Industry Leaders Interview: Dr. Steven Specker

Dr. Steven Specker is the President and Chief Executive Officer of the Electric Power Research Institute (EPRI), in Palo Alto, California. This month he speaks with e-FFICIENCY NEWS about the future of energy efficiency in the electricity industry, EPRI’s unique approach to increasing end-use energy efficiency and the way his company wants to transform the entire electric infrastructure.

e-FFICIENCY NEWS: Prior to taking over at the Electric Power Research Institute (EPRI) you spent 30 years at GE with responsibilities spanning everything from electric meters to nuclear energy. So it would be something of an understatement to say you know electricity. If you would, briefly outline the future challenges that face the electric industry with respect to energy efficiency.

SPECKER: A number of strategic challenges face the electricity industry: increasing electricity prices, steady growth in electricity demand, effective management of greenhouse gas emissions, pressures to control consumer energy costs, and a strong policy drive to increase energy independence. The benefit of energy efficiency is that it can address these issues simultaneously. As a result, energy efficiency is being explored today with a new sense of urgency by policymakers and industry leaders alike. We recognize that energy efficiency offers cost-effective alternatives to adding new capacity, but we also recognize that the historic programmatic approaches to end-use energy efficiency have only scratched-the-surface of what’s possible.

Moving forward, there is a significant opportunity to utilize technology, coupled with innovative regulation and markets, to increase the potential for both energy efficiency and demand response. At EPRI, we believe that an interactive set of four building blocks – communications infrastructure, regulatory innovation, market innovation, and smart end-use devices – constitute an emerging “energy efficiency infrastructure” that will make the “dynamic” dimension of energy efficiency more robust over time, substantially expanding the potential for energy efficiency in the broadest sense.

e-FFICIENCY NEWS: Explain EPRI’s concept of the four building blocks.

SPECKER:

• Communications:
  The communications infrastructure links the other building blocks since essentially all of the demand response strategies are predicated on the two-way exchange of data and decisions. Information could be exchanged directly with smart end-use devices, for example, so consumers would not have to make hourly or daily energy choices. This “prices to devices” approach would allow the appliance itself to optimize its operation under varying costs and conditions. Multiple devices on consumer premises could even coordinate among themselves not to exceed an aggregate demand limit set by the consumer.
• Innovative Regulations:
  For regulators, end-use energy efficiency and demand response can be viewed as tools to help expand the portfolio of options to meet demand growth, create new capabilities and functionality in the power system, and establish more of a dynamic “partnership” between utilities and their customers. Going forward, it will require a renewed business model that goes beyond that of strictly selling electricity. Viable business models are needed that:
  • Remove the disincentive of lost revenues so that the utility does not lose money by selling less electricity.
  • Allows the utility to recover the costs of energy efficiency investments and research.
  • Places energy efficiency resources on a competitive platform with new generation.
  Beyond removing disincentives and providing incentives for utilities to take action with traditional energy efficiency efforts, innovative rate structures are needed to ensure that energy efficiency becomes self sustaining in a market environment
• Innovative Markets:
  For demand response to present a viable option to power systems, it should be included as a design principle in wholesale markets. A well-functioning market is one in which demand, supply, and transmission resources all compete with and complement each other. At the retail level, innovative market design would include:
  • Retail tariffs that include continuing availability payments to DR to reflect the capacity, risk-reduction, and reliability values of the resource.
  • A broad range of program types (e.g., day-ahead bidding, real-time emergency, real-time price response, and real-time profiled response), to give customers an array of service options.
  • Mechanisms and tariffs to lower the cost of aggregating large numbers of small DR resources
• Smart End-Use Devices:
  An essential premise of efficiency and demand response strategies is an infrastructure of intelligent electricity meters and end-use devices capable of two way communication with the electricity system. Many end-use technologies are beginning to evolve, through advances in distributed intelligence, from static devices to devices with much more dynamic capabilities. One utility, for example, has proposed a pilot program to dispatch lighting in commercial and industrial facilities using wireless, dimmable fluorescent lighting; they anticipate savings approaching 50% of the lighting load.

e-FFICIENCY NEWS: In closing, could you please give an example which illustrates the opportunity provided by the four building blocks?

SPECKER: In many regions, the time of peak wind generation during a day does not coincide with the time of peak system demand. As wind becomes a greater share of the generation mix in these regions, the available wind generation may have to be curtailed during off-peak periods on some days only to be followed several hours later by the need for the use of combustion turbines to meet peak demand. Reducing this mismatch between peak demand and peak wind generation through demand shifting presents a terrific opportunity to both lower carbon emissions and consumer energy costs.

Now suppose that a smart, network connected air-conditioner is able to receive day-ahead, hourly electricity prices. For this example, assume that tomorrow’s mid-morning prices are low due to forecasted peak wind generation in the mid-morning hours. The customer has previously set the building’s smart thermostats to an acceptable temperature range and selected the option which minimizes electricity costs within this range. The smart thermostats have already “learned” through experience how to optimize the building’s inherent thermal storage to take advantage of the low mid-morning prices to pre-cool the building and then reduce air-conditioning load during the afternoon when prices are high. The actions all happen automatically and by aggregating air conditioners across the system, the mismatch between peak wind generation and peak demand is eliminated.

Science fiction? Definitely not. It may take a decade, but connecting day-ahead hourly prices with smart electricity consuming devices provides a huge opportunity to greatly improve the overall efficiency of electricity utilization.