Demand Response in the US: Lessons for a low-carbon transformation

Transcription

1 20 December 2018 Demand Response in the US: Lessons for a low-carbon transformation Webinar Leonardo Institute/DSM University Michael Hogan Senior Advisor The Regulatory Assistance Project (RAP) Sunapee, New Hampshire United States mhogan@raponline.org raponline.org

2 Key points: Direction of travel best understood in context of market fundamentals Role of responsive demand undergoing fundamental transformation Success depends on who can play and how they re compensated Technology, retail tariff design & consumer education are key enablers or barriers Regulatory Assistance Project (RAP) 2

3 1 Context What are we talking about?

4 Average value of lost load ($/MWh) Reliability, objectively Imputed Average Value of Lost Load 70,000 60,000 50,000 40,000 One event in ten years 24 hours in ten years Optimal? 30,000 20,000 Price cap 10, Annual duration of firm load curtailment (hours/year) Regulatory Assistance Project (RAP) Source: W. Hogan, Harvard University, Kennedy School of Government. 4

5 New role for responsive demand Demand response : Exploiting the fact the VoLL* for a given end use is often far less than what it costs to ensure (and far more than the price we re charging to ensure it) Specific VoLL *Value of lost load: the value lost when electricity for a given end use is curtailed. Regulatory Assistance Project (RAP) 5

6 2 The changing role of demand response From limited-use capacity to everyday energy

7 DR as limited capacity resource Traditional Demand Response Regulatory Assistance Project (RAP) 7

8 Flexibility is the scarce resource The infamous CAISO Duck Curve Regulatory Assistance Project (RAP) 8

9 System flexibility: More valuable than ever Benefit-cost ratios of different flexibility options Source: IEA, The Power of Transformation (2014) Regulatory Assistance Project (RAP) 9

10 Controllable load acting as supply Example: PJM frequency regulation signal vs. Water heater power consumption +/- 2.25kW base point Regulatory Assistance Project (RAP) Source: PJM 10

11 New role for responsive demand Moving from a world where we forecast load and schedule generation, to a world where we forecast generation and schedule load will now need to shape, not just shave, demand Regulatory Assistance Project (RAP) 11

12 3 Participation and compensation The right to play & to be paid for the value delivered

13 Demand response in PJM Source: PJM Demand Response Strategy (June 2017) Regulatory Assistance Project (RAP) 13

14 Diversity of value as capacity Source: Brattle Group, 2 nd Assessment of PJM Capacity Market (2012) Regulatory Assistance Project (RAP) 14

15 Capital-intensive capacity-intensive Regulatory Assistance Project (RAP) 15

16 MW Price ($/MWh) Price-responsive DR: the next frontier Example: ERCOT Real Time Pricing pilot 14,700 customers, $ /MWh price 5% reduction or shift in demand Interval base actual reduce price Source: ERCOT Demand Side Working Group (2017 report) Regulatory Assistance Project (RAP) 16

17 The role of demand aggregation UK minimum bid size: 2 MW Regulatory Assistance Project (RAP) 17

18 The role of demand aggregation US UK minimum bid bid size: MW kw Regulatory Assistance Project (RAP) 18

19 Dispatchable demand response Source: PJM and Enbala Regulatory Assistance Project (RAP) 19

20 Innovation: 3 rd party access is essential Regulatory Assistance Project (RAP) 20

21 Other considerations: Retail tariff design matters a lot Consumer education is critical Distribution-level grid constraint engines Optimize (eliminate?) TSO/DSO interface I[T/D]SO? Others? Regulatory Assistance Project (RAP) 21

22 About RAP The Regulatory Assistance Project (RAP) is an independent, non-partisan, non-governmental organization dedicated to accelerating the transition to a clean, reliable, and efficient energy future. Learn more about our work at raponline.org Michael Hogan Senior Advisor The Regulatory Assistance Project (RAP) Sunapee, New Hampshire United States mhogan@raponline.org raponline.org

23 Addressing the fuel cost issue in dispatchable demand response 1 issue, 2 contexts: Over-compensating demand (US), or not paying for scheduled supply (EU) FERC Order 745: LMP minus G vs net benefits test (US) Balancing responsible parties, supplier compensation or net benefits test? (Europe) Compensatory measures justified only in proportion to progress on reforming energy and services pricing Regulatory Assistance Project (RAP) 23

24 Bibliography Electric Reliability Council of Texas ( ERCOT ), 2017 Annual Report of Demand Response (March 2018) (accessed at ERCOT, Demand Side Working Group, Load Participation in the Nodal Market (23 April 2015) ERCOT, Analysis of Load Reductions Associated with 4-CP Transmission Charges and Price Responsive Load/Retail DR, Raish, Carl L. (24 March 2017) ERCOT, Load Participation in SCED v1: Overview & Refresher, Demand-Side Working Group(23 April 2014) U.S. Federal Energy Regulatory Commission ( FERC ), Assessment of Demand Response and Advanced Metering, Staff Report (December 2017) Regulatory Assistance Project (RAP) 24

25 Bibliography (continued) FERC Order No. 745, Demand Response Compensation in Organized Wholesale Markets (15 March 2011) Lawrence Berkeley National Laboratory, 2025 California Demand Response Potential Study: Final Report on Phase 2 Results (1 March 2017) PJM Interconnection, Demand Response Strategy (28 June 2017) The Brattle Group, Demand Response Review (prepared for AESO), Pfeiffenberger, J. and Hajos, A. (March 2011) The Brattle Group, Demand Response Participation in PJM Markets (prepared for AESO), Spees, K. et al (26 September 2017) Regulatory Assistance Project (RAP) 25

26 Bibliography (continued) Hogan, William W., Electricity Market Design: Market Models for Coordination and Pricing (Harvard University, John F. Kennedy School of Government, 8 April 2008) MJ Bradley & Associates, Accelerating the Electric Vehicle Market: Potential Roles of Electric Utilities in the Northeast and Mid-Atlantic States (March 2017) Hogan, M., Follow the Missing Money: Ensuring reliability at least cost to consumers in the transition to a low-carbon power system, The Electricity Journal (2016) Lazar, J. & Gonzalez, W., Smart Rate Design for a Smart Future, Regulatory Assistance Project (July 2015) Faruqui, A., Hledik, R. & Palmer, J., Time-Varying and Dynamic Rate Design, Regulatory Assistance Project & The Brattle Group (July 2012) Regulatory Assistance Project (RAP) 26