Episode 2: Peter Kelly Detwiler - Exploring the Relationship Between Campus Energy Systems and Local Utility Provider - Transcript
Dave Karlsgodt 0:03
Welcome to the campus energy and sustainability podcast. In each episode, we will talk with leading campus professionals thought leaders, engineers and innovators addressing the unique challenges and opportunities facing higher ed corporate campuses. Our discussions will range from energy conservation and efficiency, the planning and finance, for building science to social science, from energy systems to food systems. We hope you are ready to learn, share and ultimately accelerate your institution towards solutions. I'm your host, Dave Karlsgodt. I'm a principal at Fovea, an energy, carbon and business planning. Today's show was recorded by my friend and podcast collaborator Jason Delambre. Jason is a carbon and energy consultant based in Lexington, Kentucky. Jason assists utilities, cities, universities and organizations with sustainability related projects and goals. Jason recorded this interview in early February 2017 with Boston-based energy consultant Peter Kelly Detwiler. In this interview, Jason and Peter explore the relationship between campus energy systems and the local utility provider, including the impact of demand side management, peak demand charges, how utilities recoup their capital investments, the impact of co-generation and the rapid rate of change and how energy is delivered to campuses. I hope you enjoy Episode Two of the campus and sustainability podcast.
Jason Delambre 1:28
Peter Kelly Detwiler is an energy consultant based in Boston, Massachusetts, Peter has worked in the energy sector for over 30 years, and been integral to the development of innovative demand side management programs throughout the country. Today, Peter writes energy articles for Forbes, travels the country advising clients on energy procurement, and management practices, and even finds time for the occasional early early morning fishing trip. Peter, welcome to the show.
Peter Kelly Detwiler 1:52
Thank you, Jason.
Jason Delambre 1:53
I really appreciate you taking the time out of your day to talk with us, Peter, we plan to talk a lot about University sustainability on this show. And I've got four questions I'd like to kind of go through and we can kind of dig deeper as it comes up. So with that, let's jump in. And one of my big questions for you is with the rapidly modernizing national and local campus grids, what roles are you seeing demand side management play in between utilities and campuses going forward?
Peter Kelly Detwiler 2:18
So campuses and universities and colleges represent significant portions of electricity load for a lot of utilities, they can certainly represent 510, 15 or more megawatts in many cases. And so that's, that's a significant portion of utility loads in many jurisdictions of the country. So what we're seeing is, as utilities begin to focus more on integrating the customer in the planning conversation, particularly in certain markets, where there's a real equality now on what's happening on the demand side with a supply side and a focus on making the entire grid more efficient. We're seeing that colleges and universities are being increasingly treated as partners in that conversation. That is, they're invited to become involved in that dialogue in terms of how and when they use electricity. And what does that look like in terms of the context of the economics of the power grid?
Jason Delambre 3:16
Okay, that's great. How are you seeing these opportunities playing out? And what do you seen it as a benefit to the regional grid beyond the campuses borders?
Peter Kelly Detwiler 3:24
So the first thing is, let's talk about the grid in the beginning. One of them was critical things to understand about the power grid is that it's designed for reliability, it is designed for the maximum hour of peak demand that could possibly be needed. Since we're rolling into Super Bowl season of this week. Oh, yeah, my team happens to be in that again, huh? Anyway, one of the things that I experienced when I worked with the Massachusetts Water Resources authority, probably 10 years ago, when I was discussing demand response with them, as they said to me, do you know when our peak demand is that we have to plan our pipes and our and our whole treatment plan for? And I said, No. And they said, halftime for a really close Super Bowl in which the Patriots are playing. And I said, because everybody's running to the toilets, right? And they said, Absolutely. And in Germany, or sorry, England, there's a classic thing called the steam capital curve, where during a game between Germany and the UK World Cup game, during halftime, the grid peaks, because everybody's running to turn on tea, that same thing wouldn't happen here. Because we don't drink tea, we go to the fridge and grab a beer. But, but essentially, you have to think about sizing for your peak. So in the United States, the hundred hours of peak demand of the 8760 hours of annual demand on our peak, the highest 100 hours, we spend approximately 8% of our total infrastructure costs to meet those last 100 hours. So we can push down that curve. And all those last one hundred hours are highest 100 hours, we can save almost one 12th of our capital costs. So how does that involve the utility? How does it involve every customer on the grid? Well, if they are one of the contributors to that peak demand during those hundred hours. And there are ways of shaping that peak shifting at peak other periods or eliminating it through energy efficiency, through generation on site through other means, like that demand response, etc. Those savings are available to be recouped and paid among the various participants. So one of the things we all focus on as grid planners is how we look at those maximum hours of peak demand and find ways to eliminate them.
