The North American Energy Standards Board (NAESB) has recently begun the process to determine the business practice standards to support demand response/demand side management and energy efficiency (DR/ DSM/EE) at the state and federal levels in the United States. As such, NAESB has been asked to develop business practices and these form the focus of this article.

For the role that NAESB may play in setting business practice standards to support DR/DSM/EE, the organisation brings an inclusive structure and a well defined process for standards development to the table – one which is accredited by the American National Standards Institute.

NAESB is organised into quadrants representing the wholesale and retail gas and electric markets. Each quadrant is further organised into segments representing the players in each market. This feature is an important factor as DR programmes have both wholesale and retail components. Standards development is initiated either through the NAESB annual planning efforts or through requests received. When NAESB begins a standards development process, the NAESB leadership reaches out to the subject matter experts and publicises the activity to be undertaken.

There were sensitivities that arose in the initiation of the DR work that were addressed in several formation calls that highlight the NAESB process:

  • NAESB will not repeat standards development activities that are already underway in other standards development groups. The standards developed would be complementary to efforts already underway in other groups. Standards would not be developed unless they were determined to be useful and helpful to the industry. With the robust process and voting procedures, the standards also would not pass muster without strong support.
  • NAESB does not set policy, but instead develops standards that support the policies adopted by federal or state regulators, or by the industry itself, through the broad acceptance of de facto practices. Once standards are developed and adopted by NAESB, the regulators or industry participants can choose to use the standards through a variety of mechanisms.
  • Once standards are developed, NAESB will not advocate that they be adopted by any regulatory group. From an NAESB perspective, the standards are voluntary. That said, many of the wholesale standards have been adopted by the Federal Energy Regulatory Commission (FERC) and incorporated by reference into federal regulations both for the wholesale gas and wholesale electric markets, and some of the standards have been adopted by various state commissions to be applied to the retail markets. When the standards are adopted by a regulatory body, they typically become mandatory for those entities jurisdictional to the regulatory body.

Progress on the DR effort NAESB was approached to develop standards in DR/DSM/EE through both the 2007 annual planning process in late-2006 and through a request to the retail electric quadrant. The efforts were assigned to the retail gas, retail electric and wholesale electric quadrants for consideration. The request, R06024, was received from Advanced Energy, a North Carolina entity. The request asked for a standardised method for quantifying benefits, savings, cost avoidance and/or the reduction in energy demand derived from the implementation of demand side management, demand response and energy efficiency programmes. The request further elaborated that efforts are underway throughout the electricity industry to develop and implement demand side management measures and techniques in order to moderate the growth for electricity.

However, a standardised method for quantifying the energy and demand impact of implementing proposed demand side management techniques does not exist. Entities involved in these activities are using a wide variety of methods to estimate the benefits of these programmes. As various utilities across the nation look at implementing DSM and EE measures, it is evident that results may vary depending on many factors that are localised and at the discretion of the evaluating entity. On the other hand, there are standardised techniques for evaluating and presenting the benefits and costs for a supply side option.

As regulatory commissions investigate utility integrated resource plans, the development and presentation of the DSM and EE options are vigorously challenged by interveners as being incomplete, inconsistent and not treated as fairly as supply side options. Furthermore, utilities recognise the uncertainty of some proposed demand side options because they lack standardised quantitative justification, which may address issues such as programme persistence and other variables out of the DSM/EE programme’s control. DSM and EE programmes often fail to pass cost effectiveness tests (RIM, UTC, PCT, etc.) because the benefit/ cost data that is presented may be inaccurate or based on poor assumptions.

Having a standardised method that is both recognised and understood by utilities, regulatory agencies, programme administrators, consumer advocates and energy service professionals is vital. For example, the amount of energy reduction for a DSM measure in a small building can be simulated by a computer model, obtained by actual load research, based on results from another similar programme, or estimated by engineering calculations. The benefits, costs and energy impacts from any of the aforementioned techniques can vary widely.

With the help of the United States Department of Energy, members of the National Action Plan for Energy Efficiency (NAPEE) group and others, including NAESB’s Board and Executive Committee members, the NAESB leadership reached out to many subject matter experts to initiate the process. The first meeting took place on 11 April and included presentations to prepare the basis for future discussions, as well as a facilitated question and answer session to begin putting boundaries around the first phase of standards development. Presentations were given by Advanced Energy, NAPEE, DOE, FERC and ISO New England. David Pickles of ICF International acted as the meeting facilitator and structured the discussion around several questions:

  • What other DSM/EE/DR standards or guides currently exist (or may be in development)? What are the scope, authority, and timing of these standards? What is the need for a new standard?
  • What might be the scope of a new standard, which organisations would use it, and how would it facilitate better outcomes?
  • Who are the potential stakeholders, and what is the best way to engage them in the process?
  • What might be the practical realities associated with developing a new standard (expense, schedule, alignment with PUC and ISO/RTO requirements, etc.)?

As a result of the meeting, it was determined that the scope of the first phase of the standards development project will focus on measurement and verification of energy savings and peak demand reduction from both a wholesale and retail electric market perspective; addressing quantities – not prices.

This is not to give the impression that prices are not important. There is an interdependency of prices and quantities; however, the intent of the measurement and verification (M&V) exercise in this first phase is to focus on quantities. The policy objectives may be different depending upon whether the reductions are to be achieved in the wholesale or retail market, and therefore the M&V protocols may be different in each market.

For example, energy efficiency measures in retail markets must be sustainable for a longer period of time if the objective is to defer long term generation investment. Demand response in the wholesale market need only be verified for as little as one hour and provides flexibility in optimum use of the power grid. These two examples may represent the ‘bookends’ of the debate that the first phase may need to consider.

Next steps

The meeting materials can be found on the NAESB web site at www.naesb.org/dsm-ee.asp. Several other meetings have been scheduled, at which the scope of the first phase will be refined and the organisation will begin the process of developing standards. The meetings are open to all interested parties and can be accessed via conference call and web cast in addition to attendance in person. All comments are also encouraged and welcomed. NAESB asks that any party interested in the development of standards as outlined in this article contact the NAESB office.