NZE Electricity Sector Proposal
To move towards a clean, flexible energy system for the City of Star Lake, TX, MEME recommends two strategies focused on demand management and building appliance electrification.
Strategy 1: Develop and implement a time-of-use electricity rate structure.
MEME proposes working with the City of Star Lake Electric Utility Company develop and implement an electricity rate structure that rewards customers for reducing peak demand, incentivizes electrification by offering low off-peak rates, and supports grid flexibility during extreme weather events which are increasingly common in Texas. The first phase of this project involves designing a time-of-use (TOU) rate with higher prices during peak hours (4-9pm on weekdays) and lower off-peak rates to incentivize energy services like EV charging and heat pump. A voluntary program to manage energy demand may also be implemented, allowing customers to opt in to utility-controlled EV charging delays during peak demand events. The second phase of this project involves a pilot-testing period in which one thousand residential and commercial customers may sign up for voluntary participation. Participants will receive incentives such as smart thermostats and rebates for efficient appliances. The third phase of implementation involves using the pilot data to make any necessary adjustments to the rate structure before creating materials for a city-wide marketing and education campaign.
Figure 1. Bar chart shows data reported by utility companies to the EIA in 2023. Took the 26 utilities reporting more than 100 MW in potential peak demand savings. Removed outliers reporting erroneous data such as demand savings in excess of their operational peak demand. The average potential savings as a percentage of peak demand was 6.6%, and the average actual energy savings as a percentage of peak demand was 5.3%. The data shown is available at https://edu.ella.cx/2023-demand-response.pdf.
Figure 2. Electric power load profile generated using EPA Avoided Emissions and Generation Tool (AVERT). Load shifting can reduce gas-fired peak plant use. This load profile, modeling 5.3% generation reduction during peak hours, will displace 15,062 GWh of regional (Texas) fossil fuel generation over the course of a year.
Cost impacts
We estimate a startup cost of $400k for one full-time staff person and contractor payments over the course of 1 year for initial rate modeling, billing system upgrades, marketing. Smart thermostats for the first one thousand customers would cost approximately $100k. Once the program is up and running, we estimate an ongoing annual administration cost of $200k/year for program administration, customer support, and digital infrastructure for web hosting, analytics, and software services.
Strategy 2: Replace fossil fuel appliances with high-efficiency electric alternatives at end-of-life (EOL)
High upfront costs to retrofit new energy-efficient appliances are often a barrier to electrify. Instead of imposing upfront retrofit costs, MEME recommends a policy requiring homeowners and businesses to replace gas-powered appliances with electric alternatives when they reach the end of their useful life. This policy leverages natural turnover of appliances to decarbonize over time without requiring major retrofits and financial investment at once. The initial phase of implementation involves defining foundational benchmarks for building energy use, disclosure regulations, guidelines around inspection processes, and minimum efficiency thresholds determined either by age or equipment failure. To create equity and fairness, a hardship exemption and waiver process should also be established. Once the groundwork is laid out, the next phase of implementation consists of public engagement and contractor training. Contractors should be educated on new standards and provided with compliance materials. The final phase of implementation includes the establishment of appliance checks in city inspection guidelines in addition to public outreach and educational materials for city residents and business owners. The city may also partner with the Utility Company to offer financing and bulk purchase discounts.
Cost impacts
We estimate $250k/year in overhead costs for program administration including compliance inspection, training, and associated travel and labor costs. Upfront costs of appliance upgrades may vary greatly ranging from a few hundred dollars to several thousands of dollars. To create more financial equality, one million dollars per year will be allocated towards rebate funding, free audits, electrification roadmaps, and cost sharing programs will be available for income qualifying households.
Figure 3: Key findings from a study assessing CO2 emissions reductions found that HVAC and water heating efficiency and electrification measures have the greatest impact on decarbonization. The figure shows emissions reductions results from 2022-2050 modeling scenarios representing low, moderate, and aggressive energy futures against a continue-as-is reference case (Lawrence Berkeley National Laboratory 2023).