Jason Delambre 5:44
Okay. And also this infrastructure you're describing as an aging infrastructure, where a lot of that capital is going to have to be reinvested eventually anyway. So you're saying that universities can have a role and how and that infrastructure is built and dispatched?
Peter Kelly Detwiler 6:00
Yeah, the American Society of Civil Engineers indicates that we are under investing on an annual basis by 10s of billions of dollars in the grid. If you look at the grid, there are many pieces on the grid transformers and whatnot that are older than I am, which is scandalous, because I'm closing in on 57. So that's pretty bad stuff. So there's a lot of capital investment that has to be made in the relatively near future. And some of those capital investments can be avoided or deferred, if we find ways to become more efficient in our power consumption. And again, particularly reducing peak demand during periods of stress on the grid, which means there are payments that are available, or financial opportunities. So if you look at a typical utility, and almost or college university, any utility in the country, they pay a power bill, and they need to understand the contextual elements of that bill. So the first thing they pay for, or the raw kilowatt hours, somebody somewhere is sending electrons across the grid. And the college university is consuming those electrons, those kilowatt hours energy. So you can reduce the cost of the energy. But you can also, you're also charged based upon what's your period of maximum peak demand during each month, because the utility says, Oh, we emphasize our wires and poles infrastructure to serve you. So the first thing you'll look at is, what is your demand charge on the bill, and in some places in Kentucky, California, New York, markets like that the demand charge, that period of your peak demand for the month that may represent as much as 40 or 45%, of your overall costs. So the first thing you want to look at is what am i spiking in my demand? And what can I do about it? And then you look at how can I reduce my overall kilowatt hour consumption as well, the raw electrons. And if you start to really understand the bill, and the logic of that cost structure that you inhabit, as a college or university, that's where you first started, like learning a language, except it's a lot simpler. But you really need to understand one of the dynamics of that power bill, in order to make sense out of it and know where to focus your energies.
Jason Delambre 8:14
Okay, that's really interesting. And I've heard a little bit that, with this older infrastructure in place that has already been paid off that a lot of states and universities are benefiting from a reduced rate because they're not having to pay that capital return on investment, because these are capital investments have been paid off, I assume, with new infrastructure being planned, that could have an impact on rates going forward beyond just fuel charges and things like that.
