Power to the Block: The Economics of Electric HVAC Assets in New York City Demand Response Programs

Abstract

During the hottest days of the summer, the demand for electric power in New York City can exceed what the grid can supply. As the state expands its renewable energy sources to comply with the 70% of total electricity target set out in New York’s Clean Energy Standard, there is an urgent need for increased flexibility in power demand.

This study, a client-engagement with electrification retrofit startup BlocPower, evaluates the economic viability of enrolling a portfolio of electric Air Source Heat pump (“ASHP”) assets in New York’s Demand Response programs. Our analysis assesses the available programs, determining the hurdles and costs to participation as well as the payment structure and drivers of revenue. We have developed quantitative models for forecasting peak events and estimating the curtailable capacity of each asset. We use the models to estimate the economic impact of a small change in the thermostat during a peak event.

Our analyses returned results that have significant implications for the client and for the viability of ASHPs as a demand side resource. First, we found that the choice of system type, multi-split (“MS”) or variable refrigerant flow (“VRF”), had a significant impact on total project costs. The systems require different smart thermostat control solutions, and VRF systems are less costly to implement. We also found that the ISO and the utility compensate participants differently depending on the geographic location of the asset. Higher congestion areas of New York City command higher prices for reservation and curtailment. Our analysis of the curtailable capacity of each asset estimates that approximately 4% of the total system capacity is flexible under the prescribed intervention. Finally, we find that analyzing prospective projects along the three categories of geography, curtailable capacity, and asset type is a meaningful means of identifying NPV positive projects. It is important to note that our analyses use past weather and demand response event logs and do not consider the effects of climate change or seasonal warming.