April 2012

Innovations in Comfort, Efficiency, and Safety Solutions.

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Energy 2.0

OpenADR, Energy Management and Buildings

At ConnectivityWeek 2012
 Jack Mc Gowan

Jack Mc Gowan, CEM
Energy Control Inc.

Contributing Editor


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The 2.0 phenomenon seems to be upon us.  As I think we have all come to realize, the current preoccupation with adding 2.0 to a host of terms implies a next generation, higher order of functionality.  This is an outgrowth of Web 2.0, which according to Wikipedia “is a loosely defined intersection of web application features that facilitate participatory information sharing, interoperability, user-centered design,[1] and collaboration on the World Wide.”  This 2.0 phenomenon seems to be upon us, and as always there is no better place to learn about it than at ConnectivityWeek, Santa Clara, May 22-24, 2012.  The adoption of IT related nomenclature to describe Next Generation Buildings represents an awareness that buildings are huge consumers of energy, particularly electricity.  Among the dozen of trends to confront the buildings industry over the past two decades, several have pointed out that buildings make up as much as half of electricity consumption in the US.  Energy Information Administration (EIA) puts buildings at17% of US energy consumption overall, but this section accounts for 35% of electric consumption.  That fact alone explains why the building industry is very important to electricity companies.  On the flipside, EIA data also indicates that electricity represents 75% of the energy bill for commercial buildings, and presents some real impact on occupants in a number of ways.  Power outages decimate productivity, and according to EPRI cost US businesses $80 billion per year and detract from comfort by interrupting air conditioning and ventilation.  This is interesting but where does Smart Grid come in? OpenADR is perhaps the first place we are seeing Smart Grid come in, but there is much more common ground.

(Open Automated Demand Response (OpenADR) is an important, emerging standard for implementing demand response for commercial, industrial and residential customers. Backed by an impressive list of leading utilities, ISOs and suppliers, the OpenADR 2.0 standard will play an important role in grid optimization.)

The importance of Smart Grid to buildings has been completely lost for most owners, except those getting paid to participate in Demand Response. Yet Smart Grid, in a broader context, represents an opportunity for new building revenue streams, allowing them to become virtual power plants and energy profit centers.  It is about transforming the electricity business model to unlock capital and operating cost benefits for building owners.  Energy efficiency and green buildings, along with their respective benefits, have become second nature to facility professionals in last decade, but Demand Response, and ultimately Smart Grid, can unleash even more benefits.  What should buildings owners know; what is the difference between Demand Response and Smart Grid, why is it happening, how can buildings benefit and what does it cost to play?  Each question is answered here.

Smart Grid Basics

This picture depicts some Smart Grid basics.  By definition, a Smart Grid is an interconnected system of information and communication technologies, and electricity generation, transmission, distribution and end use technologies which will enable consumers, in this case: building owners, to manage their usage and chose the most economically efficient offering, while maintaining delivery system reliability and stability enhanced by automation and environmentally optimal generation alternatives including renewable generation and energy storage.  That is a bit of a mouthful, though it gets to the heart of what is underway, but why?  The best way to explain this is to start with a question; what would happen if Alexander Graham Bell and Thomas Edison came back to life tomorrow and observed the industries they were instrumental in creating? If Bell was handed an iPhone™ and asked to make a call, he would not know how to do it.  Edison on the other hand would be able to explain, in fairly technical detail, how every aspect of today’s electric system works! It has not changed in ~100 years!  Bob Galvin, former Chairman of Motorola and founder of the Galvin Electricity Initiative (Galvin), puts it another way.  Mr. Galvin was instrumental in starting the cell phone industry and he compares electricity today to telecom in the early 1980’s, a monopoly business model, pent up need for innovation, and no way to unleash entrepreneurial business models.  Speaking of business models, Demand Response (DR) and the OpenADR standard represent a near-term killer ap in the buildings space.  I know, the term killer ap has been overused, but getting paid to implement a control strategy is pretty exciting.  For those who are new to this topic, the OpenADR standards was developed at Berkley Labs and it is in the vanguard of initial Smart Grid Standards that should be mandated by the Federal Energy Regulatory Commission.  More exciting, OpenADR is integral to Demand Response programs across the country.  Open Automated Demand Response (OpenADR) is an open and standardized way for electricity providers to communicate DR signals with each other and with customers using a common language over any existing communications network, such as the Internet. OpenADR messages are received automatically by building and industrial control systems that are pre-programmed to take action based on the signal received.  The OpenADR Alliance, an industry coalition, is working to foster the development, adoption and compliance of the OpenADR standards through collaboration, education, training, testing and certification. One exciting example is California, where the utility will pay building owners to conduct a DR Audit and then install the DR-enabling technology, which requires an instance of OpenADR in each building.  Then the utility will continue to pay the customer every month to execute the strategies that are put in place.  That is DR and OpenADR, but why Smart Grid?  Because the electric industry is dangerously outdated and, equally alarming, the grid is increasingly unreliable.  That is why power outages cost US businesses billions of dollars per year.  August 14, 2003 was the day that brought this issue to the attention of congress and the American public.  On that day the entire US eastern seaboard went dark from a massive power outage.  This was not an isolated event either; outages continue to occur regularly, thankfully not on that scale, but with significant impacts. So aging infrastructure and an antiquated business model, along with escalating demand for electricity by our digital economy, all contribute to the reasons why Smart Grid is happening and is so important.  There was actually one good thing about the economic downturn; it gave electric providers a breather, since electric use was down due to businesses closing, etc.  But with Wall Street recovering, Main Street will follow, and the demand for electricity will again grow.  Before the downturn, the Department of Energy was projecting a 40% increase in electric demand over twenty years, and that it would cost ~$1 trillion to build new infrastructure to keep the lights on.  With economic recovery these projections will be renewed.  Utilities and State Commissions will be hard pressed to justify rate increases to fund needed investments in electric infrastructure.  So they will turn to energy users with Smart Grid programs. Demand Response is on key way to hedge against the speed at which new infrastructure must be built.  Again the building owner may ask; why do I care?  Money!

