What Does a Smart Grid Mean to You and Me?
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By Paul Valenta
Lately I have been hearing and reading a great deal regarding the smart grid.
What does a smart grid mean to you and me? I know as my children mature and they
become more educated or smarter I surrender to the fact that I have to step it
up or get smarter to stay even with them. If I donít get involved and understand
what they are learning, I cannot guide them.
How does that lesson apply to the smart grid? I think it means that buildings
and building systems must now be intelligent to keep up with and support the
smart grid. The smart grid will have the ability to generate and move
electricity around a grid. In short, the smart grid is a tool to manage supply
and demand of different generation types, including renewable energy, and
consumption. The smart grid will be able to harvest wind energy at night in the
desert and move it to an urban area for consumption. The smart grid will
incorporate electricity pricing that reflects its value at the time of
consumption. Prices will behave like hotel prices. Room rates are high during
the peak season, and lower in the off peak season.
Utilities are gearing up for market based pricing with smart meters and other
technology that will give them the ability to move energy around for optimum
performance and bill based upon time of consumption. Smart meters are available
now to consumers in much of the country. States that have a de-regulated utility
industry are providing non deregulated states a glimpse of what rates will look
like as the smart grid get closer to a reality. If a consumer has a low energy
management ability, they would most likely choose to go on a flat rate. This
market based flat rate pricing will consist of a modest monthly demand charge
for maximum kilowatt demand and a flat rate for each kilowatt-hour. The flat
rate is based upon the customerís electricity consumption profile from the
previous year. The history is applied to the upcoming years electricity market
based pricing. The market based flat rate is dependent upon not only how much
energy is consumed but when that energy is consumed. If a customer has a higher
ability to manage consumption there is a real time pricing rate available for
customers. Real time pricing, again, consists of a nominal demand charge for
maximum kilowatt demand, and an energy charge for every kilowatt-hour consumed
but pricing is based upon market conditions. Sometimes the energy charge can be
negative other times it could be well over one dollar per kilowatt-hour and
anywhere in between.
Because HVAC is the largest contributor to peak demand and electricity for
cooling can be easily shifted, energy storage is becoming a more and more
popular cooling system choice in commercial applications because these systems
can move consumption to different times to take advantage of cheaper pricing. In
these designs the building generates its cooling at nighttime when demand and
costs are low and stores it for use during high cost high peak times. The
challenge for engineers is how do you model electricity costs for a life cycle
cost analysis when the market based prices change annually, seasonally, or as in
Texas on the ľ hour?
The answer is to look at historical history. Letís look at the Marginal Clearing
Price for Energy (MCPE) real time pricing available in Texas. The MCPE changes
every fifteen minutes. This rate was available in 2002 and there is a history of
pricing through 2009 and soon 2010. For instance the average price at 4 am in
August was 3.3 cents /kWh while the price was 13.5 cents /kWh at 3 pm. Reviewing
the six year history of rates and by narrowing down the time period a clear
pattern emerges which can be used for a life cycle cost analysis. Significant
discounts are available for off peak consumption.
Letís look at an 8 story 225,000 sq.ft office in Dallas, Texas. The system will
use air cooled chillers and fan powered VAV. Alternate one is a conventional
system supplying 42 degree water to air handling units that distribute 55 degree
air to the space. The standard flat rate for an office building is $5.60 /kW
demand and $0.10 / kWh. Alternate two adds ice storage to the building. This
building will have a slightly lower flat rate of $0.085 / kWh because its demand
profile is flatter than a conventional cooling system with the same delivery
demand charge of $5.60 /kW. Alternate three is the same as two but low
temperature air distribution is added to the design lowering the supply air to
45 deg. F. from 55 deg. F. The electricity cost is the same as alternate two.
Alternate four is the same as alternate three except the historical real time
MCPE pricing data is used along with the delivery demand charge of $5.60 /kW.
Gathering the historical data of the MCPE pricing allows the life cycle cost
analysis to move forward in a more conventional manner allowing the analysis to
demonstrate the cost savings opportunity available should the real time costs
stay in line with historical costs within their consumption periods. ln this
example the 1st year utility costs is 45% lower using energy storage and low
temperature air distribution and the MCPE pricing over a conventional cooling
system. Simple paybacks averaged from 3.5 years with the energy storage system
to less than one year on the systems using low temperature air.
that the system is properly designed to take full advantage of pricing for the
smart grid, smart controls can ensure the design goals of energy cost savings
are reached. An existing Dallas office building uses the MCPE pricing and
thermal energy storage to contain its cooling costs. Below is a graph showing
its building demand and electricity pricing for a couple days in May. On the
right hand side you can see a price spike of over 30 cents a kWh. The control
system knew that would happen and the demand was reduced by shutting off the
chiller saving money.
The smart grid will provide a method to reduce demand, use the most efficient
assets, incorporate more renewable energy, and keep the grid reliable. Utility
incentive programs and laws such the California Energy Storage bill are
addressing how to reduce the demand for electricity during peak periods.
Designers of buildings and cooling systems must recognize how using and
purchasing energy from the smart grid will change their practices accordingly.
How much and when electricity is used is changing and building owners must
understand that a little more investment in the life cycle cost and design stage
can pay big dividends later.
About the author: Paul Valenta is the North American Sales Manager of Calmac,
the world leader in the product design and manufacture of thermal energy
storage. You can reach Paul at