Duke University Health System Demand Response Prospectus

Abstract

The Duke University Health System Demand Response Prospectus is a client-based Masters Project that explores the profitability and environmental impacts of enrolling Duke University Health System and Duke University into Duke Energy’s PowerShare demand response program. Demand response programs are mechanisms used by utilities to decrease energy demand during high-usage periods (e.g. hot days when air conditioning use is highest) by incentivizing their customers to reduce grid consumption for a limited time. This temporary demand reduction results in cost savings to utilities because it allows them to avoid using their most inefficient and expensive power plants. In our project, we analyze the economic, environmental, and regulatory feasibility of using Duke University and Duke Medicine emergency generators in a Duke Energy demand response program called PowerShare, more specifically the Generator Curtailment Option. Duke Carbon Offset Initiative credits, a Duke University funding mechanism to reduce carbon dioxide emissions, were also considered as a potential revenue source. In order to conduct the analysis, an MS Excel and Visual Basic model was created to calculate the impacts of enrollment. The model provided to the client was designed to offer an easy user interface to quickly conduct the analyses. It was also specially designed to offer the flexibility to incorporate future changes in the energy market and user preferences. The model results indicated that, while feasible, demand response enrollment is not currently attractive from environmental and financial perspectives. The financials are poor for two mains reasons. First, expected net revenues are strictly negative because PowerShare enrollment requires Duke University to re-enroll into paying a demand side management rider (DSM) to which they are currently exempt. The DSM fee, although minimal individually, amounts to an astronomical fee for large consumers like Duke University and Duke Medicine since it is charged per unit of energy purchased. Second, PowerShare curtailment compensation is lower than current cost of diesel fuel. From an environmental perspective, PowerShare is also not a favorable option. Instead of offering a carbon emissions reduction opportunity, PowerShare participation is actually expected to increase the amount of global carbon emissions because Duke University generators emit more carbon than Duke Energy’s natural gas peak usage plants.