Electric trading markets that allow consumers to procure blocks of energy directly from generation providers have existed for a long time, but have tended to be in areas with highly stable distribution systems with access limited to large consumers. Customer segmentation within electricity markets has therefore been limited, with utilities defining tariffs and establishing service reliability based on customer type: residential, commercial, or industrial. However, technology platform enhancements have enabled smaller consumers to participate in electric trading markets and enabled system operators with a less stable grid to provide this service.
The result is that consumers, and not just the utility companies, can define the characteristics and pricing for their electric service.
For Cisco, this change is allowing us to purchase electricity in one of our most important, but least reliable and highest-carbon locations — Bangalore, India — in a new way that reflects our requirements for availability and environmental impact.
In August 2013, Cisco started purchasing a portion of our electricity for our Bangalore campus through the Indian Energy Exchange (IEX). The IEX is India’s leading power trading platform, which allows entities like Cisco to submit bids to purchase electricity by 15-minute block basis a day ahead of the actual delivery of power. We created a trading strategy with our broker to account for our desire for higher reliability power by bidding at different price points depending on our price and projected availability from the local utility and the cost to operate our diesel generators. Our strategy, by design, is intended to lower our overall energy costs, and therefore our bids are not always successful. We also purchase renewable energy certificates through the exchange as a percentage of our purchased energy, which reduces the carbon content of our electricity.
The benefits we are realizing through open access market participation compared to buying electricity from the local state distribution utility are:
- Increased reliability and availability of power
- Reduced average blended electric commodity prices
- Reduced run-time, maintenance, and fuel usage of back-up generators
- Lower net greenhouse gas (GHG) emissions
Trading energy in this way, as a relatively small power consumer and particularly in India, was very new. We were one of the first non-industrial companies to trade on the exchange, and our total annual consumption of 125,000 MWh (equivalent to just over the consumption of 4,000 US homes) is dwarfed by most of the other industrial participants in the IEX. As we have become more comfortable with the mechanics of the market and working with our broker, we have continued to increase the amount of energy we nominate for any given demand interval as well as expanding to additional Bangalore facilities outside the campus.
We also believe that there will be a long term impact from markets like IEX, particularly in bringing more renewable power onto the grid. The market is able to operate in a similar way to a feed-in tariff by providing renewable energy developers a way to value and deliver their energy in a consistent and transparent way. The mechanisms of the market are also being used to promote demand-side energy conservation projects which again acts like a utility or government incentive for energy reduction.
Read more about Cisco’s commitment to environmental sustainability at csr.cisco.com.