Jackson-based Consumers Energy is targeting hundreds of its business customers statewide in an effort to reduce energy demand during times when the electric grid is most stressed.
Known as “demand response,” such efforts are a tool that utilities are incentivized to use as a way to reduce the state’s energy load and also make up for lost capacity when power plants close.
In the case of Consumers, it could help offset the loss of generation that it buys from the Covert-based Palisades nuclear plant, which owner Entergy wants to close next year.
Consumers Energy and all other state-regulated utilities are required to consider the potential for demand response programs under energy laws passed in December.
Effectively, ratepayers cut their energy use during times of peak demand, such as hot summer afternoons, or when power plants undergo an outage. For example, a company may be contacted by the utility to cut energy use — such as turning off lighting or HVAC systems — for short periods of time.
For businesses, this occurs on a voluntary basis so demand response doesn’t cut into a company’s production.
Julio Morales, executive director of customer service at Consumers, says the company has identified upwards of 600 megawatts of demand response potential. That is, the utility sees the potential for cutting its demand at certain periods of time by 600 MW. By comparison, the Palisades plant has a capacity of 811 MW.
By cutting its load, demand response also can reduce the need for Consumers to buy electricity on the market at certain times.
“We think we could have a pretty significant portfolio of demand response resources to manage that and hedge against market pricing volatility,” Morales said.
HOW IT WORKS
Consumers has had variations of programs in place that work like demand response for several years, Morales said.
For the Midcontinent Independent System Operator (MISO), which operates the regional electric grid, demand response is considered a quantifiable generation resource. For example, if a 500-MW power plant was shut down unexpectedly, a utility may be able to dispatch 100 MW through demand response to help make up for the lost generation.
Consumers offers demand response to its residential and commercial-scale customers, but finds the resource can be more effective with larger customer classes. As of late July, the utility had 138 businesses and 50 MW of demand response under contract in its first year. Consumers plans to ramp up its efforts toward commercial customers, aiming for up to 150 MW by the end of 2019.
Businesses say it’s been relatively easy to participate in the program while remaining flexible enough to avoid disrupting operations.
“We understand they are there to produce products, not be generators,” Morales said of participants.
Consumers will visit the participating businesses and identify ways to reduce their electricity consumption, such as through air conditioning, lighting controls or potentially shifting when certain manufacturing can be done.
“We cannot disrupt their ability to do business or sell products,” Morales said.
For Holland-based industrial recycler Padnos, participating in demand response events has meant shutting down a machine while employees perform other tasks.
“We’re spread out and pretty diverse, so we can be a little flexible,” said Mike Trethewey, a senior buyer and parts manager at Padnos. “If there’s a four- or five-hour window that needs to be done, typically we are able to oblige.”
Trethewey said the company is notified 30 minutes before a demand response event is requested. However, Padnos hasn’t been able to participate in all of the events this season as it “had some (production) demands that had to be met.”
Still, he believes the program is beneficial and fits with the company’s philosophy.
“I’d encourage other manufacturing and large power consumers to consider it,” he said, adding that it’s a “case-by-case” decision on whether a company can alter its operations.
Resurrection Life Church, which has a roughly 335,000-square-foot facility in Wyoming, joined Consumers’ program earlier this year. Its loads are sporadic based on church events, which means it often can shave its energy usage between 11 a.m. and 7 p.m. That includes turning off most lighting and HVAC functions, said Ben Kiewiet, maintenance supervisor at Resurrection Life. Part of the building also can run on a backup generator during demand response periods.
“It’s not too much of an inconvenience,” Kiewiet said. “For manufacturers, I could see that being an inconvenience for them to keep production going, but for us, we just have lights and HVAC and can gamble a little bit.”
In addition to lower electricity bills, Consumers also pays participating customers in bill credits for the amount of time they cut energy use.
“We compensate them like we would any other independent power producer or power generator,” Morales said. “We pay them under contract for the level of capacity they can contribute over a certain period of time they can achieve that reduction.”
Morales said there have been four “events” this season during which participants were called upon to cut energy usage. High temperatures in July were a contributing factor during some of those times. Other examples occur when the cost of electricity on the MISO market might be more expensive than dispatching demand response, Morales said.
REDUCING NEED FOR NEW PLANTS
A key aspect of demand response is potentially curtailing the need to build new generation as the state’s aging fleet of mostly coal-fired power plants close, or as demand increases. Morales said the 150-MW potential of demand response by 2019 is a “significant component going toward filling the void left by Palisades” if it were ultimately to close.
Reports from the Advanced Energy Economy Institute as well as the Michigan Public Service Commission earlier this year had similar findings. The AEEI report found that demand response could offset a projected 2,000-MW summer demand increase in the Lower Peninsula through 2026 while also saving ratepayers up to $1.2 billion.
The MPSC’s capacity resource assessment from January noted that “planned demand response programs in Michigan will provide significant contributions toward meeting near-term capacity requirements.”
Advocates have said that between Consumers and Detroit-based DTE Energy, there is still room for growth in dispatching demand response as a clean energy resource. However, the state’s new energy laws create incentives for utilities and also require them to consider demand response in long-term Integrated Resource Planning.
The MPSC is in the middle of an assessment of the full demand response potential statewide, which is scheduled be completed by the end of September. How much is deployed could ultimately affect how large or how many new power plants are built.
“I wouldn’t agree that it would eliminate the need for new generation, but certainly it’s a component we would evaluate under our portfolio of resources to meet customer demand,” Morales said. “It’s green, and it avoids the need for very expensive generating assets.”