Frequently Asked Questions about Power Generation Services, Inc.
1. What is Power Generation Services, Inc?
Power Generation Services, Inc. (PoGens™) is a company headquartered in Raleigh, North Carolina that provides products and services for stakeholders in the nation’s electric grid ranging from retail electricity consumers to regional utilities and national electrical reliability entities. Specifically, PoGens offers a comprehensive interface between generation asset owners and utility-scale electricity and capacity markets. PoGens clients are paid for their energy and capacity market participation, and grid operators benefit from an unconventional resource for ensuring grid reliability.
2. What are “generation assets,” and why are they important?
A generation asset is any electrical generator. For the purposes of the PoGens solution, a client’s generation assets are any backup or standby generators that the client might have purchased for the purpose of powering a facility when the primary electricity source (the grid) proves insufficient. These generators are common at facilities ranging from retail stores to hospitals, data centers, and cell towers. PoGens refers to these generators as “generation assets” because they are valuable for reliably operating a client’s facility in case of an emergency and because they can become a revenue source for the client when PoGens enrolls them in energy and/or capacity markets.
3. What is the grid, and why is grid reliability important?
The national electrical grid is the United States’ entire interconnection of power generators, from coal-fired power plants to wind turbines, and power consumers, from home microwaves to industrial aluminum smelters. The simplest grid would be a single power line from an electricity generator to an electricity consumer that uses exactly the amount of electricity generated at the instant it is generated. In reality, there are many generators and many consumers connected to the grid, and there is no guarantee of supply always matching demand (also known as load). Given the physical constraints of the grid, this imbalance places stress on its infrastructure and can compromise the grid’s ability to provide adequate power to all of its consumers. These grid failures manifest themselves as blackouts, which have tremendous safety, social, and economic implications in a society as electricity-dependent as the U.S.
4. Who runs the grid?
Technically, the grid is an assortment of hardware and software infrastructure predominantly owned by utilities which make money by generating power and/or transporting it through power lines to their end-use consumers. Because of the grid’s importance to public welfare, it is regulated by the federal government through the Federal Energy Regulatory Commission (FERC), whose grid reliability standards are developed, enacted, and enforced through the North American Electric Reliability Corporation (NERC). One of NERC’s most important responsibilities is certifying Regional Transmission Organizations and Independent System Operators (RTOs and ISOs), which are the companies that actually operate the grid within their respective geographical regions. These RTOs and ISOs often administer the energy and capacity programs in which PoGens enables its clients to participate.
5. What are energy and capacity markets?
In the most traditional sense, energy markets are markets where an electricity generator is compensated at a rate per unit of electrical energy produced and made available for use on the grid. Capacity markets traditionally entail electricity generators being compensated for being available to produce electricity for the grid even if they are not producing electricity at that moment. Capacity markets offer the same price for capacity whether or not the generator runs, but additional compensation is sometimes available for the actual amount of electricity a generator produces if it is called upon to do so. PoGens primarily enrolls its clients in Demand Response programs, which offer energy and capacity payments to participants making energy available and/or agreeing to make energy available to the grid during periods of high electricity demand.
6. What is Demand Response?
Demand Response (DR) is an increasingly popular means for utilities and grid operators to “balance” supply and demand (load) on the grid by reducing demand instead of building more power plants. While demand response is not exactly the same as building more generators, it has the comparable effect of increasing the ability of existing generation capacity to meet the needs of the grid’s electricity consumers.
7. Why do utilities have Demand Response programs?
DR programs provide incentives and technical assistance for conserving energy during temporary critical times. This conserved energy has the effect of making more electricity available on the grid, and is a “load-side” alternative to actually generating more electricity to supply demand on the grid. By enrolling in Demand Response Programs, your business can reduce electricity use and save money during periods of high energy demand or critical grid instability.
8. Why do utilities pay for Demand Response?
Utilities are required by NERC-certified grid operators to keep a reserve margin (think insurance) throughout the day, throughout the season, and throughout the year. In order to maintain this margin, the utility pays generators to keep a certain amount of electricity supply available and consumers (loads) to be able to reduce demand by a certain amount. Both of these are considered “capacity” and can participate in capacity markets. The margin required is usually a set percentage above the amount of demand expected on the grid for a given period.