Peter Kelly Detwiler 8:43
Yeah, I mean, a lot of utilities, even though the infrastructure is paid off, they're now thinking about what are those replacement costs, and they need to have the capital in place to to pay for that. And so all things being equal, because of that under investment today, we're likely to see rates rise. As we do, then the question again, becomes, are we going to spend that money and additional physical infrastructure? Or can we make that capital available in the form of savings to the consumers, the colleges and universities and other players, I might also add that in this period, we are undergoing a rapid evolution and some say a revolution of the power grid, where you see solar and electric vehicles and stationary energy storage and other technologies like Smart Lighting, which can reduce the consumption of a light bulb by 75%. There's always new technologies coming onto the grid at the same time, that these massive long term infrastructural investments have to be made. And one of the fears, and I think it's a legitimate fear of the utilities is they make these investments for an infrastructure for demand. And then nobody ends up showing up to the party because the demand simply does not materialize as we infuse is more it into the grid, and we become more efficient at how we use electricity. So let's take an extreme example of one level of demand that's going to be reduced dramatically in the years to come. Nighttime LED lighting, street lighting, right now we light up our roads all night long, from sun set to sunrise, the same illumination all night long, in most places, but not in Cambridge, Massachusetts, or Copenhagen. When the midnight comes along, or one or two in the morning, the lights dim because there are fewer people who need them, that's fewer kilowatt hours being consumed across the system. In a place like Sweden, when you driving a car down the road in the middle of the night, and no one else is on the road, the roads dark except for you. And the road lights up ahead of you, the LED lights have sensors in them in anticipate your speed, you know how fast you're moving down the road. And that use directed electron moves ahead of you down the road. So now, you might only be using two or 3% energy that was used otherwise during the nighttime. So that changes the ability of the utility to recoup revenues because they're not selling the electrons anymore. So again, one of these concerns is in this new world, where there's all these new technologies and ways of thinking about electricity, there's a hesitance, dare I say fear to make these large capital investments, when we don't really know what this world's going to look like in five or 10 years, which, in the old days, five or 10 years, everybody was fairly confident it would look the same nowadays, five or 10 years is hugely different. Five years ago, solar was almost nothing. Now, there's 1.2 million households in this country with solar on them. And the next thing is going to be batteries. And there's already a half a million electric vehicles. Five years is a long time in today's world, and it wasn't 20 years ago.
Jason Delambre 11:49
Well, that's, that's fascinating. And as you've hinted at, and as I've read before, you know, our previous 1940s, 1950s 1960s utilities, we're built around baseload and then having speakers, natural gas speakers and other types of peaking devices to meet that those peaks that you're talking about. But we seem to be suggesting now is, that's kind of going out the window, especially with fracking and natural gas, already changing the paradigm of peaking and natural gas as a baseload power, it just seems like that's going to speed up and escalate from what you're saying right now.
Peter Kelly Detwiler 12:23
Yeah, so there's a lot of dynamics that are unclear how they're going to evolve. One thing we know is that baseload energy consumption, which is principally the domain of industries that run three shifts, that actually is going over to China, we've lost our manufacturing load in this country. So at the same time, we've migrated into more and more of a service economy, which is a daytime economy, which involves computers, and among all the things that involves it'll much more air conditioning. So we become a peak year economy, using more electricity periods of peak demand, then we used to be in the old days. So now the question is, how do we respond to that? How do we shape the grid differently? And what technologies can we bring to mitigate that increase picking at pickiness that we haven't seen before? So this what's what's interesting right now is because there were so many different dynamics, there's fracking, which is lowering the cost of natural gas. But there's LNG technology, which is increasing the demand of gas, there's solar panels, which bill by 30%, in just six months this year, battery storage, which was expected to decline by 50%, over five years, we believe the new batteries coming out of China next year, we're going to be 30% cheaper than they are this year. So there's, there's all these different trends that are slamming into each other with an amazing astonishing rapidity that just did not exist a decade ago, and how all these cards once they're thrown up into the air where they land, which ones are face up, which ones are faced down where the aces lie, nobody really knows how that's quite going to look. But there's, there's an attempt to create a new playing field where the right incentives are put in place for people to do the right things at the right time with the right technologies.
Jason Delambre 14:16
Circling back, that's great context, circling back to universities, if I'm a university facility director, and I'm sitting here with an aging infrastructure, maybe a central plant, I do have maybe some on site generation or at least backup potential. How am I taking advantage of some of these trends that you're seeing out there? How am I looking at them? How am I staging them? What am I looking at in the near term? What am I looking at further out?
