Managing Rising Costs Amidst the Alphabet Soup of NY Energy Initiatives

If you’re a mid- to large-sized energy user in New York, you’ve likely come across a veritable alphabet soup of acronyms: REV, CES, DR, DER…the list goes on. Many of you who run commercial and industrial (C&I) businesses know that you can actively leverage Demand Response (DR) programs and earn revenue by curtailing load when called upon to do so during emergencies to support grid reliability. Granted, some years have been more rewarding than others since capacity prices ebb and flow in New York just like in other energy markets. Of course, capacity prices have risen substantially since 2012, resulting in increased earnings from DR participation in New York. So what can DR participants across New York expect in 2017 and beyond?

First, a bit of context on REV and CES:

In 2012, Hurricane Sandy hit the East Coast, causing devastation and leaving millions without power.  Shortly thereafter, working with the New York governor’s office, New York Power Authority and other state agencies, the Public Service Commission (PSC) launched the landmark Reforming the Energy Vision regulatory proceeding. Now commonly referred to as REV, its goal is to make the power system cleaner, resilient and more affordable. Regulators aim to transform traditional utilities into platform providers — entities that facilitate the deployment of distributed energy resources (DERs) and use them instead of traditional infrastructure.  And Demand Response is poised to continue to play a vital role as this initiative evolves.

In simplest terms, the Clean Energy Standard (CES) mandates New York to acquire 50% of its energy from clean resources by 2030. As part of this, it seeks to further that goal by providing zero-emission credits (ZEC) to support upstate nuclear plants that were in danger of closing. In late 2016, the PSC fended off numerous challenges to its adoption of the CES and its subsidy for nuclear power generators. Keep an eye on this space, however, as the PSC’s order doesn’t mean this is finalized (as of this writing in Feb 2017, two court challenges remain pending). Generators and some environmental advocates said the ZEC program — which critics say will cost over $7 billion over its 12-year lifespan — goes beyond the authority granted to the PSC by state law.

Impact on your bottom line:

In the near term at least, REV and CES, while noble causes, are going to lead to increased fixed costs (~$4/MWh) on mid- to large-sized energy consumers.  This scenario, however, also presents additional opportunities and specific actions you can take today to offset these costs:

• Increased DR participation especially in new distribution utility programs, and
• Capacity tag management.

New DR Programs: Both the NYISO and New York Electric Utilities offer demand response programs that pay businesses like yours for using less energy when the grid is stressed. Many commercial and industrial businesses in New York aren’t aware of the new summer-only local utility programs available to them via an authorized DR services provider. These programs offer another revenue stream in addition to the NYISO DR program that they may have been enrolled in for years. In 2016 for example, the New York Public Service Commission mandated that local utilities provide a Commercial System Relief Program (CSRP) throughout their entire service territory as part of a statewide effort to develop a new regulatory framework which includes incentives to leverage the deployment of distributed energy resources such as demand response.

Capacity Tag Management: Additionally, there are demand management services that can help significantly lower your capacity charge which make up 20-40% of the total supply portion on your monthly utility bill. The capacity charge is based on your individual capacity tag which, in New York, is determined by your facility’s usage when the NYISO sets its single annual peak hourly demand across the whole system. CPower sends an advanced day ahead demand management notification to reduce your usage when it is likely the NYISO will hit its hourly peak demand, thus reducing your capacity tag and capacity charges for the following year.

In the end, it’s all about implementing smarter techniques to manage your overall energy spend. The NYREV was launched 3+ years ago but it’s more relevant now than ever to survive as a large C&I energy user, as it will certainly change how energy is transacted in the future. At CPower, our job is to stay abreast of these developments and keep you informed about their potential impact. To get started, check out the various programs available in NY and informational videos to learn more on how you can offset rising energy costs in 2017 and beyond.