Data now verifies a pandemic-driven collapsing commercial-industrial (C&I) electricity load is only partially offset by sheltering-at-home customers' spiking residential usage.
Utilities have implemented measures to help residential customers cope with rising powerbills. But some utility leaders and analysts are thinking beyond today's uncertainties and looking instead toward tomorrow's system needs in light of these shifting load dynamics, they told Utility Dive.
Because of the economic turmoil, "a sharp recovery to previous 'normal' daily load shapes is unlikely without new stimulus efforts," Energy Innovation Senior Fellow Eric Gimon told Utility Dive. But "utilities are safer equities than most in this storm, so it could be a moment for CEOs to pursue new electrification revenues and expenditures for system flexibility they will need going forward."
The growing "emphasis on energy efficiency and clean and alternative resources" will present new "opportunities for economic development as the economy reopens," Consolidated Edison (ConEd) spokesperson Allan Drury agreed. "Coming out of the pandemic, customers and regulators are likely to set higher expectations for reliability" that require new "smart investments" that will be "good for the economy," he told Utility Dive.
Disconnection moratoria and bill relief address near term needs, and keeping close track of shifting load data is vital, but the better question is what tomorrow's power system can be, utility spokespeople and system analysts told Utility Dive.
C&I decline amid the pandemic
For system operators across the country, C&I loads are sharply down and residential use is rising, but with flatter peaks. Overall, U.S. load was down 6.5% in April, according to a May 12 Brattle Group report.
A sampling of residential demand showed an average 12% increase and that C&I demand was off by an average of 31% through April 27, consulting firm ICF reported May 3. Average "daily peak demand dropped by 10%" from April 27 to May 3, but has since "reached relative steady state," it found.
Meanwhile, utilities face new challenges created by the shifting C&I and residential loads.
Demand from residential air conditioning is up "about 40%," which is "a real concern" for system operators and customers, Scott Hinson, chief technology officer at consumer energy data specialist Pecan Street, told Utility Dive. "Electricity bills could go very high in June, July, and August when it gets hot."
"With more people at home using electricity, DR programs will likely get less use reduction per household and need higher enrollments to spread reductions over more customers."
VP, Uplight Marketing
Because residential customers' usage is atypically high, local utilities could face higher transmission charges and ERCOT could face reliability challenges, Hinson said. "Texas operates on a fairly thin reserve margin and has data center and manufacturing loads that are not flexible, which means an increased air conditioning load could test those margins."
To protect reliability and keep customer bills low, Austin Energy and other utilities "probably need to ask residential customers for changes in behavior," like reducing home cooling or using public cooling centers during heat waves, he added.
Similar conclusions from a larger analysis of residential customers during the first three weeks following isolation orders were reported by utility data specialist Uplight. The analysis included customers under the service of undisclosed utilities in an Eastern and mid-America region.
Among Uplight's findings, average residential peak loads increased 21% in the mid-American region and 35% in the Eastern region which, "for families facing job or income losses, could mean significant bill impacts," Uplight Senior Vice President, Marketing, Indran Ratnathicam, told Utility Dive.
Utility disconnection moratoria offer near term protection, but utilities should take two further steps before summer air conditioning loads come on, Ratnathicam suggested. One is reworking demand response (DR) programs for residential customers and shifting them away from C&I customers, whose usage reductions will be less available.
"With more people at home using electricity, DR programs will likely get less use reduction per household and need higher enrollments to spread reductions over more customers," Ratnathicam said. "But newly cost-conscious residential customers will be more interested if enrollment includes opportunities for smart thermostats and new light bulbs that save money."
The second step is to "act now, before usage rises, to upgrade residential distribution system infrastructure and technologies," he added. Hot weather demand "could overwhelm operations, but new smarter technologies can manage that dispatch."
Successful messaging from utilities must strike "a delicate balance" with customers and regulators, Ratnathicam said. "It is informing about higher bills and solutions without disturbing customers."
Many utilities are developing near-term responses to these new challenges focused on demand response and energy efficiency, they told Utility Dive.
Utilities can be central to the pandemic response because they can help implement solutions "one home or business at a time," Electric Power Research Institute (EPRI) Director of Energy Utilization Mark Duvall told Utility Dive.
TVA, Austin Energy and the Sacramento Municipal Utility District are working on the kind of messaging described by Uplight and Pecan Street, but not making changes to their DR programs, their spokespeople emailed Utility Dive.
New England's Eversource Energy is developing new residential bill relief and savings along with energy efficiency offerings, company spokesperson Reid Lamberty said. The utility is also expanding its DR programs "to offset the potential for increased residential loads," including adding new incentives and technologies to bring more smart thermostats and window air conditioners to its DR capabilities, Lamberty said.
Southern California Edison's (SCE) total load was down 6% from 2019 and 11% below its five-year average load from March 16 to April 10, SCE spokesperson Julia Roether emailed Utility Dive. But with residential load up 14% from 2019, and non-residential load down 16%, "the overall load shape has less of a ramp, which means the DR need may not be as high," she added.
"Significant no-regrets investments in shovel-ready transportation electrification projects can create jobs and have important economic impacts that, in the long term, will increase utility kWh sales and savings for consumers."
