California Utilities

LOBOS: A Solution For Both Supporters & Critics of FERC Order 745

Thursday, December 6, 2012

If you don’t spend your evenings reading energy-industry trade journals, “FERC 745″ is probably gibberish to you.  So let us try and explain.

The Federal Energy Regulatory Commission – FERC – is the government institution that creates rules about how power is distributed across the country.   In March of 2012 they issued order 745, a new rule that changes how large energy producers have to treat demand response energy savings.

At its core, order 745 requires large utilities to value a kilowatt of energy saved by demand response the same way they’d value a freshly generated kilowatt. Under order 745, if you use a system like LOBOS to lower your energy consumption by 1,000 kWh during a demand response event, the electrical company has to pay you for saving that energy. Furthermore, order 745 says that the amount they have to pay you for saving 1,000 kWh is the same amount that buying 1,000 kWh of electricity would generally cost in your local market.

As you can imagine, most people on the demand response side of things think this ruling is the greatest thing since sliced bread.  It means that if you participate in demand response, not only will you get the benefit of reducing your energy costs during peak energy consumption periods, you’ll actually get paid for the energy you save, just as if you’d generated it.

As positive as the response has been from demand response aggregators and building owners, order 745 hasn’t received glowing reviews form every corner of the energy community.  Many power producers aren’t huge fans of the changes brought about under order 745.  In fact, they even went so far as to file a petition with the U.S. Court of Appeals trying to get it overturned.

One objection referenced by the trade group that filed the petition against FERC 745, is that the order will allow, “behind the meter generation to qualify as ‘demand response.'”  What they mean is that during a demand response event, an individual facility could fire-up their own diesel generators to supplement the energy they’re pulling from the grid.  In this scenario, the facility would be using less energy from the grid, and under order 745, getting paid fairly for each kWh they “saved.”  But they wouldn’t really be reducing their overall energy consumption, just shifting the energy production from the grid onto their own generators.

Energy producers don’t see this as fair, and additionally they argue that since small-scale generators aren’t regulated under the same emissions laws as large-scale generators, they could contribute significant amounts of air pollution.

Another concern, voiced by Paul Centolella in a Green Tech Media article, is that order 745 misses the point.  Order 745 doesn’t distinguish between manual or automated demand response.  Under order 745, there’s nothing to specifically encourage automated and intelligent demand response. Paul sees that the future of a truly optimized electrical grid demands more than just flipping off switches, it demands fully automated, graduated  and intelligent demand response.

Lucky for us, we feel that LOBOS offers demand response in a way that both supporters and detractors of order 745 can get behind.

For building owners and demand response aggregators, LOBOS helps to get the most out of FERC 745’s potential.  With a fully-automated LOBOS demand response system, you can take part in demand response events automatically, and reliably deliver big energy savings while minimizing any disruptions to the comfort of your occupants.

For the power generation community who are concerned about order 745 moving power generation “behind the meter,” LOBOS offers demand response capacity from actual energy usage reductions, not generation.  Thanks to the intelligence built into the LOBOS platform, buildings with LOBOS installed can reduce their pull on the grid without resorting to generating any additional electricity.

For critics like Paul Centolella who are concerned that order 745 doesn’t do enough to promote demand response automation and intelligence, LOBOS offers a fully automated and intelligent demand response system that can deliver precise energy savings in response to realtime market conditions.

We understand that not everyone is a supporter of the changes brought about by order 745.  But, whether you fall into the pro or anti-745 camp, we do think that just about everyone can get behind the type of intelligent, automated and precise demand response offered by LOBOS.

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