Guest Interview with Daniel Violette, PhD. of Navigant Consulting

  How long have you worked at Navigant Energy Practice?
  I have worked in Navigant Consulting’s Energy Practice for approximately two years.  Prior to that, I
  helped found Summit Blue Consulting, a firm focused on utility planning and evaluation work with an
  emphasis on integrated resource planning, and the role of demand response (DR) and energy
  efficiency (EE) in a resource portfolio.  Much of the work involved Evaluation, Measurement, and
  Verification (EM&V) on DR and EE resources and activities. Navigant acquired Summit Blue in
  December of 2009, and we have continued performing the same work at Navigant with the advantage
  of having access to Navigant’s existing supply planning and transmission planning models and
  consulting, as well as engineers from Navigant’s acquisition of Arthur D. Little approximately 10
  years earlier.

What is your role at Navigant Energy Practice?
I am a Managing Director in the Energy Practice working on a wide range of projects, but with a focus on energy economics, resource assessment and valuation, utility planning, and EM&V of DR and EE resources. We have over 300 people in the firm’s Energy Practice with experience across engineering, planning, and economics.  This allows me to work on a diverse set of projects, but the common theme is resource planning and assessment, EM&V plans for smart grid technologies, and work on DR and EE EM&V projects.

How long have you been involved in demand side activities and research?
My involvement dates back to 1986 when we participated in one of the first state-wide evaluations of DSM activities in New Jersey.  This was one of the largest EM&V projects undertaken at that time - a 3-year, multi-million dollar effort across eight electric and gas utilities.  Multi-year and multi-utility evaluations have become more common today, but this project for the New Jersey Conservation Analysis Team (NJCAT) was one of the first.  I continue today to run into key actors from that early path breaking effort in the demand-side industry.

What challenges have you faced as a DR professional within your organization and within the industry?
There have been two key challenges.  The first involves determining how to incorporate demand response resources and innovative pricing into resource planning.  Resource planning has a long history and planners have adopted models and methods to develop integrated resource plans.  DR poses challenges for these resource planning efforts in that it is a resource that has very high values in certain years, but may not be used much during other years.  Incorporating the value of DR to ameliorate the costs of low-probability, high-consequence events has challenged resource planners and required the development of new tools and approaches.  For DR to be successful, resource planners need to see the value of DR in the resource portfolio.  This has been hard to quantify.  A report I authored for the International Energy Agency (IEA) showed that DR may only be used to near capacity levels once every five years with lower levels of use during the other four years; but, that one time in five years when it was really needed provided benefits that covered the costs of the DR infrastructure for more than ten years.  This insurance value of DR has been hard to capture in resource planning, and is only beginning to be acknowledged by resource procurement professionals. It requires acknowledgment that there are unexpected events that occur outside normal planning parameters and DR is an important if not critical hedge against these events.  The hot summer of 2011 and the need to call DR resources provides, yet again, an example of the value of DR.

The second challenge has been the measurement and verification of DR resources.  DR resources are different than supply-side resources and the “instrumentation” of the DR power plant needs to be different.  A baseline against which DR contributions can be measured is needed.  This can challenge accurate measurement of the delivery of MW from DR, but while this is a challenge for DR, the many uncertainties in supply-side resources also need to be considered.   Supply-side resources have uncertainties in the costs (i.e. revenue requirements) they impose on ratepayers going back to the resource development decision where uncertainties in fuel costs, siting and construction costs, environmental compliance costs, and in the performance of the unit (heat rate, availability, and maintenance costs) can result in nearly +/- 100 percent uncertainty in future revenue requirements from a decision to develop a supply-side power plant.  As a result, both DR and supply-side resources have substantive uncertainties that need to be addressed in developing 5 and 10-year plans; however, the uncertainties are different and appropriate tools need to be developed to balance out the risks and rewards of investments in different types of resources. 

What changes have you seen in the industry as it relates to DR and EE over the last few years?
The role of DR in restructured markets with independent system operators (ISOs) has increased rapidly after overcoming a slow start as system operators developed the procedures necessary to integrate DR into their energy and capacity markets.  Much of this has occurred in the past five years.  DR has not been as widely embraced in other parts of the country served by vertically integrated utilities. It has been harder to demonstrate the value of DR in these integrated utility markets, but progress is being made and the outlook for DR looks good.  We have had substantial development of DR in a few key areas, but there remains a lot of upside for DR in other regions of North America.

What do you expect to be the biggest challenge with implementing DR in the next decade?
DR is still somewhat of an infant industry, in my opinion.  The basic challenges still remain – 1) appropriately determining the role of DR in a resource portfolio over 5, 10, and 20 year timeframes and developing the planning tools that will provide DR with appropriate values in the resource plan; and 2) continuing to improve our measurement and verification of DR resource contributions as we move towards a more integrated grid structure (i.e. taking steps toward the eventual smart grid in the long term).

What advice or guidance would you give to young professionals who are considering a career in demand response and smart grid?
I would recommend that professionals new to the DR and smart grid industry take advantage of the time they have early in their career to expand their tool kit in quantitative methods.  The one time you have to really study statistics, modeling and engineering methods is in college and in graduate programs.  Once you are in the field, mastering tools and expanding your tool kit to solve problems is more difficult.  Also, all participants in the industry need to adapt to working with the different types of planning uncertainties posed by every type of energy resource.  Supply-side resources pose one type of uncertainty that may be focused on the cost of and time to develop the resource while DR poses other uncertainties that need to be incorporated into portfolio design.  Both types of resources will continue to be important to the industry going forward, and we need to get better at taking advantage of what each type of resource has to offer end-use customers and ratepayers in a planning region.