Demand Response Policy and Programs

Demand Response

Policy and Programs

Dr David Crossley

Managing Director

Energy Futures Australia Pty Ltd

Metering, Billing and CRM/CIS

Australia and New Zealand Conference 2005

Melbourne, 16 March 2005

Presentation Topics

z

_{What is demand response?}

z

_{Enabling technologies for demand response}

_{Use of demand response to provide reserve}

capacity

z

_{Demand response in the United States}

_{Demand response in the rest of the world}

Benefits of demand response

z

Barriers to demand response

What is Demand Response?

z

Demand response refers to actions taken by end-use

customers to reduce their demand for electricity in

response to:

„

problems on the electricity network; or

high prices in the electricity market

z

Demand response focusses on

when

and

where

electricity is used and

how much

it costs:

„

when

– short term (minutes or hours) when network

problems occur or prices are high

„

where

– at locations where load reductions can

relieve network constraints

„

how much

– high electricity prices relative to the

Demand Response and DSM

z Demand response is a particular type of demand side

management (DSM) measure

z DSM measures are designed to influence behaviour on the

customer’s side of the electricity meter (the “demand side”) rather than to change actions on the utility side of the meter (the “supply side”)

z DSM measures include:

„ actions taken on the customer side of the meter, eg

energy efficiency and power factor correction

„ arrangements for reducing loads on request, including

interruptibility, direct load control, and demand response

„ fuel switching, eg replacing electricity with gas

„ distributed generation, eg standby generators, PV arrays

Demand Response and Energy Efficiency

Demand Response ≠ Energy Efficiency

Energy efficiency programs treat all energy

usage equally and are not concerned with

when

Origins of Demand Response

z

_{Demand response is the successor to}

generations of load management programs in

Australia, Asia, Europe and North America, eg:

„

utility direct load control of customer

equipment and appliances (water heaters, air

conditioners, pumps and some industrial

equipment)

„

interruptible and curtailable tariffs for

commercial and industrial customers

Demand Response vs Interruptibility

z Demand response works in much the same way as interruptibility with the following additions:

„ as well as reduced electricity tariffs, end-user

participants in DR programs may receive payments for

the availability of demand response and the load

reductions actually achieved

„ a third party DR Provider often enrols end-user

participants in demand response programs and

maintains communication with both the system operator and the participants

„ communication between the system operator, the DR

Provider and end-user participants is usually automated

„ remote meter reading and telemetry enable all parties

to see the impact of demand response actions in near real time

Demand Response Process

All parties see impacts from Demand Response in near real time

Communications system alerts third party DR Provider to request

System Operator initiates request for Demand Response

Meter records load every 5 minutes and reports data to all parties

End-user Participant receives message from DR Provider and instructs staff to implement load reduction procedures

GoodCents

®

_{Select DR Program}

z The GoodCents® _{Select demand response program,}

developed by the GoodCents® _{company, has been}

implemented by Gulf Power in Florida

z The Florida GoodCents® _{program comprises four}

interdependent components:

„ an in-home, customer-programmed, automated energy

management system

„ a communication gateway which rapidly communicates price changes, critical peak conditions, and other

messages to program participants

„ a time-varying design for electricity prices with a near

real-time pricing component

„ a means of recording and retrieving the requisite

GoodCents

®

SELECT

Major Components

Communications Gateway

SuperStat

GoodCents

®

SELECT

PriceStat

GoodCents

®

SELECT

The Communications Gateway

Facilitates communication between the system components, records energy usage and communicates this information to Gulf Power Company. It also provides an electronic pathway for future value added services.

Residential Service Variable Pricing (RSVP)

Rate Schedule

•Standard Residential Customer Charge applies: $10.00 per month •RSVP Participation Charge: $4.95 per month

GoodCents

®

SELECT

Prices per kWh

(includes energy charge, fuel, ECCR, PPCC and ECRC)

Low 4.7 cents/kWh Medium 5.9 cents/kWh High 10.5 cents/kWh Critical 31.4 cents/kWh Standard Residential Rate: 6.8 cents/kWh

GoodCents

®

SELECT

Residential Service Variable Pricing (RSVP) Rate

Percent of Annual Hours in Effect

Critical pricing periods are most likely to occur Monday to Friday between 6 am and 10 am (winter) and between 3 pm and 6 pm (summer)

Low High

59 %

28%

12%

1%

GoodCents

®

SELECT

AVG HOURLY DEMAND ON JAN 24 AT HOUR 7 AND 8, 2003

5.9645 6.3930 6.6515 6.0201 5.6898 5.0808 6.0456 5.5266 2.6395 2.7273 4.9718 5.3619 1.5000 2.0000 2.5000 3.0000 3.5000 4.0000 4.5000 5.0000 5.5000 6.0000 6.5000 7.0000 kwpre1 kwpre2 kwcrt1 kwcrt2 kwnxt1 kwnxt2 HOURS KW control sample

