Energy Efficiency and Demand Response Programs in the United States

(1)

Claude Godin Director Energy Data Analytics

October 2013

Energy Efficiency and Demand Response

Programs in the United States

(2)

Energy Efficiency and Demand Response Programs in the United States October 2013

Overview



Introduction

-

Definitions of Demand Response (DR) Energy Efficiency (EE)

-

Size and importance of EE and DR programs in the U. S. electrical industry

-

Structure of the U. S. electrical industry: ownership and regulation



Demand Response Programs

-

Types of DR Programs

-

Organization of DR Programs

-

Performance of DR Programs

-

Peak demand reduction

-

Effects on Customer Bills

-

Next steps in Developing DR Programs

(3)

Definitions



Demand Response Programs: organized activities to induce

end-users to modify temporarily the time pattern of energy use in

response to signals from electric system operators

-

Direct control of selected end-use loads

-

Signals based on generation or transmission system imbalances or shortages,

fluctuations in wholesale prices

-

Signals built into retail electric rates



Energy Efficiency Programs: organized activities to induce end-users

to reduce total energy consumption, without regard to time of use

-

Promote research and development to increase the efficiency of end-use

technologies

-

Accelerate the adoption of efficient end-use technologies

-

Accelerate the adoption of practices and behaviors that reduce energy use

(4)

Importance of EE and DR in the U. S. Electric Market

Energy Efficiency Programs: 2011



Energy Savings from new projects:

36.5 TWh/Year or 0.5% of 2010 total

electric sales

-

California: 1.8% of 2010 sales

-

Massachusetts: 1.1% of 2010 sales



Energy savings from all projects in

place: 117.4 TWh/Year or 3.1% of

2010 total electric sales



Program costs: $5.9 billion or 1.6% of

total sales revenues



Cost Effectiveness:

-

Costs of conserved energy: $0.03 -

$0.06/kWh

-

Levelized cost of energy supply: $0.08 –

0.11 cts/kWh, depending on jurisdiction

Demand Response Programs



Load under Demand Response

Contract, 2012: 66.3 GW or 8.5% of

summer peak load



Actual Load Reduction, 2012: 20.2

GW or 2.6% of summer peak load

-

Utilization of contracts ranged from 15% to

90%, depending on region



Program costs: ~$2 billion/year,



Revenues of related businesses: $2 -

$3 billion



Cost Effectiveness

-

$50 - $75 per year for kW of DR v.

minimum of $110 per kW, levelized cost of

least expensive generation resource

(5)

Effect of EE and DR on U. S. aggregate electric demand

Key Points



Combined demand reduction attributable to DR and EE equal to 4.2% of

non-coincident summer peak in 2009

(6)

Structure of the U. S. Electric Market

6

Regulation

System Function/Type of

Organization

Market Metric

Share Owned

Investment

Reliability

Rates/

Revenue

Generation

Investor-owned utilities

Public/Municipal

Federal Government

Non-Utility (Merchant)

Installed Cap.

38%

14%

7%

41%

S

L,S

F

S,Mkt

F,S

F

F,S

S,Mkt,F

L,Mkt,F

F,Mkt,F

Mkt,F

Transmission

Investor-owned utilities

Public/Municipal/Coops

Federal Government

Independent TransCos and other

Miles HV Line

66%

13%

14%

7%

F,S,L

F,S

Distribution

Investor-Owned Utilities

Public/Municipal

Cooperatives

Customers

73%

15%

12%

S

L

F,S

F,L

S

L

Retail Supply (In 17 States)

Residential Sector

Commercial & Industrial Sectors

Annual Sales/US

4%

18%

S

Mkt

F= Federal, S = State, L = Local, Mkt – prices or investment influenced primarily by markets

(7)

Independent System Operators/Regional Transmission Org.

Functions



Schedule and dispatch

generation



Schedule and dispatch

transmission



Operate wholesale electric

markets: capacity, energy,

balancing (regulation)



Integrate DR into

electricity market

operations

Scale



Serve ~ 2/3 of US electric

customers; ½ of Canadian

customers

(8)

Energy Efficiency and Demand Response Programs in the United States 2011-11-13

Demand Response Programs

(9)

Objectives Served by Demand Response

1. Energy Efficiency programs reduce overall electricity

consumption, generally also at times of peak demand.