Reliable Controls No one disputes that investments building owners have made in efficiency are “bankable” and cost effective.  These investments also help utilities, but only with one of their two concerns.  When considering electricity, there are two important topics; energy use and energy demand.  Efficiency helps utilities with energy use and it makes sense to optimize building energy consumption because it reduces building operating cost.  Electric demand and emerging electricity markets are completely different topics, and the financial benefits they can offer to building owners, that are largely unknown.  True those managers with graying temples remember demand limiting and such programs from the 1980’s, but that is just part of the story.  It may be shocking that 25% of a multibillion dollar electric infrastructure (power plants, transmission and distribution lines, etc.) exists to keep the lights on for ~100 hours per year.  This is because the monopoly electricity business model has traditionally set one price for a unit of power, $ / KWh, no matter when it is consumed.  A separate Demand Charge, $ / KW, is applied to commercial bills, but that does not begin to match wholesale electric price volatility before, during and after periods of peak electric use.  Demand charges give building owners limited incentive to reduce use at these times, but they can’t cash in on the true benefit of wholesale power cost because they don’t know when the peak times occur and how they impact the cost to deliver electricity.   That is why Galvin and others are promoting dynamic price signals be sent electronically to customers, which will give them access to this information allowing them to change use patterns and save more money.  Compare this to going to a movie, walk up to the box office on Saturday night and a ticket will cost ~$15, but decide instead to go to a matinee the next day and it will ~$7.  Why can’t customers make the same choices with electricity, and if the electric price information was available; would it change building owner’s behavior?  At first blush, facility owners and managers may answer no, for two reasons; 1) tenants pay the energy bills and 2) tenants will not sacrifice comfort for cost savings.  This could be debated, but set that aside for now.  The more important question is; if an owner has a Smart Building, and could minimize or eliminate tenant discomfort, but still save maybe 20% of electricity cost, would they do it?  The answer proposed here is yes for Smart Buildings that are Web-enabled to participate in electricity markets.  Quite simply as shown below, Smart buildings use energy in Clean and efficient ways and are therefore Green buildings, but more importantly they are green in the environmental sense, as well as in the economic sense.