GoodCents

®

SELECT

GoodCents

®

SELECT

Contingency vs Economic Demand Response

Economic DR

z Focus is on avoiding high market prices

z Newest and fastest growing form of DR

z Sometimes dispatchable via a strike price or other economic threshold

z Generally voluntary with no penalties

z Dwindling distinction between economic DR and fully market-based electricity prices

z Still small by comparison with contingency DR programs

Contingency DR

z Focus is on providing a

dispatchable, physical hedge against supply shortages and network congestion

z Typical of most early load management programs

z Primarily capacity value

z Designed to operate less than 100 hours per annum

z Usually involves reservation payments and non-compliance penalties

z Some 15,000MW of this type of DR in North America, equal to about 5% of total demand

Enabling Technologies for DR (1)

z

_{Enabling technology for demand response}

programs generally falls into three categories:

automation

,

monitoring

and

communication

z

Automation already occurs in direct load control

programs

z

Monitoring and communication are newer

innovations that:

„

enable more efficient operation in a dynamic

environment;

„

allow the DR Provider and end-user

participants to play more active roles

Enabling Technologies for DR (2)

Interval metering Energy Information Tools

Communications/ Notification

Direct Load Control Backup Generation

Enabling Technologies for DR (3)

z

_{The actual response achieved in a DR program}

depends on many factors, eg customer and

facility type, end-use composition, work load,

weather

z

_{Investment in automation, monitoring and}

communication enables increased

responsiveness under any given conditions

z

Customer-owned generation represents a

special type of enabling technology because it

allows greatly increased flexibility in demand

response by the end-user participant

Enabling Technology for the DR Provider

z

Interval metering

of end-user participants’ sites

z

Two-way quick turnaround

communications

between

DR Provider and end-user participants, often using the

internet

z

Special purpose

communications technology and

software

to interface with participant-owned enabling

technology and deliver value-added services

z

Improved

capabilities to forecast

day-ahead market

prices

z

Back office systems

to measure and verify actual

demand reductions achieved by end-use participants

and settle financial transactions

Enabling Technology for the Participant

z Multiple, user-friendly communication pathways, often using

the internet, that notify the participant of price levels, system status, DR Provider requests

z Energy information tools that display load shapes so the participant can analyse performance relative to baseline usage, and obtain diagnostics to improve responsiveness

z Pre-determined demand reduction strategies that are

optimised to meet differing high-price or electric system emergency scenarios

z Load controllers, building energy management control

systems and other automation equipment which facilitate

rapid deployment of demand reduction strategies at the end-use level

z On-site generation, used either for emergency back-up or to meet the primary power needs of a facility

Use of DR for Reserve Capacity

z

Use of demand response to provide reserve capacity is

growing

z

Demand response is often cheaper and more flexible

than using generation in the ancillary services market to

provide:

„

voltage regulation

load following

„

frequency response

supplemental reserve

z

Some advocates in the United States believe demand

response should also be used to provide spinning

DR for Reserve Capacity in Australia (1)

z

In late 1997, the Victorian Power Exchange (VPX)

initiated a Capacity Support Program to provide reserve

capacity against a potential shortfall of some 700 MW

across Victoria and South Australia

z

VPX tendered for supply of reserve capacity and

demand-side options to ensure system reliability over

the 1997/98 summer

z

At the close of tenders in October 1997, approximately

150 MW of demand-side resource (of which 58 MW was

considered firm load, the balance being ‘non-firm’) had

been contracted for dispatch by VPX

DR for Reserve Capacity in Australia (2)

z The VPX Capacity Support Program made available three

levels of payment:

„ availability payments, which participants received for

nominating a demand-side resource that they could make available;

„ pre-notification payments, which participants received if the system operator told them to stand by; and

„ dispatch payments, which participants received if they actually shed load in response to a request. Failure to deliver the minimum amounts of load reduction that had been bid resulted in financial penalties

z Two retailers received an availability payment, but were not

required to reduce demand because the supply system capacity was sufficient to meet demand over the summer

DR for Reserve Capacity in the US (1)

Source: Reports by North American Electric Reliability Council and

DR for Reserve Capacity in the US (2)

NERC Regions

ECAR - East Central Area Reliability

Coordination Agreement

ERCOT- Electric Reliability Council of Texas FRCC - Florida Reliability Coordinating