9. Who can participate in Demand Response programs?
Any customer with load and most customers with backup generators within the facility can participate in DR programs. Generally, utilities require customers to have a minimum load (say 20kW) either individually or as a group (known as an aggregate), the ability to reduce load by a certain time if called (for example, within 2 hours), and a 7/24 desk to take emergency calls at any time.
10. What role does PoGens play in Demand Response?
PoGens provides comprehensive Demand Response services for clients wishing to participate in their utilities’ load-side energy and capacity markets. PoGens specializes in market enablement for small to mid-sized generation assets. By enrolling clients’ generators in their utilities’ DR programs, PoGens allows clients to realize a monetary return on their investments in backup generation capacity. DR programs have existed in some form for decades, but they are coming into their prime now thanks to more stressful grid conditions, new regulations favoring DR, and technologies like the PoGens solution.
11. What is “the PoGens solution”?
“The PoGens solution” refers to the suite of PoGens products and services that allows owners of mid-sized backup generators to participate in energy and capacity markets with minimum effort on the part of the owner. From end-to-end, PoGens installs industry standard control and communication hardware on client generators, enrolls them in DR and market programs, strategically activates them in response to grid and market conditions, monitors their performance, and ensures that clients are compensated for DR program and market participation. All components of the PoGens solution, are engineered for robustness, reliability, and precision.
12. What makes PoGens the best representative for generation asset owners in the market?
PoGens provides comprehensive services for its clients from the installation of its control and metering hardware to compliance management and risk mitigation. PoGens leverages industry standard hardware, industry standard communication protocols, proprietary software, and its status as a national utility to maximize payback for clients. To ensure the safety of clients and their investments, PoGens provides real-time generator status monitoring, operates from NERC CIP-certified facilities, and offers environmental compliance services.
13. How much does the PoGens solution cost?
PoGens hardware costs around $3,000 to install on a client’s generator, but PoGens offers revenue share payment plans in which client expenses can be paid with the money they make through electricity or capacity market enrollment. For large sites, the same initial hardware assembly can be expanded for control of multiple generators.
14. How big does a client’s generator have to be to make use of the PoGens suite of products and services?
PoGens hardware is adaptable for virtually any generator (5kW through multi-MW). As a general rule, electricity and capacity market participation is more valuable for larger generation assets. One of the most important services PoGens provides is the aggregation of small to mid-sized generation assets that do not meet the minimum size for DR programs and market participation into larger “portfolios.” This unique aggregation function allows any sized generator to participate in wholesale markets.
15. Why don’t clients opt to participate in DR, electricity markets, or capacity markets themselves without an intermediary?
Because so many stakeholders place such a high value on the reliable function of the national electric grid, there are restrictions on who can participate in reliability programs. Grid operators often require registered agents or utilities to represent generation and demand response resources participating in grid operations. PoGens is registered as such an agent/utility. Additionally, PoGens provides the revenue grade metering and secure control equipment that enables real-time market participation and ensures accurate compensation for the generator owner.
16. What is an interval meter, and do clients need to have an interval meter to be in a DR program?
An interval meter is an electricity meter that provides metering resolution to specified time “intervals”. While all meters are interval meters to the extent that they are checked at intervals (like a residential meter, monthly), most DR programs and energy markets require at least 15 minute interval recording capability for generators and loads to participate. The ANSI-certified revenue grade meters that PoGens installs as part of its solution track electricity usage and generation in real time, making them more than sufficient for participation in DR programs.
17. Retail electricity rates are relatively low, fuel prices are relatively high, and the PoGens solution costs money to install. How do PoGens clients profit from this arrangement?
Depending upon the demand response program in which a generation asset is enrolled, clients are either paid directly for the amount of electricity they self-supply (and therefore leave available for other customers on the grid to use) or for having this “capacity” of electricity available for on-site use (think insurance again). In situations where the client is being paid directly for electricity, it is when electricity prices have hit a premium due to short supply. These prices can be many times the normal retail rate. In capacity programs, the client is paid on a regular basis for being able to operate a generation asset and receives compensation even for the vast majority of the time the generator is inactive. The key is PoGens’ ability to strategically dispatch its clients’ generation assets in response to grid conditions in real time.
18. How does PoGens get paid from clients’ participation in DR programs?
PoGens sells its hardware at close to cost for the ultimate purpose of enrolling its clients into DR programs and energy and capacity markets and profiting from the related suite of services it provides. In the long term, PoGens sees DR programs and energy management systems as growing arenas in grid technology, especially as more intermittent renewables requiring larger and more responsive capacity reserve margins enter the playing field. PoGens’ revenue share option for clients subscribing to its services is a mutualistic means for PoGens and its clients to realize revenue streams for the entire life of a client’s generator.