Peter Kelly Detwiler 14:41
that's a that's a good question. So first of all, whenever you're looking at this year, it's imperative to look at it again next year, you can't do a study and say, Okay, I know what the world looks like now put it on the shelf, and forget it. Because essentially, you just looked at a snapshot in a, and we're inhabiting a Motion Picture world with the frames accelerating. But let's say we start with that one frame, the first thing you do is you look at Okay, how am I consuming electricity? And again, in the context of the bill? What is my plant likely to look like in the future? You know, my student body would my demands that are likely to change? And then do I have infrastructure that's due for renewal for replacement, etc? What does that look like? And then the next question is, once I understand my cost structure, and my avoided cost, and what am I need to do, then it's a conversation with your utility, every university and college is large enough that they should be able to get the utility to sit across the table from them, because you consume millions of dollars of power a year, in most cases. So you're a significant enough consumer, that the utility is going to sit down and have the conversation in most cases, and many utilities have incentives for efficiency programs for demand response for interval interoperable, rates, etc. So the first thing you want to find out is, okay, what's available to me? There's one example from your neck of the woods, Glasgow, Kentucky, where the municipality was paying many 10s of percentage of 30 40% for the demand charge. And what did they do? They put batteries in all over behind the meter residential opportunities? Because they saw an ability to reduce costs in a way that made sense. That was their own little ecosystem, economic ecosystem, if you will. But every utility has an economic ecosystem where they know where their avoided costs are and what makes sense to invest in what doesn't, you as a college university have significant leverage, because you're a large consumer. So the question then is, how do I sit across the table from my representative and say, all right, what is available to be now? And what else might I be asking for from my utility? And it's a series of exploratory conversation to say, Look, I know what the rebates are right now out there. But what if I did this? What if I were able to do that? And pretty soon, you know, you might need a consultant, you might have someone on hand who can do it yourself. But if you know what you think your demand charges, your energy charges, your other charges in the bill are going to be then you can turn around you can look at Okay, does it make sense for me to put in solar storage is do I need steam is cogent an opportunity here? What where am I opportunities and alternatives. The good news right now is you are no longer a price taker, you're not a hostage to a cost situation, you cannot change with all the technologies out there, and all the developers and financial entities that are capable of stepping up to the plate and putting money behind these things. It's a completely different world than it was just a little while ago. But it does imply that you have to educate yourself and become an informed consumer.
Jason Delambre 17:51
Well, that's, that's wonderful. And it also sounds like universities could benefit instead of acting, just thinking as a customer maybe put themselves in the place of how the utility is seeing their larger grid and how as a large customer in that grid, they can, from their perspective, being easier customer to work with, thereby hopefully, getting lower rates or these other benefits. One formalized process.
Peter Kelly Detwiler 18:16
So just just to You're right about that one thing is the most effective negotiators know what they look like from the other side of the table.
Jason Delambre 18:23
That's great. And then as a formal example of that, that's taking place in some higher rates, parts of the country that you have helped pioneer with your work at constellation energy is to demand side management or megawatt development of utility portfolios such as see power, or what internet is working with, to talk a little bit about. I know a lot of campuses out on the west coast and East Coast are taking advantage of some of these along with other industry and utilities. Can you talk about other colleges that should be looking at this at other parts of the country and and how these kinds of things work?
Peter Kelly Detwiler 18:59
Sure. So demand response typically takes place in a competitive power market, or California, which isn't competitive, but a setup a similar sort of a structure. And what they do is they basically say in addition to the utility demand charge, which is your period of maximum demand, your particular facility, or whatever your meter is, they say, what's just as important for us is, what is your contribution to the hour when the system peak was reached, when everybody was contributing to the system peak. And then so that's your icap charge your installed capacity charge, or your demand charge. And so what companies like see power and internet do is say, we can offer you a demand response program, where let's say the cost of capacity is $50,000. a megawatt year will give you say, 80% of the value of that $40,000. In audio, if you can commit to shaving demand during periods when we call, you know, if that involves some facilities manager in college, and maybe 15 students running around turning lights and air conditioning off and that sort of thing. That's a fool's errand. The good news is today, with the instrumentation that's out there right now, and control systems, is an ability to automate this that didn't exist, just you know, five or 10 years ago, we found a constellation we built a platform called Virtual lot, which then migrated to see power after we bought them. And then they were spun off where customers could see their usage in real time. They could see prices in real time. And they could be curtailed automatically. And I don't know I can all the all the demand response providers now have similar capabilities, because it's absolutely critical that the grid can rely on those curtailment during periods of peak demand, and then customers get paid as consequence.
