Can utilities work in partnership with firms that design, construct, operate, and maintain high-performing buildings? Can they work together to push energy management to the next level?
A partnership between two private companies — Avista and McKinstry — is tackling some of the utility industry’s biggest challenges. The South Landing project, an innovative development in the University District of the city of Spokane (Washington, U.S.), is focused on designing and operating net-zero and carbon-free buildings that are grid friendly.
The regulatory model for investor-owned utilities (IOUs) has not kept pace with technological innovations, clean energy mandates, and evolving customer expectations. The IOU model was formulated during the early 20th century to avoid inefficient duplication of infrastructure. Under this model, a significant proportion of utility fixed infrastructure costs are recovered via a volumetric rate measuring kilowatt-hour consumption.
The built environment accounts for approximately 40% of all energy consumption, of which half is wasted because of process and equipment inefficiencies. The variable space-conditioning load of the built environment is a significant driver of utility peak demand. The current regulatory framework provides limited scope for a utility to actively manage or incentivize a customer’s load or demand profile. For commercial customers, this is further separated by the tenant-landlord relationship, as lease agreements typically do not incentivize energy conservation or demand reduction.
Significant disruptions are underway in the electric utility industry. Community choice aggregators are posturing to procure the resource mix of the utility’s customers. California alone has seen the creation of over 19 community choice aggregators, serving more than 2.5 million IOU customer accounts, largely driven by customers interested in energy choice. 60% of Avista’s service franchise resides in the state of Washington where the state legislature recently passed Senate Bill 5116, requiring all electricity in the state to be carbon-neutral by 2030 and carbon-free by 2045. The costs to achieve this mandate are projected by some studies to be in billions of dollars.
Beyond legislative mandates, utility customers are showing an increased preference for on-site energy generation, energy choice, and source transparency. Utilities are seeing high levels of distributed generation deployment, presenting a significant challenge to integrate these intermittent resources into a 20th century power system.
Commercial developers are seeing an increase in investor interest in economically viable projects that reduce energy intensity and environmental impact. To address this need, a rapidly expanding industry has emerged to endorse high-performing buildings, including net-zero and carbon-free certifications.
On the surface, one might assume high-performing developments would be desired and encouraged by utilities, given these developments would reduce demand for scarce grid capacity. However, because of the typical generation profiles of solar, the capacity impact of these buildings on the grid can actually be proportionally greater than a traditional development, particularly in cold climates where electric resistance heating is required to avoid fossil fuel combustion. Utilities require sufficient capacity to supply energy to customers at the time of maximum system load. Reducing the energy consumption of a development without offsetting the capacity requirements does not reduce the cost associated with the utility infrastructure. Rather, it shifts the fixed infrastructure costs to other customers. Solving this challenge requires a new, collaborative approach.
The South Landing development sets a new vision to balance the energy and demand performance of the built environment with the capacity constraints and needs of the utility grid. Avista and McKinstry’s partnership demonstrates what’s possible when utilities and developers collaborate to unite the energy value chain and transform building design, lease framework, and optimized operations.
The South Landing development includes the Catalyst building and the Hub facility. The Catalyst building is designed to meet — if not exceed — net-zero energy operations and pushes the boundaries of active building management.
The Hub facility will host a cutting-edge central energy plant that can generate, store, and share thermal and electrical energy with a combination of heat pumps, boilers, chillers, thermal, and electrical storage. The resulting eco-district has the capability to aggregate and control the entire campus electric consumption, and balance this against the needs of both the development and the grid. Future buildings within South Landing will be served by the Hub’s central energy plant, expanding the district’s shared energy footprint. In addition, the central plant will aggregate site renewable generation with energy storage to provide operational flexibility to heighten economic value for the building owners and the utility grid.
Through the creation of an eco-district, and by deploying thousands of internet of things (IoT) sensors backed by machine learning and analytics, the South Landing development will move beyond demand response programs into active energy management. Active energy management combined with structured incentives can improve grid use, reducing the need for system capacity and deferring planned network augmentation. Active energy management also enables other use cases, such as shaping building load to better match on-site variable generation.
In this case, the eco-district becomes the manager of the energy resources supplied to the South Landing campus buildings and their tenants. The eco-district is empowered and incentivized to drive down operational costs — breaking through the traditional utility-customer (meter) and landlord-tenant (lease) barriers. As a part of this effort, the operational flexibility of the eco-district will be captured. This valuation will quantify:
- The value of utility capacity reduction; and
- The value of efficient and reliable conditioned environment service to building tenants.
With the optimized operational mode identified, there may be opportunities to design a modified rate structure that incentivizes grid friendly net-zero and carbon-free buildings while ensuring fair utility cost recovery.
The South Landing project is an example of how utilities and developers can collaborate to drive technological innovation and accelerate meaningful transformation of the utility business model. The eco-district model is envisioned as a platform and gateway to an affordable clean energy future.
