Mark Bramfitt - Utilities & IT

Customer-Side Energy Storage: An Opportunity for UPS Companies

My recent snark regarding a recent Atlantic article aside, there clearly is a growing market for electric storage both on the utility and customer side, certainly in California and likely in other high-cost markets as well.

Utilities and independent power generators are looking at storage to help balance the relatively volatile production from wind and solar plants, which because of regulatory rulings have upended the traditional loading order in some states. (The solar and wind power must be taken first, and traditional base-load plants are now expected to meet shifting demands.)

And utilities can implement storage to solve localized capacity shortfalls or peaking problems - right down at the distribution circuit level - helping to avoid capital investments that won't generate financial recovery through rates.

Customers will be brought along for the ride too. Rates will increasingly reflect the cost to serve, including punishingly high peak pricing. And if customers want to take on the onus of mitigating their peak loads through storage, they should be offered an equivalent "subsidy" that is comparable to what the utilities would otherwise have had to invest to meet that load.

As always, I want to trace this all back to data centers, which have the great advantage of an unerringly predictable load. Most data centers, whether a legacy facility or a new, highly efficient design, have load factors of slightly less than 100%. I know what the peak demand will be, because it's the same any hour of the year.

So, could data center operators play the energy storage game? Of course they could, maybe even using the banks and banks of batteries they already have on site in their UPS rooms. Except...

...that most UPS banks are sized to take a data center through a power outage only long enough to get the generators started and synced in. That's usually five minutes or less, so the UPS capacity really isn't enough to warrant a storage scheme. 

That, and data center operators are not about to discharge their UPS systems, making them vulnerable to down time in the event of an outage, to avoid peak power charges.

Finally, any data center that is a megawatt or larger is getting industrial utility rates (the lowest rates that utilities offer), so avoiding the peak power charges would be the least economically viable of any class of customers. (The customer-side storage companies should look to medium-size commercial customers for the best returns.)

So, my best and brightest take away is that the UPS companies have an opportunity to modify their products for the customer-side storage market. (Perhaps lead-acid battery systems could beat the lithium ion equipment that is getting all of the press right now.)

I'll accept a one-tenth of one percent commission for the idea!

Customer-Side Energy Storage: The Demise of Utilities?!

I had a good exasperated chuckle at this breathless account of customer-side energy storage that appeared in the Atlantic last week as part of a broader series on "The Great Energy Shift".

The report starts with the ominous warning that "trouble lies ahead" for utilities because customers are going to start installing battery storage systems that help them avoid peak pricing rates.

This is a bit of a facile observation given that utilities are increasingly changing their rate structures to reflect the true costs of providing service, particularly at peak times, that they provide incentives for load management, are experimenting with utility-side energy storage systems, and are in some cases set to provide incentives for customers to do the same.

In what way does this constitute "trouble"?

I appreciate that a hotel operator may have difficulty implementing load management strategies. I mean, turning off air conditioning in the summer in a San Francisco hotel isn't doable, not because guests who pay $300 a night won't tolerate it, but because there just isn't that much air conditioning load when it's only 62 degrees outside!

And installing an energy storage system is not "pulling the plug on the utility", it is load management, pure and simple.  And, demand rates have not risen thirty percent in California over the past three years - customers are now seeing peak usage charges for fifty or so hours out of the year.

It makes sense for the utility and/or their customers to manage that peak load. It drives the capacity ratings of the distribution system up, and really kills on the generation side, where marginal costs can spike to well over a dollar a kWh during peak periods.

I'll credit author Todd Woody with at least providing some context around energy storage, including noting that California utilities have been authorised to install 1350 MW of storage by 2020 (the costs of which will be reflected in customer rates, by the way), and that sixty percent of the costs of the system installed at the Intercontinental were covered by incentives (which will also be paid out of rates).

And yes, the system is financed by the maker of the system (Stem), though that is hardly novel, as there isn't a PV array that isn't financed today. (Stem also indicates that they sell utility-side storage systems.)

But I have to say, given all of the regulatory impetus behing real-time utility pricing, orders to install utility-side storage, and subsidies for customer-side storage, I just don't see that the "traditional utility business model, which for over 100 years ago has served its purpose well, has come to an end."

If anything, the utility business model, enabled by the regulatory process, makes the energy storage market viable.

EUCI Presentation: Utility Rate Fundamentals For Data Centers

Late last year I participated in an EUCI forum on data centers in San Francisco, and thought I'd do a brief post on each of the four presentations I delivered over the day-and-a-half session. Check out EUCI - they offer a robust series of programs and sessions for the energy industry.

We kicked off the event with an hour-and-a-half overview of emerging trends in the market from KC Mares, President of Megawatt Consulting. I haven't managed to find a copy of the slide deck - it would be well-worth getting a hold of it if you can.