Jason Delambre 20:53
Yeah, that's wonderful. And I guess one good example, you mentioned Glasgow, Kentucky earlier. And I know you've done some research on that. They've pushed similar kind of programs out because of their relationship with TVA. And they've really tried to push it not only into large commercial, but also commercial and residential. Do you see some good parallels there that maybe universities could draw from, and looking at like a Glasgow situation?
Peter Kelly Detwiler 21:16
I do. And again, it starts with what Glasgow did. And Billy Ray, I actually interviewed him for Forbes piece a couple years ago, before he enacted that program, and I was really impressed with he has what you see in innovators, which is they see the world and in a really clear way. And he knew exactly what his cost structures were any was very proactive and thinking about how to approach it. And you see this with some of you are more forward thinking colleges and universities that are on the cutting edge. So for example, UCSD out in San Diego University, California, San Diego, where they have a micro grid, other colleges, one of the things that you and I had a chance to work on Jason was the sustainability program for university where we looked at best cases around the country. And I would encourage folks listening to the podcast, to just google efficiency programs, universities, a code generation universities, micro grids, universities, demand response universities, and you'll get a really quick sense of who are some of the leaders in different spaces around the country. And that helps you not have to reinvent the wheel, because you can see what other people did, how they did it, what some of the pitfalls were, and a lot of the advantages. And with today's internet and the ability to email someone or pick up the phone and get that information, you can really short circuit, the learning curve that used to take so darn long, just a short period of time ago. So what Billy Ray did, you know, he put the batteries behind the meter, now we're starting to see universities in California, putting batteries out there, becoming involved with integrating electric vehicles on their campuses, those sorts of things, putting obviously a lot of solar behind the meter to mitigate their energy charges. And so again, there are a lot of technologies, which not only taken individually, but sometimes combined together like solar and storage together is is not just one plus one equals two, it's more like one plus one equals 2.5, because they complement each other in helping to reduce costs. So again, I would advise people, sometimes it's really helpful to get a consultant. But even before you do that, go online and do some basic research and four or five hours, you can inform yourself to the level where if you do hire a consultant, you can have a much more important conversation to be asking much more intelligent questions earlier in the game, then if you don't spend that initial time to understand the context.
Jason Delambre 23:45
Okay, yeah, that is that is all wonderful. So we're coming down to the the end of the 30 minutes here. And let me just ask you a kind of question to wrap this all together. Many people say that with the aging infrastructure, you've mentioned a little bit of that here of our utilities, as well is all of these new technologies coming on, and then also adapt patient issues around climate change, that universities really need to think about how redundancy and adaption to a changing and maybe volatile future would be coming down to them? Would you mind just sort of wrapping this all together into sort of single vision of what you think a university or college should be doing there should be looking at, and how they should be thinking of themselves in this larger world of energy?