19. If I participate in a Demand Response program will I be asked to use my backup generators to feed power back into the grid?
No. The basis of DR programs is to use the backup generators to curtail your native (on-site) load. Most customers do not have the proper electrical gear to “back feed” the system, and thus this is a recognized constraint that the utilities expect.
20. Are clients’ backup generators still available when they are needed?
PoGens understands that, for its clients, the primary value of standby generation assets is reliable power for their facilities in the event of an emergency. PoGens clients enjoy full access to their on-site generation capacity at all times. Because clients’ generation is being nominated to markets and DR programs as “curtailed load,” all of the energy the generator produces is retained on-site. Clients’ generators may run more often than they would strictly for power failures, but there will never be an instance where the generator is running and the client cannot use the electricity.
21. Aren’t backup generators dirtier to run than utility generation? Is the PoGens solution environmentally friendly?
Base load utility generation (generally large-scale coal/nuclear power) is generally considered the most reliable, least cost, and lowest emission conventional generation. The PoGens solution is applied when base load utility generation is no longer sufficient to meet high electricity demand. As a result, market-enabled backup generation runs a fraction of the time of base load generation (roughly 50 hours/year versus 8760 hours/year). This strategic operation of already existing small generators for limited amounts of time in compliance with all EPA, state, and local regulations prevents the negative environmental effects of grid failure. Demand Response resources reduce utilities’ need to construct new generation and offer a counterbalance to intermittent renewable resources like wind and solar generation.
22. What are the risks of participating in DR programs? Does PoGens mitigate the risks of market participation?
In theory, categories of risk exposure that a generation asset owner must consider are wear and tear on the generator, physical risks from interaction with the grid, contractual obligations in the program (and related penalties), and environmental compliance requirements. PoGens represents its clients in energy/capacity markets and has a mutual interest in the wellbeing of the client and the asset, the performance of the assets under management, the reliability of the generators enrolled in DR programs, and their continued ability to operate under regulatory constraints.
23. Is there a risk from the generator being interconnected with the grid?
For PoGens clients, “interconnection” with the grid typically doesn’t imply any direct physical interactions between grid power and generator power. The generator is strategically activated to supply on-site power via an automated transfer switch (ATS) that isolates it from grid power. The interconnection component of the PoGens solution merely means that power both from the utility and from the generator is measured to determine the load the client removes from the grid. In this arrangement, there is no additional physical risk from interconnection with the grid.
24. How does PoGens prevent wear and tear on client generators?
A major selling point for the PoGens solution is that it provides a revenue stream to compensate generator owners for the depreciation in the value of their assets. Depreciation in generation asset value is two-fold: the generator’s resale value declines, and its value as a reliable emergency generator declines with aging hardware. The PoGens solution provides a revenue stream for the generator owner, and it also provides optional maintenance services to complement its real-time generator status monitoring. This combination of monitoring and maintenance ensures the best possible performance and longest possible life of the generation asset.
25. Is there a penalty if a client’s generator fails to turn on or to produce as much power as it is supposed to? How does PoGens minimize this risk of penalization?
Some DR programs do not assess a penalty if a client’s generator fails to perform up to its rated ability. For the most part, the penalties that are assessed are in the form of reduced compensation for the generator owner with some leeway. Several programs also allow generator owners to specify percentages of the time they are enrolled in a DR program for which they will be unavailable. Clients utilizing PoGens as a service provider and aggregator enjoy the added advantage of PoGens being the entity responsible for nominating their power into DR programs. PoGens optimizes the generation portfolios available for a given DR program at any time based on real-time generator status awareness, thus mitigating the risk of nonperformance for its clients and for DR programs.
26. What are the compliance issues facing DR program participants? Does PoGens handle these?
Most generators over the smallest residential sizes require some degree of compliance consideration. PoGens, as the agent for its clients in DR programs, is responsible for meeting the applicable interconnection reliability requirements under the local utility, the RTO/ISO, and NERC. PoGens also offers compliance assessment and reporting services for the U.S. Environmental Protection Agency (EPA), state, and local environmental authorities. Often, these are complicated regulatory interactions, but PoGens understands that generator owners recognize the most value from DR programs when the generator is compliant with the applicable regulations.