2. Price Response programs move consumption from times

of high prices to times of lower prices (real time pricing or

time of use) – expanded to address transmission

distribution congestion management.

3. Peak Shaving programs require more response during

peak hours and focus on reducing peaks on high-system

load days – expanded to address transmission distribution

congestion management.

4. Reliability Response (contingency response) requires the

fastest, shortest duration response. Response is only

required during power system “events.”

5. Regulation Response continuously follows

minute-to-minute commands from the grid in order to balance the

aggregate system load and generation – This is also very

new and appears to be very promising for certain loads.

Demand Response can affect load in several ways

(10)

Dispatchable v. non-dispatchable demand response

10

Demand Response

Non-dispatchable

Dispatchable

Time-sensitive

pricing

(TOU, CPP, RTP)

& time dependent

capacity tariffs.

Grid/system

reliability

Economy

Capacity

services

Ancilliary

services

Energy

market

(11)

Distribution of Enrolled Load by Program Type: 2012

(12)

Development of DR shaped by Federal Laws & Regulations

12

Legislation/Regulation

Major Effects on Demand Response

1992: Federal Energy

Policy Act



Allows independent power producers to participate in

wholesale power markets

1993: FERC Order 888



Mandates open access for high voltage transmission



With 1992 Energy Policy Act, enabled restructuring, which led

to development of RTOs and ISOs to coordinate deregulated

generation markets

2005: Federal Energy

Policy Act



Declares official federal policy to promote DR, facilitate

deployment of enabling technology, eliminate barriers to DR

participation in energy, capacity, and ancillary service markets



Takes value of DR to non-participating customers into account

2008: FERC Order 719



Directs RTOs and ISOs to ensure that market prices reflect

value of DR



Enables aggregators to bid directly into electricity markets



Directs RTOs and ISOs to accept DR bids for ancillary services

2011: FERC Order 745



Requires that DR be compensated at the full market price for

the comparable products



All RTOs and ISOs must develop filings detailing how they will

comply

(13)

Growth in DR parallels development of capacity markets



Relationship of capacity markets to growth of DR

-

Provides steady stream of revenue to aggregators and other providers

-

Providers no longer dependent on relatively rare events in local energy markets

-

Pool of potential participating customers increased

(14)

Growth in DR parallels development of capacity markets

14

(15)

Reliability of DR is comparable to conventional generation

-

Demand resources delivered 86% of capacity commitments versus

90% for conventional emergency generators

-

Generation fleet availability after accounting for forced outages:

94.5%

Performance of New England Demand Response

and Emergency Generation Resources: 2010

(16)

DR Programs Reduce Average Prices to Consumers

-

Load curtailments generally occur during highest cost hours

-

Benefits of spot price reductions received by all customers on the system

16

PJM Modeled Real Time Energy Price

Decreases Per 1% Load Curtailed

(17)

DR Programs have Delivered 10-minute Reserves

(18)

Range of Energy Savings from Pricing Programs

-

Highest savings achieved by Critical Peak Pricing approach

-

Combination of messaging technology or automatic controls with pricing

appears to generate the most savings

(19)

Impacts of Pricing Programs on Annual Utility Costs

-

Pricing programs are designed to save money for customers who shift

consumption patterns

-

Share of participants who reduced bill ranged from 66% to 94%, depending

on program design and market segment

(20)

Savings & Elasticities: Commercial Pricing Programs

(21)

Customer Baseline: Settlement and Evaluation



Verification of compliance with

contract requirements and

measurement of reduction require

estimate of baseline: what demand

would have been during the event in

the absence of curtailment efforts



Most common methods use

regression of hourly demand versus

temperature and hour of the day for

individual sites during non-event

days, adjusted for event day

characteristics



Best Practice: methods should reflect variability and weather sensitivity

of loads

(22)

Current Challenges to Continued Growth of DR in the US



Limited number of customers on time-based rates

-

Particularly important for residential customers



Lack of standards for communicating DR signals and measuring

demand reductions

-

Increases costs and uncertainty for providers and customers

-

National standard setting organizations are addressing this issue



Lack of customer engagement

-

Consumers must be educated to the benefits of DR, otherwise consumer

dissatisfaction and distrust of smart meters may occur



Lack of DR modeling and forecasting tools

-

Complicates the development of convincing business cases for program

funding

(23)

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