Peter Kelly Detwiler 24:27
Sure. So I start with a couple of premises. One is, universities are that shining city on the hill, and they've always meant to be that. So they're there, they should be exemplars of what society at large, should be thinking about. And they have traditionally had that role, which means a they they need to be leaders. And it's also cost effective for them and practical for them to be leaders because they're mitigating risk that they're otherwise exposed to. So microgrids on campuses where you have the ability to shut off the entire campus from the power grid, in the case of a hurricane sandy or some other outage. Some campuses are now doing that, obviously, the solar in the storage. Second thing, though, is these are unparalleled education opportunities, hands on education opportunities for students, and you put me in touch with somebody at University of Cincinnati, and I can't unfortunately, remember his name right now, who is doing some really amazing things on the campus with new technologies. When they were new, opportunities for upgrades, they got rid of a steam boiler, dirty boiler, for example, and put in a more efficient system. And they had students involved in the process. What's better for a kid coming out of college out of a masters or an undergrad degree than to be able to point to his curriculum, and say, I was involved in a hands on program, building a micro grid, replacing a boiler designing a solar system. One of the people that I work with right now, one of my assignments, I work with a software company, and the best employee in the entire company is probably this guy who graduated a few years ago. And he was responsible for putting solar on his campus up in Maine at College of the Atlantic. By the time we met him, he knew everything about inverters, DC, AC connections, the economics how to size that thing, because he was a practitioner at the ground level, he was unbelievable. And he came straight out of college. These are the kinds of opportunities that not only can we But should we it's an obligation for us to be training the workforce of the future, to know how to do this stuff. If we don't, it's practically criminal in this world that we're evolving into. We can't just look, I love liberal arts. I'm a German major, but I also think it's really important for people to come out of school with some hard skills. And one of the things that people can really be educated with is, how do you actually do this stuff. And I think every college and university should be trying to develop some kind of a program around these physical skills. One Forbes piece I wrote about community college down in the Carolinas, I think North Carolina, and they actually had the transformer on campus that the students could work on. They paid, I think it was 10 or $15,000 a year to go to school for two years. And the starting salary these kids coming out of school was $80,000. a year. Why? Because the utility industry is retiring half of its workforce in the next 10 years. They need students who are literate both in the technology and in it and how these pieces are all combining. And they're way short, that we're going to have to import talent from overseas. And we're not even sure if we can get it there. So as much as anything, I see universities right now fulfilling a super critical role in training the workforce of the future, even while they're pragmatically solving their own problems on campus, and it's an unparalleled opportunity.
Jason Delambre 28:04
That's, that's amazing. So as a facility director at a college or university, I shouldn't just think about my brick and mortar, I shouldn't just think about my piece of the pie. Instead, I should be thinking, How can I align my objectives and goals with the larger mission of the university in college and bring in stakeholders across the entire campus community in what I'm trying to do as a comprehensive solution?
Peter Kelly Detwiler 28:26
Yeah, there's a there's a unique opportunity. Look, we are moving through a revolution, which is probably unparalleled. It's the sort of second computer the second Machine Age, which involves it with this mandate to decarbonize, so the entire grid is going to transform within the next decade, two decades, it's a trillion dollar transformation. China alone is investing $50 billion a year because they want to own the space. So here's this once in a lifetime chance to be involved in this massive transformation of how we are supply energy in what is arguably the biggest machine and the most complex machine in the world, which is our power grid. So here's this chance for higher education, to not only solve its problems, but also to create this really powerful Educational Foundation and trajectory for students for the next decade to spin off into this emerging energy economy as it evolves. To me. It's one of the most exciting things that I see happening in our economy today. And it's so underdeveloped relative to the potential that wise out there right now.
Jason Delambre 29:35
Well, that is true that I think that is a great, optimistic, forward looking view to stop here. For those of you who are listening, I hope you enjoyed this conversation. There will be more podcasts coming out on sustainable issues with universities and colleges. If you'd like to learn more about Peter Kelly Detwiler, he writes for Forbes, and you can google his name and find it there will also have a link with the podcast. So Peter, thank you for your time today, your expertise is unparalleled in this area. And I'm really glad you took the time to share it with us.
Peter Kelly Detwiler 30:06
Well, thank you for making the opportunity available.
Jason Delambre 30:08
Absolutely. Thank you, Peter.
Dave Karlsgodt 30:11
We hope you enjoyed the second episode of the campus energy and sustainability podcast. You can find links and other show notes on our website at campusenergypodcast.com. We'd love to hear your feedback. Please feel free to email us at email@example.com. Thanks for listening.