My first section was billed as a primer on utility rates as they apply to data centers, and I jumped back and forth between the viewpoint of data center operators and the utilities that serve them, as both groups were pretty evenly represented in the audience.

The upshot is that all of the price signals that utilities try to send to customers don't make it through to decision makers at data centers, and that most of those signals are moot in any event as data centers have essentially unitary load factors.

Despite this, for operators of utility-scale data centers, and for sophisticated utilities, there are opportunities around the margins, for demand response, renewable supply options, and attracting data center development.

Here's a copy of the presentation deck:

Download EUCI Pres 1 Utility Rates

Happy to field questions or comments!

Thermal Energy Storage For Data Centers

Thermal energy storage has often seemed an attractive technology application for data centers – providing a sure-fire way to cut energy costs while delivering redundancy for cooling that isn’t found in most facilities.

Here’s how the case would play out:

You’ve got a data center with a totally predictable day-to-day cooling load, so install a thermal energy storage system sized to the four- or six-hour peak rate period from my utility.  (There is a big advantage to having this predictable load; TES systems for offices often fail in execution because control systems are unable to accurately predict loads.)

Make ice or chilled water at night, when electric rates are lowest and when your chiller plant is most efficient due to lower ambient temperatures. Then draw on the thermal bank during peak periods, avoiding peak energy and demand costs.

The redundancy play is that you can provide backup generator power only for pumps and fans, assuming that you’ll have some storage on hand to meet your cooling needs, at least for the duration of a power failure.

The economic model would yield pretty good results for this design: you’ve got to pay for storage, probably an up-rated chiller plant, and controls; in return you get solid, predictable cost savings every summer weekday and probably winter one as well, and some redundancy you didn’t have before that can lower your need for power backup.

So what’s not to like?

In a retrofit scenario, this might all make sense, with the caveat of finding space for the chilled water storage tank or ice bank.  (Space limitations could be the leading killer of TES retrofit projects.) You may already have sunk the costs of backup generation for your chiller plant, but the economics may still work out.

But here’s the real rub: the leading data center designs of today don’t use chilled water at all, they rely instead on air-side economizers supplemented with evaporative cooling.  No need for TES in these designs, and no need for backup power for cooling beyond supplying the fans.

It’s a much more efficient and elegant solution, and leads me to believe that TES for data centers is an unlikely application.

Better Than Free Power - No Kidding!

My colleagues in the high tech world may not quite believe this, but electric power on the open market is occassionally priced at less than free - producers will actually pay you to take it.

Here's what happens: utilities or customers enter into power supply contracts including ones that feature "take or pay" clauses for base load capacity. Hydroelectric plants fall in this category because there is a minimum amount of flow through the dam to preserve habitat downstream.

So how do we get to negative pricing? Let's say a utility has 1000 megawatts of take-or-pay base load resources, but in certain times of the year customer load drops below that. Now the utility is faced with paying the generator for power that can't be used. (Easy enough for a hydro operator to back off on production by altering the pelton wheel profile or bypassing the turbines completely.)

Now the utility would be happy to pay a customer to take the power as long as the price was less than what he had to pay the generator (better to pay you a penny a kilowatt-hour than the generators two cents).

In my experience, this is a rare occurence, maybe happening on winter nights when loads are lowest.

But that situation is changing in interesting ways. In the Pacific Northwest, wind producers have contracts that feature take-or-pay clauses, and the operators receive favorable tax treatment based on the actual power delivered to the grid. Bonneville now has something like 30% of their portfolio coming from wind, with much of the rest hydro.

So now, even on some summer nights, customer load isn't enough for the power generated by the hydro and wind plants, and there are significant costs and impacts involved in curtailing the power production. The wind operators in particular don't want to be curtailed because of those tax breaks.

The four state region is grappling with this issue in a positive way - seeking opportunities to engage customers who could use power during these surplus events. They're looking at traditional load shifting strategies like precooling office buildings and refrigerated warehouses, and time shifting electric water heating loads.

And...we're trying to think about how data centers could participate. I personally don't see a pre-cooling strategy being viable, but I keep coming back to thermal energy storage as an exciting solution for data centers. You get load shifting capability (and might even get paid for taking off-peak power sometimes!) along with redundancy in your cooling infrastructure.

I know of only one data center that has implemented a thermal storage system, but I can't help but think this is a larger market opportunity.

Demand Response in DCs Discussed at Connectivity Week

I was asked by David Shroyer at NetApp to moderate a panel on demand response opportunities in data centers at the Connectivity Week conference in Silicon Valley Monday.

We had a great group of panelists, but unfortunately attendees outnumbered us by only a very small margin.

Mary Ann Piette from the Lawrence Berkeley National Laboratory brought the academic perspective, along with the results of an initial opportunity study and the promise of future research into actual demand response participation in data centers.

KC Mares of Megawatt Consulting represented the utility scale data center operator perspective, drawing on his long history of working in this field.

We were also joined by my former colleague Albert Chiu, who works in Pacific Gas and Electric Company's demand response group.

Because we only had a dozen people in the room, the discussion was lively and interactive. I noted a dichotomy of thought: it was postulated that data center operators would participate in demand response programs if they saw a more active, real-time pricing signal from utilities, but at the same time they desire some assurance that their participation would pay off in a predictable fashion so that they could justify implementation costs.

David further muddied the waters by describing how NetApp purchases power on the open market (made possible by a recent easing of direct access rules in California). As expected, NetApp is interested in low cost power, but also price assurance, so they seek long term contracts and have a hedging strategy. In simple terms, they are trying to reduce price sensitivity.

Not to throw cold water on the prospect of data center participation in DR, but a pure market pricing system runs contrary to the desire for pricing predictability. This means that participating in DR may be lucrative one year, and worthless the next, depending on market conditions. That precludes making investments in enabling technology because the business case is unpredictable.

Further, with their very high load factors, data centers are sitting pretty when it comes to real time electricity pricing. Any hit from peak conditions is more than ameliorated by extensive off peak energy use. Other end use customers are more likely to see an overall increase in costs, and will find DR participation more urgent.

We did come to the conclusion that some utility scale data center operators, especially those competing in the cloud service space, are likely to be the early adopters of any demand-side management opportunity, including DR, load shifting, and self-generation.

 

Appeared At: Uptime Forum 2011

Bit of a conference whirlwind in the past few weeks - this is the first of a series recalling memorable themes form the events.

I attended all three days of the 2011 Uptime Forum in Santa Clara two weeks ago (and that's a long slog!), with the added bonus of sheparding two of my utility clients around the conference as they attended for the first time.

The 451 Group and their varied consulting groups (including Uptime) established a broad conference theme around the industry disruption that is or will occur as users move IT activities to cloud providers. I was most interested in the program on day three, which explored the energy and environmental impacts of this trend.

My "star turn" was to act as the moderator at an executive lunch session sponsored by Panduit and Power Analytics (formerly EDSA). They were joined by Byron Washom from the University of California San Diego, who is running what is essentially a highly integrated utility on campus featuring self generation of a variety of types, along with demand control and extensive metering and monitoring.

That setup lead us to our primary discussion, which centered on why data center operators are loathe to consider self generation, demand response, and load shifting opportunities. I had to get things rolling by calling on some participants (it's a good thing I knew at least half of the folks in the room!).

Many commenters posited that critical facility operators are too concerned about reliability to be open to supply and demand management. Byron truly put that in perspective by pointing out that his campus supports data center infrastructure, but that isn't even his critical load - he has medical facilities including a hospital with critical care units, and a storage facility for ice core samples dating back a century.

My ultimate assessment is that data center operators should be thinking about supply and demand management, and that there are good tools (including gear from Panduit and Power Analytics) that can get them there.  The industry is no better or no worse than other sectors when it comes to engaging more fully in these areas. Ultimately, some leaders will break out front, and they're likely to leverage the benefits by being a more competitive cloud service provider, search provider, or e-tailer.

GSMI Presentation Deck

Delivered a presentation yesterday in San Diego on how data center and IT managers should work with their local utility on energy efficiency, demand response, load shifting, and siting and capacity planning issues.

Here's the presentation deck: Download GSMI 6 16 10

Presentation Report: GSMI "The Green Data Center Conference"

Flew down to San Diego yesterday to speak about the opportunities for partnering engagements between utilities and their data center and IT customers on energy efficiency, demand response, load shifting, and siting guidance.

Good crowd of primarily operators, though I must say that all of the speakers had a difficult time getting any crowd response going. For myself, I thought I did pretty well for my first speaking engagement as a consultant, and only caught myself referring to PG&E as "we" a couple of times!

For those of you who attended and are looking for a copy of the presentation deck, here it is: Download GSMI 2 4 10

Consulting Available!

Perhaps my most important post to date is simply to note that I have added a new page listing the areas of expertise and types of consulting services I am offering to clients.

I've divided the document into four sections, focussing on services for utilities, for the IT industry, for data center operators, and for the start-up and venture capital communities.

Essentially, if you're a potential client, we can pull from this document to develop a consulting scope of work that meets your needs.

I am available to work on a project-by-project basis, or on retainer, and look forward to speaking with you if I can offer the services and insight you're looking for.

Cheers!