process is creating flexibility so that we can balance renewables, reduce grid infrastructure investments, and keep the lights on at the lowest possible cost to ratepayers.

Adapting to change

To continue to foster an environment where energy efficiency is valued, Mr Golden said the industry needs to evolve to change the ultimate focus for utilities.

“In the US our entire system is set up to encourage utilities to drill holes in the ground and build power plants, which is actually not good any more – so there is some restructuring going on,” Mr Golden said.

“On the efficiency side of the equation it’s a transition away from utility-centric programs, where you’re typically picking technology winners, deciding how we expect customers to purchase these things and paying in advance. The reality is, markets do not work this way.

“What we need to do is introduce markets and market forces into energy efficiency. That means is agreeing on how we measure the impact – and it needs to be open source technology available to all parties, it can’t be a black box. From there it’s about setting up systems that encourage market competition and paid for outcomes.

“If you can affect demand in a way that is valuable, you get paid for that in a way that is calculated over time.

“That sends the right signal into the market, it says that the way you’re going to make the most money and acquire the most customers is to figure out how to sell things to customers they actually want, in the way they want to buy it, while optimising what it is you’re delivering to maximise the climate and mutual benefit.”

Changing the energy climate

Californian utilities, regulators, aggregators, evaluators and Mr Golden’s organisation, Open Energy Efficiency, have developed set of publicly available standard methods – called Caltrack – which define how to take meter data and turn it into energy saving calculations that can be relied on.

“We’ve also developed something called the OpenEEmeter, which is an open source engine that runs those methods, that’s available to any party.

“The reason we’ve built these is that you have to have a product, but you need weights and measures before you can have a market.

“Our goal as a company is to enable much larger scale investment in energy efficiency. We have developed that within the market, and then we provide that as a service to utilities and regulators on one hand, and the market on the other.

“We work for most of the major utilities in California, and many of the states in the US, providing the ability to track the performance of their electrification and energy efficiency programs.”

Open Energy Efficiency also works with a range of different companies, including program owners, IOT vendors, contractors and finance companies, providing them with many tools to track their target customers and quantify risk – things you need to respond to the price signal.

Efficiency’s place in the global carbon footprint

The International Energy Agency has found that energy efficiency is doing much of the heavy lifting when it comes to carbon abatement, however the global carbon footprint is still rapidly growing. Mr Golden says for efficiency’s full abatement potential to be realised, more acccurate carbon measurements will be important.

“In order to measure the impact of energy efficiency, you need to know when and where it happens. The challenge is that saving kilowatt hours of energy does not necessarily reduce carbon, it has to be done in a period of time that really matters.

It’s totally possible in places like California to reduce a lot of energy and have no impact on carbon, because we’re running negative energy pricing and solar on almost a daily basis.”

Mr Golden also believes that for efficiency to have a major impact on carbon emissions, it needs to be done at scale.

“If we want energy efficiency to have a real role in this transition, if you want to be able to access the large-scale capital that we need to actually scale to meet the challenge, we have to break free of the paradigm and become a real resource. More importantly, have the right pricing in the market, so that we’re not just making things more efficient, we’re making them more efficient without carbon.”

Matt Golden will be speaking more on energy efficiency as a resource at the National Energy Efficiency Conference in Sydney on 19 – 20 November 2018.

Matt Golden had been working in the tech industry when he made the leap into the energy industry over ten years ago.“I wanted to do something more meaningful with my life. Initially that meant going into solar, I helped build the first megawatt facility in the state of California. I got the bug. Why do we build the most expensive solar, when we always have the incandescent light bulbs running? This is crazy.”

From there, Mr Golden ran a company of around 150 people called Recurve, that was a venture-funded private business doing building retrofits for insulation, HVAC, general and solar using a whole building integrated approach. “It’s an incredibly hard business. All the incentives are stacked against you. Most of the programs that came to help made our business harder and actually reduced our power.

“Thinking about how to bring efficiency into the market as a resource started when I was banging my head against this wall as a contractor, with all these serious venture capitalists and companies like those providing capital to scale and I couldn’t do it.” Since then, Mr Golden has been trying to solve the problem of how to enable companies like Recurve to integrate and scale in the marketplace.

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