Customer demand for energy services is evolving quickly. Both residential and institutional customers increasingly demand products and services that are both “green” (i.e., environmentally friendly) and “smart” (i.e., Internet-connected, communicating, and automated).
Innovative companies are busy developing new products and services to chase this demand as fast as they can. In particular, opportunities are emerging for devices, building controls, and related software to address both of these trends at the same time. One such opportunity is known as “automated emissions reduction.” This technology can take advantage of customers’ demand flexibility to shift load to when generation is cleanest. This approach can provide customers with a way to meaningfully reduce their emissions footprint, at near-zero cost, with minimal inconvenience.
Deployed at scale, this technology could represent both a big business opportunity for companies successful in tapping customer demand for green and smart products, and a big emissions reduction opportunity for the grid. Rocky Mountain Institute (RMI) is hosting a workshop this week in Chicago to engage industry partners on finding near-term opportunities to tap this potential and identifying a roadmap to scale the market.
Customer demand for green and smart energy services
Many customer segments are increasingly demanding environmentally friendly products. This is particularly visible in the consumer products segment. A 2016 Gallup poll revealed that 73 percent of Americans want to emphasize alternative energy instead of oil and gas production. And consumers will put their money where their mouth is: Globally, 66 percent of consumers are willing to pay a premium for environmentally conscious brands.
Institutional customers, including commercial and industrial facilities, universities, and municipal governments, are also demanding green products and services. Among the Fortune 500, 45 percent of companies have sustainability goals that affect energy service procurement. What’s more, among the largest 100 of these companies, which have the most buying power, 66 percent have such goals, and 13 percent have already signed power purchase agreements for or invested directly in renewable energy to serve their facilities’ energy demands.
Customers’ devices and building control systems are also increasingly connected to the Internet. Major technology companies like Amazon, Google, and Apple are fiercely competing in the “smart home” space, fighting for market share to provide home assistants, smart thermostats, and software platforms to integrate many different kinds of devices together. In institutional facilities, there is an increasing recognition that connected building and industrial facility control systems can provide significant business value, in addition to energy savings. These evolving demands are contributing to forecasts that there will be up to 30 billion Internet-connected devices by 2020.
A new emissions reduction opportunity
Automated emissions reduction technology presents an emerging opportunity for companies to provide products and services that address both green and smart customer desires. First, the green opportunity: The amount of emissions associated with meeting customers’ electricity demand changes every five minutes, due to the operation of power markets with different generators, of varying efficiency, which use different fuels. Depending on dynamic demand and supply conditions, the generators that are “on the margin” can swing dramatically in each interval.
Practically, what this means is that turning on the lights at different times will change what fuel is used to meet that incremental demand, ranging from an old, dirty coal plant, to a new, efficient gas-fired generator. This can even increase renewable energy utilization if, for example, the output from wind turbines or solar panels would otherwise be curtailed due to grid congestion or inflexibility.
Second, the smart opportunity: When coupled with the flexibility of many end-use devices, software that estimates these swings in emissions intensity means it’s possible to make small shifts to load timing, and in doing so realize significant emissions savings. For example, CO2 emissions from loads connected to the PJM grid in Chicago can be reduced by 5–15 percent, and mercury emissions by 15–40 percent, by prioritizing energy usage for periods when coal plants are not on the margin.
The scale of this opportunity in the near term is large. RMI has analyzed the potential emissions savings in the U.S. associated with slightly changing the timing of just two common residential loads—water heaters and air conditioners—and found that these imperceptible adjustments could reduce CO2 emissions by over 6 million metric tons per year—equivalent to removing more than 1 million cars from the road. Adding institutional facilities to our analysis could triple the emissions reduction potential.
The scale of this opportunity will only increase with time for several reasons:
More loads: We estimate that at least 30 percent of U.S. electricity consumption has significant demand flexibility on intervals from five minutes to several hours.
Better data: With direct data feeds from utilities and wholesale market operators on the marginal emissions of the grid, service providers can more precisely identify the best time intervals for load shifting, and realize larger savings.
More variable supply: As variable renewable resources like wind and solar rapidly grow, these resources are likely to be on the margin more and more, due to the limited flexibility of other generators and transmission networks. This phenomenon is already creating significant volatility in marginal emissions, which will only increase as more and more renewable capacity is built.
Aggregated impacts: With many individual devices participating, there will be increasing potential to affect more than just five-minute marginal emissions intensity. For example, millions of loads following an emissions signal could significantly alter so-called “unit commitment” decisions on the scale of hours and days. In other words, with many devices participating, it will be possible to change load shapes so that coal plants don’t actually have to start up. On an even longer timescale, these operational impacts can affect resource investment decisions by making demand more flexible and thus making it more economically attractive to build more variable renewable resources.
Finding new business opportunities to capture this value
To pursue this opportunity for large-scale emissions reduction, RMI and our project partners are hosting forward-thinking industry leaders in Chicago this week at an innovation workshop. We will facilitate a ground-floor discussion to address questions key to scaling this market:
- What sources of value can automated emissions reduction provide across market segments?
- What near-term business opportunities should be prioritized?
- What is the roadmap to scale this opportunity?
RMI’s workshop will synthesize these and other topics into a report to help kick-start a self-scaling market for this technology. This will help technology providers provide both the green and smart technologies customers want, and achieve significant emissions reductions for the grid.
Image courtesy of iStock.