Director of Energy Utilization, EPRI
DR stakeholders in New York, however, have recommended significant adjustments to DR programs, and ConEd is "reviewing those recommendations" with regulators and other utilities, Drury said.
"Changes in electric demand and consumption patterns from COVID-19 have created uncertainty and challenges," Advanced Energy Management Alliance Executive Director Katherine Hamilton wrote to the New York Department of Public Service (DPS) on April 15, on behalf of the Joint DR providers.
Over-burdened essential businesses "may not have load flexibility to respond to DR events," and shuttered non-essential businesses "do not have load available to be reduced," she said.
In response, DPS has granted new flexibility to DR providers on enrollments and ConEd is implementing changes to its DR programs focused on deferring consumption and reducing summer peak load.
Both ConEd and SCE agree with EPRI's Duvall that there can be a significant role for utilities in a broader economic recovery and have begun thinking about specifics.
ConEd's "access to low-cost capital" and "expertise in running large energy systems" would make utility ownership of large-scale renewables "an economic plus," Drury said. And its authorization by New York's regulators to administer incentives for heat pumps is "an opportunity to drive customer savings and job growth."
SCE's new 770 MW battery storage project and ongoing electric vehicle charging program both offer important "shovel-ready" investments "when restrictions are lifted, that should help California's economy," SCE's Roether said.
The shifting system dynamics will also require a response from utility regulators, Regulatory Assistance Program Senior Advisor Jim Lazar told Utility Dive.
How regulators can help
Utilities can more readily allocate expenditures for things like new messaging and improved DR programs if regulators give them assurance that any new financial burdens from the pandemic-induced economic downturn will be well-handled in rate cases, Lazar said.
The key for regulators is to recognize both impacts that put "upward pressure on rates and bills" and "those that provide downward pressure," Lazar said on the Regulatory Assistance Project website May 5. Regulators' responses will differ in vertically integrated and restructured states and can be critical to utility financial stability where there is revenue decoupling, he said.
About half of states have revenue decoupling, which allows a utility revenue recovery when kWh sales fall unless the utility acted imprudently, he said. But most decoupling was designed to protect utilities that offer revenue-reducing incentives for customer-sited energy efficiency and distributed renewables, not for "a sudden and deliberate pandemic-induced economic contraction."
Decoupling does, though, provide recovery for the "lost sales margins" that utilities now face, and regulators should cautiously but seriously consider applying it, he added.
"This is a moment to re-imagine the energy system and understand the value of new transmission, long duration storage, and demand response programs that add load and dispatch flexibility."
V. John White
Executive Director, Center for Energy Efficiency and Renewable Technologies
Regulators should also require utilities to track and disclose all revenue changes, ensure the changes are properly treated in accounting procedures, and guard against improper rate case claims, he added. Finally, regulators should consider utilities' falling cost of capital against requests to recover lost revenues.
Former electric utility commissioners Ann McCabe of Illinois, Richard Sedano of Vermont, and David Littell of Maine, who all work at the Regulatory Assistance Project along with Lazar, told Utility Dive they agree with Lazar's prescriptions.
Data analysis offers regulators and utilities reassuring guidance in the face of today's uncertainty, but there is a "better question" to ask on behalf of utilities and their customers as they face increasingly variable supply and flexible loads, some power system analysts say.
The better question
The "better question" is how power system stakeholders can use this moment to prepare for the future, Center for Energy Efficiency and Renewable Technologies (CEERT) Executive Director V. John White told Utility Dive.
As in 2008, there is economy-wide trauma and double-digit unemployment, including huge job losses in the clean energy sector, White said. But 2009 stimulus policies provided loan guarantees and other incentives and led to "thousands of megawatts of new renewable capacity," he recalled. "Renewables proved their value to the economy by paying off the loans and adding more to the recovery than they cost."
Many states now "have pipelines of renewable and storage projects that are shovel-ready," White said. "Clean energy and storage infrastructure can provide jobs and new capital investments to help bring our economy back."
"Virtually every utility at the highest levels was already focused on how to facilitate electric vehicle charger installations and that has not changed," EPRI's Duvall said. "Significant no-regrets investments in shovel-ready transportation electrification projects can create jobs and have important economic impacts that, in the long term, will increase utility kWh sales and savings for consumers."
The investments will also allow deployment of other technologies that increase load flexibility and add value for utilities, customers and the economic recovery, Duvall added.
TVA, SMUD and Eversource are staying with long term plans to increase system flexibility, their spokespeople said. SCE's Roether described shovel-ready projects in development.
Working at home "gives people motivation to manage their home energy usage," ConEd's Drury said. "Energy companies and their regulators should see savings opportunities" in deploying energy efficiency for residential customers and "economic benefits for equipment installers, retailers and others."
"This is a moment to re-imagine the energy system and understand the value of new transmission, long duration storage, and demand response programs that add load and dispatch flexibility," White said. As in 2009, "we need innovative, forward-looking policies that address the energy system's new stresses and protect companies teetering on the brink."
When the nation emerges from the current crises, climate change "will be there waiting for us," EPRI's Duvall said. "It is up to policymakers to propose solutions, but utilities can figure out [that] cost-effective implementations can come from millions and millions of very small customer decisions and transactions."