Incentives to save electricity grow as plants power down
Using less electricity will become more lucrative for Pennsylvania universities, government agencies and industries when coal-fired power plants close during the next several years.
A regional power-management group is boosting payouts to organizations that conserve voluntarily, offering money if they curtail demand on summer's hottest days. Maximum payouts will climb about 33 percent by 2017, management group PJM Interconnection told the Tribune-Review.
The move should help contain power prices for residential customers and small businesses by easing pressure on limited supply, industry observers said.
“It really is just supply and demand,” said Stu Bresler, a vice president with Montgomery County-based PJM. “If customers are able to shift their demand, there would be less need for additional capacity for generation or transmission.”
PJM manages electricity distribution across Pennsylvania and all or parts of 12 other states, balancing demand against the technical constraints of transmission systems and power plants.
Regulators will be challenged as utility companies consider shutting more coal-fired plants because of stricter federal environmental laws. Completed and anticipated closures — including Hatfield's Ferry Power Station in Greene County and Mitchell Power Station in Washington County, both owned by FirstEnergy Corp. — will cut 10 percent of the PJM region's generating capacity by 2017, according to the group.
Aggressive conservation among major electricity users will close about a third of that gap. Electricity will come from other regions and natural gas-fired plants will make up some of the loss, Bresler said. More generous payments will lead institutional participants in the conservation plan — known as a demand-response program — to manage usage during summer supply shortages, he said.
Even without coal-plant closures, Bresler said, PJM planned to give program participants as much as $2,700 per megawatt hour conserved during key peak-use periods by 2017, up from $1,800 today. One megawatt hour can power about 1,000 homes for a day, according to utility providers.
“The more demand-response you commit, usually the fewer generation resources you're committing,” Bresler said. “It's reasonable to expect that, in future years, we will see more calls for demand-response to meet increasing energy needs.”
Conservation can deliver thousands of dollars to participants for relatively little sacrifice, energy analysts said. Universities, governments, manufacturers and other large users agree to cut usage for several hours when PJM issues alerts during extreme hot weather and other high-use periods. The alerts can come several times per year. Participating organizations typically trim their usage by easing air-conditioning usage, switching off unneeded lights and coffee pots and scaling back other noncritical functions.
Westmoreland County alone can receive as much as $30,000 for each day its agencies curtail use, said a county operations engineer. Allegheny County expects to save about $145,000 for its demand-response participation in 2014-15, up from a projected $32,000 this year, said Philip LaMay, deputy director of facilities management.
LaMay said the county pledged to shed, on demand, roughly 3.8 megawatts of usage from nine buildings.
“If we hit that mark, then we're going to get the full funds that are projected. If not, we get a little less,” LaMay said.
Other participants include Carnegie Mellon University and the University of Pittsburgh. They did not specify their incentive amounts, but Abby Simmons, CMU spokeswoman, said the school “makes a little money from this.” She said CMU participates “just as much to do our part to keep the grid from going down.”
“There's a tremendous amount of flexibility in demand,” said Eilyan Bitar, an assistant professor in the School of Electrical and Computer Engineering at Cornell University.
He said the demand-response approach gained traction in the mid-1990s when the government deregulated electricity providers.
The method since has become common in power-grid management, said Jim Kirtley, a professor of electrical engineering at the Massachusetts Institute of Technology. He said such controls can improve overall efficiency and temper the need for large, new power plants when coal-fired plant go offline.
That can help cap overall costs for utility companies and customers through economies of scale, industry observers said. Wholesale electricity prices posted through PJM slipped by nearly 50 percent since 2008, according to the Pennsylvania Public Utility Commission.
With coal still a primary fuel for that power, Kirtley said a hypothetical mass closure of all coal plants at once could destabilize the grid.
“But it really depends on how fast the politicians can manage to shut down the coal-fired power plants,” he said. “If they're as effective as politicians usually are, I don't think I'd be all that concerned.”
Adam Smeltz is a Trib Total Media staff writer. Reach him at 412-380-5676 or firstname.lastname@example.org.