Tuesday, 7 October 2008

“The whole future of energy is linked”

Article: Interview with Capgemini’s Doug Houseman
smartelectricnews.com special

There is a call for greater integration of demand response and energy efficiency to ensure that investments in energy systems, technologies, and practices are integrated and optimised.

Experts acknowledge that energy efficiency and demand response, demand side management, distributed energy resources, plug in electric hybrid vehicles etc. all have to fit together into a single picture for each country or service territory.

“The whole future of energy is linked,” says Capgemini’s Doug Houseman.

“You can not pull one thread out of the tapestry and still have a complete picture,” Houseman told smartelectricnews.com.

According to Houseman, who is scheduled to speak during Intelligent Demand Response for Electricity Summit 2009, to be held in Amsterdam on 28-29 January this year, it is important to realise that the regulators play the biggest role in determining the future.

“They will frame the picture, providing incentives to one set of answers, ignoring others, and penalising another set. In many cases, the penalties will not be intentional, but they will exist. There is no way to design a programme that does not impact some items in a negative way, so regulators have to carefully choose what they want to do and run market simulations to see what the knock on effects are of their policy.”

Citing an example, he said, “Germany did not mean to make solar more expensive globally and reduce the overall availability of the solar power in the rest of the world. Their aggressive incentives for solar photovoltaic did just that. Even though the manufacturing costs for solar are down by more than 10 percent, the global demand for solar - the main growth is from Germany - has driven prices up on the wholesale level by more than 15 percent. This will in the long run result in more factories to handle the demand, but in the meantime, a country with one of the lowest production potentials (based on hours of available light bright enough to produce power) has cornered the market on photovoltaic cells. If Germany had not put the incentives in place, solar would not have been a viable option for most business and home owners.”

Further from the regulatory standpoint, Houseman shared his viewpoint regarding how demand response can be used effectively to manage energy use year-round, managing residential programmes and much more. Excerpts from an interview:

smartelectricnews.com: It is said that technologies that can enable demand response also can be used effectively to manage energy use year-round. How do you assess the situation?

Doug Houseman: It is true that once you have communications with your customer and/or their equipment, it is easy to use that communications all year round. In home displays, home area networks and direct load control equipment can all be used for more than the 200 hours or so that the market really needs demand reduction during peak times…it would be a shame to put in equipment and then let it sit idle more than 8,500 hours a year.

smartelectricnews.com: Can you cite example of financial benefits resulting from optimal execution of such programmes?

Doug Houseman
: The best example is at Florida Power and Light – it is also one of the oldest programmes having been in existence for almost 30 years now. By 2006, as per the last time numbers were published, the programme had cost FPL about $1.1 billion dollars and saved FPL more than $8 billion dollars. The regulatory requirement is that ½ of the cost savings be given directly back to all customers – not just the ones that are part of the programme. The rest of the savings can be used to fund the programme and to make profits for FPL. There are several others that can be discussed, but this in the largest, best documented and the oldest programme in the world.

smartelectricnews.com: When it comes to installation, maintenance and data management of such programmes, what factors do you think need to be taken into consideration for enablement cost where one-time cost includes equipment installation and administration and annual maintenance cost?

Doug Houseman: It is not a simple one size fits all (situation)– residential programmes can be done along the lines of one size fits all, but commercial and industrial programmes can not. If I stick to the residential programme, there are some clear winners from regulatory rules standpoint that help with the overall programme size, pace and effectiveness:

• Allow utilities to earn their usual rate of return on the equipment (or more if you want the programme to go faster).
• Allow companies to depreciate the equipment coming out at the same pace as they would have and continue to earn the normal rate of return on the value on the books of the old equipment.
• Reduce the amount of data that has to be retained to only the amount that is really required to deal with bad bills. Most regulators require that all information be kept for several years, if you want to keep the programme costs down, determine what will make a difference for the ratepayer and the commission and allow the utility to decide what they want to keep beyond that. In a single day, a single meter will send in more than 10 times the data that a meter generates in a year with the current meters.
• Agree to a simple VEE method – most methods that are on the books today are intended for very large customers, where the difference of 2 or 3 percent can mean thousands of dollars in added costs to the business. In the home owner’s world, having 2 to 3 percent of the power in the wrong interval would normally be less than $2. Over time, the mistakes tend to even out on the smaller customers (e.g. a kilowatt hour is placed in the peak bucket one month because reading is missing, and then if it happened again the next kilowatt hour would be allocated to off peak evening up the charges).
• Allow consumers to buy most of what they want to put in their home at the local hardware or DIY center. Different customers will want different levels of knowledge and control. Make sure you provide the customers with the right information so they can buy equipment that will run with the equipment from the utility.
• Never stop monitoring the programme for equipment failures, maintenance deferral or bad consumer level devices.

If you do these six things, then the determination on how to handle the installation, maintenance and data management can be managed for a reasonable cost and customers can have choices about what they want.

smartelectricnews.com: When it comes to components of such programmes being subsidised / regulated, what role according to you national, local governments and the European Union can play in the time to come?

Doug Houseman: They will have to lead, there is no way in a regulated (or semi-regulated) market that anyone can take a substantial decision without a nod from each of the regulators they have to deal with. In the UK, there is a potential for more than a dozen regulators to get involved in these programmes.

Intelligent Demand Response for Electricity Summit 2009

Capgemini’s Doug Houseman is scheduled to speak during ‘DR Cost Benefit Analysis: Assess the cost to install, operate and maintain your DR & DSM programme’ of Intelligent Demand Response for Electricity Summit 2009, to be held in Amsterdam on 28-29 January.

For more information, click here: www.smartelectricnews.com/demand08


Abbie Badcock ,
Smart Electric News,

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