Energy Costs

Assuming Smart Grid has piqued the facility professional’s interest, how do buildings participate and are any reaping benefits today?  The answer is yes but it isn’t available everywhere.  The U.S. market is the focus here and Smart Grid activity is unfolding differently on a state and regional basis.   Electric markets have developed in larger population centers and where electricity is deregulated.  As states deregulated, markets opened up creating a wholesale electric business run by Independent System Operators (ISO’s) regulated by the Federal Energy Regulatory Commission, and a retail business operated by traditional electric utilities and by intermediaries who are able to sell power to consumers.  The largest and most progressive U.S. retail energy provider is Constellation Energy, now part of Exelon and the largest utility in the US.  That company offers both energy sales and a host of other Smart Grid / Demand Response services.  Big Smart Grid opportunities, particularly with Demand Response, are available now for facility managers and owners operating facilities in the Northeast, California, parts of the Midwest and Texas.   More lucrative programs are also developing quickly there. Technologies available from multiple suppliers already enable buildings to participate in electricity markets, such as Constellation NewEnergy’s VirtuWatt Web service.  It allows building owners to opt in and opt out of participation in electric markets in real time, and it will calculate how much they get paid to participate.  Of course the more functionality already built into the facility, the more robust the participation.  Buildings start with commissioned, effectively operated BAS, electric sub-metering, dashboard technology to visualize building performance and analytics to evaluate performance over time and develop benchmarks for comparison.  Buildings enabled like this can participate in demand response (DR) immediately by implementing technology to receive electronic “event notifications”, via the OpenADR standard, when demand response events are called.  The building then reacts to that event by modifying equipment operation to reduce an agreed upon number of KW.  Programs vary in the amount of notice that customers receive, usually “day ahead”, “day of” or “10 minute” notice.  Programs also vary in the amount of money paid for participation but customers typically receive payments between $50 and $300 per KW.  For example, a 200 KW enrollment would net an annual payment between $10,000 and $60,000.  With most programs customer gets paid whether an event is called or not, and in California the utilities will even pay to install the technology.  That all sounds pretty good, but it is just the beginning.  This same Smart Grid/DR technology can be used to enable customers to sell electricity, they agree not to use, back to electric markets.  I call this “day trading for energy”, and it gives customers another7 way to leverage financial value from Smart Grid.

Control Solutions, Inc At first building owners may think this is too complicated and maybe it’s not worth it.  The same could have been said of many technologies now widely used, when they were first introduced.  That could also be said of green building recognition systems that have become the norm.  Even more compelling, customers that leverage these technologies and programs effectively, can literally spin the meter backwards, reduce electric bills and optimize building performance.  The ideal scenario is when customers go further and expand building technologies to include; energy storage: thermal or battery, onsite generation, or what are now called “microgrids”.  The idea is to take this crisis with electricity, and apply entrepreneurship to turn buildings into profit centers for energy.   Demand Response (DR) is a near term opportunity that is paying big dividends for many building owners, but the next step is to insulate the tenants from inconvenience due to DR.  This is done by leveraging automation systems to pre-cool for example, focusing strategies on shutting down nonessential equipment, and leveraging onsite generation, but numerous other options exist.  Using advanced DR and OpenADR based technology, owners can also aggregate across multiple buildings and Opt In or Opt Out based on what is going on in the building. Owners may also be able to finance solutions.  Two common approaches to respond to DR with inconveniencing tenants are: 1) to leverage on site generation from renewables, i.e. Photovoltaic’s, or microturbines and 2) utilizing thermal storage.  Battery storage is expensive today, which certainly impacts electric vehicles, but with thermal storage buildings can make ice or chiller water off peak, and sell back the electric use they chillers would have consumed.  The picture below comes from the Electric Power Research Institutes “Green Grid” report and shows how many of these technologies could be applied to any size building.  Building systems shown include:  information technology, web portals to send electric price signals or DR event notices, automation or building EMS, on site generation, an electrical charging station, storage and on site generation.  Where the grid provides intelligence to leverage all of this technology in a new electricity market, Smart Grid has arrived and building owners are benefiting.  It is not everywhere yet, but astute professional should research the local market to uncover opportunities.  In this economy Smart Grid amounts to free money and no one can afford to turn that down.

Green Grid

[1] http://en.wikipedia.org/wiki/Web_2.0

This piece was adapted from a Building Operating Management article published in March 2011.

About the Author


Jack Mc Gowan is CEO of Energy Control Inc. (ECI), an OpTerra Energy Group company and is Chairman Emeritus of the U.S. Department of Energy GridWise Architecture Council and Ambassador for the OpenADR Alliance for Demand Response. He is on the Galvin Electricity Initiative Team of Leaders and was Founding Co-Chair of the National Institute of Standards and Technology Building to Grid Working Group.  Mc Gowan is working with utilities in California, Florida, Oklahoma and New Mexico on Demand Response and Smart Grid Projects. The Association of Energy Engineers admitted him to the “International Energy Managers Hall of Fame” in 2003 and named him “International Energy Professional of the Year” in 1997.  ECI won a 2008 American Business Award sponsored by Dow Jones and the Wall Street Journal as Best Overall Company in the U.S. with less than 100 employees. Mc Gowan is an author with 5 books on Fairmont Press and Prentice Hall and over 125 articles.  He also sits on Technical Advisory Boards and is a Contributing Editor with www.automatedbuildings.com .


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