Demand reduction strategies could save Indiana up to $2.3 bln, Advanced Energy Economy report says

For Indiana businesses and residents, a few cutbacks during peak energy times could save the state between $448 million and $2.3 billion over 10 years, a new report from Advanced Energy Economy (AEE) said.

AEE, a national association of business leaders dedicated to making the global energy system more secure, clean and affordable, released the report, “Potential for Peak Demand Reduction in Indiana,” earlier this month. Prepared for Indiana AEE by Demand Side Analytics, the report highlighted strategies to help the state avoid electricity infrastructure investments, including new power plants, transmission lines, and distribution infrastructure across the state.

The report focused on three main strategies impacting both commercial and residential customers: curtailing commercial and industrial electricity demand, installing more smart thermostats across Indiana’s residential sector, and deploying energy storage technologies.

Demand for electricity can spike for just a few hours each year. Because of that about 10 percent of a state’s electric system’s capacity is built to meet demand in just 1 percent of hours during the year, creating significant costs to consumers. One proven tool to reduce peak demand is demand response (DR) which enables grid operators and electric utilities to relieve stress on the electricity distribution system by compensating commercial, industrial and residential customers for curtailing electricity use during peak demand times or times of system emergency.

“Indiana is a very energy intensive state,” said Vince Griffin, executive director of Indiana Advanced Energy Economy, a state affiliate of national business association AEE. “We have steel mills, smeltering, auto manufacturers. Indiana has something like 43 foundries, which is very energy intensive. … And what we’ve found is that, on the commercial side, if we can reduce the load during peak times, we, and the businesses, can see big returns on energy usage,” Griffin told Daily Energy Insider.

Griffin said that by implementing DR strategies to shave usage off of peak loads or shift some usage to off-peak hours, commercial and industrial customers across the state would see a cost-effective alternative to constructing new energy resources that would sit idle most of the year.

According to the U.S. Energy Information Administration, the state’s commercial and industrial sectors spent $11.3 billion on electricity in 2015, consuming more than 144,000 gigawatts, the report said. Implementing avoided cost scenarios, the research team estimated 2,159 megawatts of DR potential in Indiana by 2027, nearly 20 percent of the forecasted summer peak demand in the commercial and industrial sectors, resulting in $485 million in savings over the 10 years.

Additionally, he said, using connected thermostats, where utility companies would have the ability to cycle air conditioning or heaters off and on, could produce a $300 million savings.

“In a residential unit, utility companies would be able to cycle on and off a water heater, for instance,” Griffin said. “But also, in a big box store, the utility company could cycle off an air conditioner for 20 minutes, and no one in the store would even notice it. … not only would it decrease the amount of energy used, but the businesses and residential customers would see savings on their utility bills as well.”

According to the report, “reducing peak load by using connected thermostats will lead to lower utility costs and lower customer bills than building new peaking power plants to address power plant retirements or increases in load.” In one scenario where 214,000 smart thermostats were utilized throughout the state, net benefits of $73 million over 10 years were estimated.

The report identified some emerging technology surrounding energy storage that could potentially save the state money, as well.

Being able to store some of the power generated by the state’s wind turbine farms and solar panels would provide the state with energy to use during peak usage times.

The key to the savings though is getting different parties to the table to adopt the changes, Griffin said.

“It’s a mutual opportunity,” Griffin said. “The utilities have to be open to working with the businesses and individual consumer. Legislators need to work with the utility companies … it’s so important that this be a team thing. It can’t just be a business thing, or a utility thing or a legislator’s thing. It has to be everyone coming together to see it all happen.”