How will consumers capture the value created by their active participation (Demand Response)?

Transcription

1 How will consumers capture the value created by their active participation (Demand Response)? Energy Pool 03/10/2011 SAS au capital de euros

2 Energy Pool in short a young innovative and successful company Energy Pool was incorporated in 2008 by Olivier Baud, who has a long experience in the industry We are an aggregator of Demand Response capacities, focusing on large electricity consumers, mainly industrial facilities with complex processes Our operations started in France in 2009 and we won a large share of the DR capacity reservation call for tender organized by for RTE, the French TSO We are currently exporting the concept into Africa and Asia, but also developing operations in other European/Developed countries In December 2010, Schneider Electric took a majority stake in Energy Pool Energy Pool has ~40 employees Please visit our website : Our DR NOC in Chambéry SEDC event - 03/10/2011 2

3 Energy Pool identifies, aggregates and operates DR capacities creating value by reducing risk and complexity for all parties From many different kind of capacities Continuous process merely impossible to stop Complex Process can be stopped with cautious operations Side-processes with a big storage capacity We identify opportunities Only for emergency situation High fixed fee Availability highly depending on the price High variable prices Can be stopped almost every day Lower price, big volumes We collect availability and specific constraints of our customers EP economic schedule and keep an eye on consumption EP Measure To aggregate opportunities in offers to the markets Balancing Mechanism Security Reserves Capacity Market Energy Market Transactions D-1 and/or Intraday And create as much value as possible Long term contracts, Emergency operations Mid or Long term contracts Intraday to Long term contracts SEDC event - 03/10/2011 3

4 Demand Response provides answers to many global issues : peak-shaving, securing investments, GHG emissions reduction Peaks Peak load growth is 1.5x to 2x faster than the base growth DR can shave peaks to lower investments in capacity GHG Valleys «Low-load» hours are increasing, endangering base generation profitability (a nuclear power plant cannot be profitable if it runs only 6000hr/yr) DR can stimulate load when there is an excess of power, and increase generation profitability and so security of supply (investments not being delayed) Peak loads often are assumed by CCGT or LFO generators that are producing a lot of GHG DR either cancels load or shifts it from peakers (mainly fossil-fuel generation) to hydro or nuclear GHG-free base generation Demand Response value creation now is well accepted and is currently being deployed by Energy Pool in a few countries, but value is scarcely redistributed to consumers SEDC event - 03/10/2011 4

5 Demand Response also bring some more indirect value less easily measured or controlled DSO value RES value EE value The local peak is not always the same as the national one Localized DR may have the same positive effect on the local balance Morning peak Summer peak Source : ERDF Most Renewables Energy Sources are connected to the Distribution Network, their production is variable and very unpredictable DR may provide additional flexibility to balance the RES variability, at a local level The energy audits that are made to identify DR capacities often can be used to increase energy efficiency Consumer participation is a way for electricity users to be smarter in their usage, with a financial incentive that perpetuates changes SEDC event - 03/10/2011 5

6 Demand Response has a double value on the electricity markets energy (MWh) and power/capacity (MW) Energy Value ( /MWh), because DR has a physical impact on the load and then on the offer/demand balance Timeline : month, D-1 to Real-Time Private good Exclusive & adverse Energy Sourced by the suppliers on the energy markets System security EPEX Spot Goal Timeline : one year or more Capacity Market (tbc) Private good Exclusive & adverse Capacity Sourced by the suppliers on the capacity market Capacity adequation Power value ( /MW) because DR can engage to bring avalaibility of a capacity that will modify the offer-demand balance on some given periods (pre-determined or not) Impure public good Non-exclusive & adverse Balancing Mechanism Impure public good Non-exclusive & adverse Security Reserves / Ancillary services Compares with generation at the variable cost of the marginal asset in function Compares with generation at the full cost of the capacity mix There is a link between those two values and there can be transfers inbetween SEDC event - 03/10/2011 6

7 What is the situation in France? Energy Capacity & GHG Energy value can be revealed partially: The Balancing Mechanism is open to DR, but with some limits in volumes (activated only for incidents on the network) and constraints (hard to benefit from the «pool» effect) The spot market theoretically is open, but it requires heavy administrative discussions with LSE Capacity value has a long way to go: Security reserves contracts are an opportunity but are limited in volume because they feed the Balancing Mechanism, not the spot Capacity market will be active in (activation, rules published and first exchanges in 2013) GHG value is supposed to already be in the spot prices Is that correct? At least the CO 2 prices are still too low In developing countries, CDM may be used SEDC event - 03/10/2011 7

8 What is the situation in France? Local, Renewable Energy Sources and Energy Efficiency Efforts made at the distribution level cannot be paid: No zonal prices The DSO does not have a budget to buy DR operations for network management RES integration is not taken into account in the existing market rules: Feed-in tariffs do not stimulate the usage of backup DR capacities. There will be an opportunity in the capacity market, as RES will not get capacity certificates alone, but may get some if they prove to have contracted a backup with DR It is an opportunity to lower the CSPE (specific french tax) France has a white certificates market: Maketing/Communication efforts can get some certificates, so DR should, too The prices and structure of this market are an issues SEDC event - 03/10/2011 8

9 Conclusion on DR value a fair redistribution still requires efforts, mainly regulatory DR (consumer active participation) brings competitive answers to some of the main issues the energy industry is facing As, today, value created is not fairly redistributed between the actors, DR adoption is still slow Even if some countries are currently changing their regulations, we may foster the full DR potential only if we adopt new regulations at a european level Fully open energy markets to DR Release existing constraints that are generation-oriented Create capacity markets Give a faire value to GHG emissions reductions Take local effects into account, with local prices and/or capacity payments included in the distribution tariffs Include RES variability in their revenue structure Link DR and EE as they both participate to a smarter energy consumption SEDC event - 03/10/2011 9

10 Contacts Davy Marchand-Maillet +33 (0) Olivier Baud Headquarters & Operations Savoie Technolac - BP Le Bourget du Lac Cedex - France Tél +33 (0) (0) Fax (0) Sales & Engineering Departments 34, rue Rachais Lyon - France Tél +33 (0) Fax +33 (0) SEDC event - 03/10/

11 Illustration 1 : Load curtailment may fill the RES generation «gaps» Forecasted production Massive variability in electricity generation (e.g. solar) can lead to grid unstability Demande Response provides additional flexibility and can mitigate these risks RES variability requires quick and flexible DR Actual production With DR SEDC event - 03/10/

12 Illustration 2 : High wind ramp rates (April 13, 2008, USA) Load stimulation can help the grid absorb a ramp Wind generation increased from around 750 MW at 3:40 to 2250 MW at 4:10 Ramp rate of 50 MW/Min for 30 minutes The aggregator s role is to identify processes that can start or be stopped in a few minutes, to be aware of the availability of theses operations and to activate the DR capacities when an event occurs SEDC event - 03/10/