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Show me the money

CARA OLMSTEAD
CARA OLMSTED

By Cara Olmsted,
Director of Marketing and Business Development
ConEdison Solutions
One observation about the demand response (DR) market is that it is complex.

Because of its complexity, there is the potential for confusion, particularly as it relates to the revenue streams available from participation in the various programs.

To participate in these DR programs, organizations should work with a Curtailment Service Provider (CSP), such as ConEdison Solutions, to turnkey the assessment of potential resources, registration levels, registration of load with NYISO and CECONY, bidding, and settlement of the various DR programs and revenue streams.

It is worth the peace of mind that you get when you have knowledgeable energy experts working in partnership with your staff.

Typically, the capacity demand response programs available from the NYISO and Con Edison Company of New York (CECONY) provide participants with capacity and energy payments. This year, CECONY has introduced a new source of revenue-the three-year retention bonus payment.

This is the first multi-year, pay-for-performance bonus in the U.S. and it enables CECONY to more accurately plan for a three-year horizon, because participants will want to optimize their performance and stay in the program for three consecutive years in order to receive this large bonus payment.

The performance requirement is that each year your facility must stay above an 80% performance factor (PF). If your DR resource falls below 80% within the three-year pledge period, you’ll have to reset your three-year bonus payment’s clock. The bonus dollars are to be paid only after the third consecutive year with 80% PF (or greater).

Let’s take a detailed look at the new three-year retention bonus revenue streams:

CECONY Distribution Load Relief Program (DLRP) Three-Year Retention Bonus Payment
The CECONY Distributed Load Response Program (DLRP) pays a monthly capacity reservation payment per specified capacity (kW) that organizations pledge to reduce when called. This is their two-hour advance notice program. CECONY has about 80 networks and has created this short-notice contingency program to mitigate unforeseen impact on its local networks and ensure greater reliability.
If your organization stays in this DR program for three consecutive years AND each year performs with an 80% PF or greater, then you will get an additional $5/kW-mo, for all 15 months; essentially, this bonus nearly doubles your DLRP reservation payments, since the DLRP program now pays $6/kW-mo for its reservation payment.
Each summer is a five-month DR period (May through September). Let’s assume you have a 500 kW capacity pledge for demand reduction for this example. Calculate your DLRP three-year retention bonus like this:
($5/kw-mo) x (500 kW) x (5 mo) x (100% PF) = $12,500 per summer (times three summers). Your CSP will receive the $37,500 payment in the October following your third consecutive summer capability period.
The key here is hitting that 80 percent PF. It can actually be harder than it seems and, again, that’s where a reliable CSP partnership comes into play.

CECONY Commercial System Relief Program (CSRP) Three-Year Retention Bonus Payment.
The CECONY Commercial Service Relief Program (CSRP) is CECONY’s day-ahead, 21-hour notice program. It pays participating organizations for pledging a specific reservation amount (kW) to shave system-wide demand at times of system peaks.
If your organization stays in this DR program for three consecutive years AND performs each year with an 80% or greater PF, then you will get an additional $10/kW-mo for all 15 months. This bonus actually doubles your CSRP reservation payments, since the CSRP program pays $10/kW-mo for its reservation payment.
Calculate your CSRP three-year retention bonus the same way as your DLRP three-year retention bonus payment: ($10/kw-mo) x (500 kW) x (5 mo) x (100% PF) = $25,000.00 per summer.
Your CSP will actually receive the $75,000 payment in the October following your third consecutive summer capability period. Be sure to have a revenue share term in your third-year contract for this bonus CSRP revenue stream.
Maintaining an 80 percent PF (or greater) to receive these two new three-year bonuses may sound difficult, but with a dedicated DR partner providing you with real-time views into your DR performance, obtaining those bonuses can become a reality.

ConEdison Solutions’ clients view the impact of their participation in demand response programs in real-time through the various dashboards that are part of the VPower software that we use, so our clients can always be aware of their DR performance. VPower is a great way to verify that your DR dollars are being continuously optimized.

In addition, VPower empowers you to lower your monthly utility demand charges.

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