Demand Response Policy and Programs

Transcription

1 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

2 Presentation Topics What is demand response? Enabling technologies for demand response Use of demand response to provide reserve capacity Demand response in the United States Demand response in the rest of the world Benefits of demand response Barriers to demand response Policy conclusions

3 What is Demand Response? 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 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 average price

4 Demand Response and DSM Demand response is a particular type of demand side management (DSM) measure 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 ) 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 pricing initiatives, eg time of use pricing

5 Demand Response and Energy Efficiency Demand Response Energy Efficiency Energy efficiency programs treat all energy usage equally and are not concerned with when and where energy is used and how much it costs

6 Origins of Demand Response 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

7 Demand Response vs Interruptibility 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

8 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

9 GoodCents Select DR Program The GoodCents Select demand response program, developed by the GoodCents company, has been implemented by Gulf Power in Florida 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 realtime pricing component a means of recording and retrieving the requisite billing data

10 GoodCents SELECT Major Components SuperStat Communications Gateway RSVP Rate

11 GoodCents SELECT PriceStat for 2005

12 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.

13 GoodCents SELECT Residential Service Variable Pricing (RSVP) Rate Schedule Standard Residential Customer Charge applies: $10.00 per month RSVP Participation Charge: $4.95 per month Prices per kwh (includes energy charge, fuel, ECCR, PPCC and ECRC) Low Medium High Critical Standard Residential Rate: 6.8 cents/kwh 4.7 cents/kwh 5.9 cents/kwh 10.5 cents/kwh 31.4 cents/kwh

14 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 Medium 59 % 28% 12% 1% High Critical (Maximum)

15 GoodCents SELECT AVG HOURLY DEMAND ON JAN 24 AT HOUR 7 AND 8, KW control sample kwpre1 kwpre2 kwcrt1 kwcrt2 kwnxt1 kwnxt2 HOURS

16 GoodCents SELECT 1/2/02 No Critical kw Time

17 GoodCents SELECT 7/18/02 Critical time 2:00 PM to 4:00 PM 6 5 kw Test Group Control Group Time

18 Contingency vs Economic Demand Response Contingency DR Focus is on providing a dispatchable, physical hedge against supply shortages and network congestion Typical of most early load management programs Primarily capacity value Designed to operate less than 100 hours per annum Usually involves reservation payments and non-compliance penalties Some 15,000MW of this type of DR in North America, equal to about 5% of total demand Economic DR Focus is on avoiding high market prices Newest and fastest growing form of DR Sometimes dispatchable via a strike price or other economic threshold Generally voluntary with no penalties Dwindling distinction between economic DR and fully marketbased electricity prices Still small by comparison with contingency DR programs Source: Modified from Grayson Heffner

19 Enabling Technologies for DR (1) Enabling technology for demand response programs generally falls into three categories: automation, monitoring and communication Automation already occurs in direct load control programs 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

20 Enabling Technologies for DR (2) Interval metering Energy Information Tools Communications/ Notification Backup Generation Direct Load Control

21 Enabling Technologies for DR (3) The actual response achieved in a DR program depends on many factors, eg customer and facility type, end-use composition, work load, weather Investment in automation, monitoring and communication enables increased responsiveness under any given conditions Customer-owned generation represents a special type of enabling technology because it allows greatly increased flexibility in demand response by the end-user participant

22 Enabling Technology for the DR Provider Interval metering of end-user participants sites Two-way quick turnaround communications between DR Provider and end-user participants, often using the internet Special purpose communications technology and software to interface with participant-owned enabling technology and deliver value-added services Improved capabilities to forecast day-ahead market prices Back office systems to measure and verify actual demand reductions achieved by end-use participants and settle financial transactions Source: Modified from Grayson Heffner

23 Enabling Technology for the Participant Interval meters with two-way near real time communications Multiple, user-friendly communication pathways, often using the internet, that notify the participant of price levels, system status, DR Provider requests Energy information tools that display load shapes so the participant can analyse performance relative to baseline usage, and obtain diagnostics to improve responsiveness Pre-determined demand reduction strategies that are optimised to meet differing high-price or electric system emergency scenarios Load controllers, building energy management control systems and other automation equipment which facilitate rapid deployment of demand reduction strategies at the enduse level On-site generation, used either for emergency back-up or to meet the primary power needs of a facility Source: Grayson Heffner

24 Use of DR for Reserve Capacity Use of demand response to provide reserve capacity is growing 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 Some advocates in the United States believe demand response should also be used to provide spinning reserve

25 DR for Reserve Capacity in Australia (1) 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 VPX tendered for supply of reserve capacity and demand-side options to ensure system reliability over the 1997/98 summer 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 This was about 1.5% of the forecast maximum demand

26 DR for Reserve Capacity in Australia (2) 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 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

27 DR for Reserve Capacity in the US (1) Source: Reports by North American Electric Reliability Council and United States Energy Information Administration cited by Grayson Heffner

28 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 Council

29 ISO New England DR Program Electricity customers in the service area of the New England Independent System Operator (ISO-NE) can participate in demand response programs 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 DR Providers are companies that provide technology and services to help customers participate in the demand response programs 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 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

30 Actions Undertaken if Asked to Curtail 60% 50% Reliability Programs (N=28) Non-Participant (N=11) Price Response (N=49) 40% 30% 20% 10% 0% Reduced lighting Adjusted HVAC temps Adjusted ref rig equip Turned off Turned off office equip fans/pumps Turned off elevators Operated generator Shift mfg processes Other action taken

31 :00 11:05 11:10 11:15 11:20 11:25 11:30 11:35 11:40 11:45 11:50 11:55 12:00 12:05 12:10 12:15 12:20 12:25 12:30 12:35 12:40 12:45 12:50 12:55 13:00 13:05 13:10 13:15 13:20 13:25 August Test Performance All Resources 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 Time Reduction MW Enrolled MW MW

32 :00 11:05 11:10 11:15 11:20 11:25 11:30 11:35 11:40 11:45 11:50 11:55 12:00 12:05 12:10 12:15 12:20 12:25 12:30 12:35 12:40 12:45 12:50 12:55 13:00 13:05 13:10 13:15 13:20 13:25 August Test Performance Emergency Generation Only Time Reduction MW Enrolled MW MW

33 :00 11:05 11:10 11:15 11:20 11:25 11:30 11:35 11:40 11:45 11:50 11:55 12:00 12:05 12:10 12:15 12:20 12:25 12:30 12:35 12:40 12:45 12:50 12:55 13:00 13:05 13:10 13:15 13:20 13:25 August Test Performance Load Reduction Only Time Reduction MW Enrolled MW MW

34 DR in the United States (1) 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 interruptible tariff programs

35 DR in the United States (2) Some Major Utility DR Programs Company Tennessee Valley Authority Florida Power Duke Power Residential DR 60MW 1350MW 500MW Commercial & Industrial DR 1800MW 400MW 800MW Total Load 29,900MW 10,076MW 16,000MW Source: Grayson Heffner

36 DR in the United States (3) Some Major ISO/RTO DR Programs Region Participants Registered DR Load Other DSM Programs Regional Peak Demand NY- ISO MW 865MW 31,000MW PJM MW 2070MW 62,500MW ISO- NE MW 1587MW 25,500MW Source: Grayson Heffner

37 Factors Driving Increased DR in the US (1) Advanced and affordable interval meters and automatic meter reading New opportunities for two-way utility-customer communications and interaction using the internet 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 50GW of installed back-up generators now in place and in many cases available to bid into wholesale markets Source: Grayson Heffner

38 Factors Driving Increased DR in the US (2) More sophisticated customers who understand the opportunities inherent in competitive energy markets Increased sophistication in building energy management and control systems developed through years of energy efficiency improvements Gradual opening up of access by customers to their interval load data in near real time Energy-internet entrepreneurs actively pushing the envelopes of load management applications and technology Source: Grayson Heffner

39 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 underfrequency trip off South America Electrobras Demand Controller Domestic water heater control Africa Eskom Hot Water Cylinder Load Control Water heater load control for distributors Source: Grayson Heffner

40 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 Source: Grayson Heffner

41 Winter Peak Reduction Scheme The Winter Peak Reduction Scheme was introduced by the Electricity Supply Board, an integrated utility in the Republic of Ireland 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

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51 Benefits of Demand Response (1) 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

52 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 Source: Modified from Grayson Heffner

53 Benefits of Demand Response (3) Impact of Demand Response on Market Clearing Price Source: Grayson Heffner

54 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 with high electricity prices

55 Benefits of Demand Response (5) Annual Value of 100 hours of Demand Response based on Wholesale Market Prices Source: Grayson Heffner

56 Benefits of Demand Response (6) Many of the benefits of DR can be classed as public goods Public Goods Reduced price volatility and mitigation of cyclical variations in wholesale power prices Improvements in the reliability of the electricity network and relief of network congestion Deferral of new generation and network capacity Operating flexibility Customer choice Private Goods Cost savings to end-user participants from reduced electricity tariffs Payments to end-user participants for availability and actual demand reductions Cost savings to electricity retailers and network owners from increased system efficiency and asset utilisation Insurance hedge value to electricity retailers and network owners Source: Modified from Grayson Heffner

57 Barriers to Demand Response Most customers on retail tariffs never see wholesale electricity market prices and are therefore unaware of the value of demand response Most small customers never see their load profile, because installing interval metering without subsidies is too costly Design of most ancillary services markets effectively precludes any demand-side participation When there are low prices in the wholesale electricity market, this reduces payments for demand response Participating in a DR program can be complex (though this may be mitigated by a third part DR Provider) End-users must typically make additional investments in enabling technology to maximise responsiveness

58 Policy Conclusions Although the benefits of demand response are evident, realising them will still require much coordination and effort There are many ways to arrange the various parties involved in demand response and no clearly superior arrangement has as yet emerged Exposing end-users to dynamic market prices is not enough; many participants require the structure of a DR program, including advice and enabling technologies 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 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

59 Information Sources Reviews of documents on DSM in Australia are available at the following website: The International Energy Agency DSM Programme carries out multi-national research projects on DSM. Website for information about the IEA DSM Programme: 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: