In the News
Power Aggregator Bids Between 55 MW and 110 MW of Load Cuts to NYISO During Summer 2006 Peak Demand ConditionsFoster Electric Report
April 5, 2006
As grid operators try to find ways to encourage companies to agree to cut load when demand for electricity starts to outstrip available power supplies, a company in New York has been successfully doing some of that work for the New York Independent System Operator. Power aggregator ConsumerPowerline has announced that of the 550 MW total load that it has under contract, between 55 MW to 110 MW will be made available to the NYISO for load curtailments during the upcoming summer. Included in that amount are various New York City office buildings, residential complexes, hospitals and educational institutions who have agreed to reduce their electricity consumption, or supply their own power during peaks with on-site emergency generators, in exchange for payments by the NYISO.
Each spring and fall, the NYISO conducts auctions where commercial, residential and industrial property owners and managers can volunteer, in advance, to curtail electricity consumption during times of a potential grid crisis. On extremely hot or cold days, the NYISO can call upon these volunteers, with 21 hours' notice, to scale back their electricity use through methods that will not impact tenant comfort, but will allow the buildings to meet their capacity curtailment commitments. For example, ConsumerPowerline said that building managers can engage in pre-cooling, switch to on-site generational resources, or shut off nonessential equipment.
ConsumerPowerline has 550 MW of total load under contract, the "vast majority" of which is located in New York City, according to Reena Russell, chief officer for market and product development. Since these customers can typically reduce their demand by 10% to 20%, she said ConsumerPowerline was able to bid between 55 MW and 110 MW - she refused to disclose the exact number, citing the need for confidentiality - of load reduction commitments into the NYISO's demand response capacity auction for this year's summer period. Known as the "summer strip," the auction closed on March 31.
Whether or not the NYISO calls on ConsumerPowerline's and others' facilities to reduce consumption, the grid operator makes monthly capacity payments simply because the resources are made available for curtailment. If the NYISO does call for load reductions during emergency "events," the users also will receive the hourly market prices prevailing in NYISO's New York City zone. Most of the facilities' revenue comes from monthly capacity payments, however, since emergency events are rare.
Before summer 2005, Russell said the NYISO's capacity payments amounted to $5.50 to $6.50/kW-month during the winter, and $11 to $11.50/kW-month during the summer. Last summer, the payment reached a new high at $11.68/kW-month, which was followed by a new low of $5.11/kW-month set this past winter.
Russell said summer 2005 was also unusual in that the NYISO called more "standby" events - i.e., program participants were notified that they may be asked to cut load the following day - than any year previously. Moreover, Russell said last summer was the first time that she recalls that program participants were actually called upon to cut load during an emergency event; most of the time, standby events are cancelled, but last summer one was not.
Russell explained that the NYISO's capacity reduction program payments go to ConsumerPowerline, who keeps about half in return for providing the necessary metering and monitoring equipment, controls and engineering expertise, as well as providing other energy management services. The aggregator also will help the contracting parties obtain permits to run their emergency generators during peak periods.
As part of the agreement, ConsumerPowerline assumes the risk of NYISO's financial penalties if some users do not reduce power consumption by the agreed upon amounts when called upon to do so. The company mitigates that risk by having a number of clients in the bidding group, some of whom offset any negative load cut balances by exceeding their own required cuts.
As part of the agreement, ConsumerPowerline assumes the risk of NYISO's financial penalties if some users do not reduce power consumption by the agreed upon amounts when called upon to do so. The company mitigates that risk by having a number of clients in the bidding group, some of whom offset any negative load cut balances by exceeding their own required cuts.
ConsumerPowerline passes on the other half of the NYISO's capacity payments to its customers who sign up for the program; over the past four years, the aggregator has passed through more than $15 million to these customers. Its customers also can use the special equipment to reduce and manage their individual demand charges imposed by utilities, and can keep all of those savings.
According to ConsumerPowerline, the load signed up for the summer 2006 program is about 50% more than what was offered for emergency load reductions last summer. Among the customers aggregated by ConsumerPowerline for the auction are "Fortune 500" companies Morgan Stanley, Starwood Hotels and Macy's Department Stores, along with some of the nation's largest commercial, residential, retail and institutional property owners and managers.