Council

MAAC - Mid-Atlantic Area Council MAIN - Mid-America Interconnected

Network

MRO - Midwest Reliability Organization NPCC - Northeast Power Coordinating

Council

SERC - Southeastern Electric Reliability

Council

SPP - Southwest Power Pool

WECC - Western Electricity Coordinating

ISO New England DR Program

z _{Electricity customers in the service area of the New England}

Independent System Operator (ISO-NE) can participate in demand response programs

z Customers participate through an Enrolling Participant which can be a NEPOOL member (such as a local utility or energy supplier) or a Demand Response Provider

z DR Providers are companies that provide technology and

services to help customers participate in the demand response programs

z Enrolling Participants are responsible for helping customers identify the demand response program that is most suitable for their operation and enrolling them with ISO-NE

z ISO-NE makes incentive payments to Enrolling Participants who then share the incentives with their customers. Enrolling Participants may also offer other incentives and services

Actions Undertaken if Asked to Curtail

Turned of f of f ice equip Turned of f f ans/pumps Turned of f elevators Operated generator Shif t mf g processes Other action taken Reliability Programs (N=28) Non-Participant (N=11) Price Response (N=49)

August 20 2004 Test Performance – All Resources 0 20 40 60 80 100 120 140 11: 0 0 11: 0 5 11: 1 0 11: 1 5 11: 2 0 11: 2 5 11: 3 0 11: 3 5 11: 4 0 11: 4 5 11: 5 0 11: 5 5 12: 0 0 12: 0 5 12: 1 0 12: 1 5 12: 2 0 12: 2 5 12: 3 0 12: 3 5 12: 4 0 12: 4 5 12: 5 0 12: 5 5 13: 0 0 13: 0 5 13: 1 0 13: 1 5 13: 2 0 13: 2 5 Time MW Reduction MW Enrolled MW

Notice sent at 10:45 a.m. Event Started at 11 a.m.

Resources had 30 Minutes to Respond Event ended at 1:30 p.m

August 20 2004 Test Performance – Emergency Generation Only 0 20 40 60 80 100 120 11: 0 0 11: 0 5 11: 1 0 11: 1 5 11: 2 0 11: 2 5 11: 3 0 11: 3 5 11: 4 0 11: 4 5 11: 5 0 11: 5 5 12: 0 0 12: 0 5 12: 1 0 12: 1 5 12: 2 0 12: 2 5 12: 3 0 12: 3 5 12: 4 0 12: 4 5 12: 5 0 12: 5 5 13: 0 0 13: 0 5 13: 1 0 13: 1 5 13: 2 0 13: 2 5 Time MW Reduction MW Enrolled MW

August 20 2004 Test Performance – Load Reduction Only 0 5 10 15 20 25 11: 0 0 11: 0 5 11: 1 0 11: 1 5 11: 2 0 11: 2 5 11: 3 0 11: 3 5 11: 4 0 11: 4 5 11: 5 0 11: 5 5 12: 0 0 12: 0 5 12: 1 0 12: 1 5 12: 2 0 12: 2 5 12: 3 0 12: 3 5 12: 4 0 12: 4 5 12: 5 0 12: 5 5 13: 0 0 13: 0 5 13: 1 0 13: 1 5 13: 2 0 13: 2 5 Time MW Reduction MW Enrolled MW

DR in the United States (1)

z

A survey of utility demand response programs in the

United States and Canada currently in progress shows:

„

most of the utilities contacted are conducting at least

one residential and one commercial/ industrial DR

program

„

the most prevalent residential demand response

programs are two-part time of use tariffs and direct

load control programs

„

the most prevalent commercial/industrial demand

response programs are two-part time of use tariffs,

voluntary demand “buy-back” programs, and

DR in the United States (2)

Company

Residential

DR

Commercial

& Industrial

DR

Total Load

Tennessee

Valley

Authority

60MW

1800MW

29,900MW

Florida

Power

1350MW

400MW

10,076MW

Duke Power

500MW

800MW

16,000MW

Some Major Utility DR Programs

DR in the United States (3)

Some Major ISO/RTO DR Programs

DR Load Other DSM Programs Regional Peak Demand

NY-ISO

1706

1458MW

865MW

31,000MW

PJM

179

891MW

2070MW

62,500MW

ISO-NE

91

166MW

1587MW

25,500MW

Factors Driving Increased DR in the US (1)

z

Advanced and affordable interval meters and

automatic meter reading

z

New opportunities for two-way utility-customer

communications and interaction using the internet

z

Tremendous interest in customer-level energy and

power solutions of all types to improve power quality

and protect sensitive digital end-uses from grid

reliability problems

z

50GW of installed back-up generators now in place

and in many cases available to bid into wholesale

markets

Factors Driving Increased DR in the US (2)

More sophisticated customers who understand the

opportunities inherent in competitive energy

markets

z

Increased sophistication in building energy

management and control systems developed

through years of energy efficiency improvements

z

Gradual opening up of access by customers to

their interval load data in near real time

z

Energy-internet entrepreneurs actively pushing the

envelopes of load management applications and

technology

DR Programs in the Rest of the World (1)

Region Utility Program Description

Europe Stattnet Load Reservation

for Power Regulation

Industrial load shedding as an ancillary service

Europe EDF TEMPO Critical peak pricing

Europe Yorkshire

Electricity

Frequency Response Management

Very large users under-frequency trip off

South America

Electrobras Demand Controller Domestic water heater

control

Africa Eskom Hot Water Cylinder

Load Control

Water heater load control for distributors

DR Programs in the Rest of the World (2)

Region Utility Program Description

Asia KEPCO Air Conditioner

Load Control

Low voltage air conditioner load control

Asia Kyushu

Electric

Air Conditioner Load control

Domestic air conditioner load control Asia Tai Power Co Commercial Air Conditioner Load Cycling

Paging system for load control of larger users

Asia TEPCO Large Customer

Interruptible

Large customers interrupted with three hours notice

Winter Peak Reduction Scheme

z

_{The Winter Peak Reduction Scheme was}

introduced by the Electricity Supply Board, an

integrated utility in the Republic of Ireland

z

_{The drivers for introducing the program included:}

„

winter demand is very “peaky” in Ireland

expensive to ensure security of supply

„

efficient to encourage customers to manage

usage

Benefits of Demand Response (1)

z

_{Many parties receive benefits from demand}

response programs:

„

electricity retailers and network owners

electricity system/market operators

„

electricity regulators and policy makers

end-use participants in DR programs

Benefits of Demand Response (2)

For electricity retailers and network owners, regulators and policy makers, and market/system operators, DR programs provide:

„ a physical insurance hedge against energy market volatility

„ cost savings from lower market clearing prices and

increased operating flexibility, system efficiency and asset utilisation

„ improved reliability during periods of generation shortages

or network congestion

„ deferral of costly (and difficult to site) new generation or network capacity

„ a dampening effect on lumpy, asset-intensive and thus inherently cyclical energy markets

Benefits of Demand Response (3)

Impact of Demand Response on Market Clearing Price

Benefits of Demand Response (4)

For end-use participants, DR programs provide:

„

access to

the same or similar

price signals

provided

to supply-side producers

„

payments

for availability and actual demand

reductions as well as reduced electricity tariffs

„

improved

understanding and control

of day to day

electricity use (with investment in enabling

technologies such as interval metering, energy

management technology and energy information

tools)

„

increased

customer choice

in relation to dealing

Benefits of Demand Response (5)

Source: Grayson Heffner

Annual Value of 100 hours of Demand Response based on 1999-2001 Wholesale Market Prices

Benefits of Demand Response (6)

Public Goods

z _{Reduced price volatility and}

mitigation of cyclical variations in wholesale power prices

z Improvements in the reliability

of the electricity network and relief of network congestion

z Deferral of new generation

and network capacity

z Operating flexibility

z Customer choice

Private Goods

z _{Cost savings to end-user}

participants from reduced electricity tariffs

z Payments to end-user

participants for availability and actual demand reductions

z Cost savings to electricity

retailers and network owners from increased system

efficiency and asset utilisation

z _{Insurance hedge value to}

electricity retailers and network owners

Many of the benefits of DR can be classed as public goods

Barriers to Demand Response

z Most customers on retail tariffs never see wholesale

electricity market prices and are therefore unaware of the value of demand response

z Most small customers never see their load profile, because installing interval metering without subsidies is too costly

z Design of most ancillary services markets effectively precludes any demand-side participation

z When there are low prices in the wholesale electricity market, this reduces payments for demand response

z Participating in a DR program can be complex (though this may be mitigated by a third party DR Provider)

z End-users must typically make additional investments in enabling technology to maximise responsiveness

Policy Conclusions

z Although the benefits of demand response are evident,

realising them will still require much coordination and effort

z There are many ways to arrange the various parties involved

in demand response – and no clearly superior arrangement has as yet emerged

z Exposing end-users to dynamic market prices is not enough;

many participants require the structure of a DR program, including advice and enabling technologies

z Electricity retailers and network owners will gain major

benefits from cost-effective demand response and should encourage end-use customers to participate in DR programs

z The role of third party DR Providers is crucial. Governments,

regulators, electricity retailers and network owners should investigate ways to stimulate and support the development of a DR Provider industry

Information Sources

z

Reviews of documents on DSM in Australia are

available at the following website:

www.efa.com.au/dsmdocs.html

z

_{The International Energy Agency DSM Programme}

carries out multi-national research projects on DSM.

Website for information about the IEA DSM

Programme:

http://dsm.iea.org

z

The IEA DSM Programme has recently initiated two

research projects on demand response and

network-driven DSM. Website for information about

participating in these IEA projects: