Demand Response development"

Transcription

1 Smart Energy Demand Coalition Demand Response development" Jessica Stromback Executive Director

2 Smart Energy Demand Coalition Our Membership

3 Smart Energy Demand Coalition The SEDC is an not-for-profit industry group, representing the requirements of programs involving Smart Energy Demand in order to support the 2020 objectives, further the development of the Smart Grid and ensure improved end-consumer benefits

4 Requirements for robust, reliable Demand Response development Presentation Content Potential of Demand Response Aggregation and Reliability Market Structures Requirements for Success

5 Stochastic Power Lack in Capacity Internal Congestions Inc. Interconnections Next Generation Market Place More and more complex operational issues to solve on the Grid (AC/DC) Need to Explicitly take into account models / physics in electricity markets More and more need for collaboration Need Regional coordination for both System and Market operation More and more uncertainties Need to get Closer to realtime market operation Importance of look-ahead Need to provide incentives to cover investments Importance of regulation New products (DR, flexibility) Capacity markets

6 Demand Response = Growing Potential Globally Why Care? USA - As of 2012, over 2 billion Euros earned by the local economy through Demand Response 7 years after marktet openning 29 GW under Demand Response programs USA Multi Billion $ Business Direct Revenue + avoided investments Generation, T&D Demand Response took off in 2005 with Demand Side access to capacity markets Average estimate peak clipping 8-11% US Average estimate possible peak clipping 6-13% Europe Developing nations looking at DR for peak clipping purposes. India, Brazil, China etc. A total of 66 GW were under some form of control, making up 9% of total US national capacity AESO CASIO ERCOT IESO ISO-NE MISO NBSO NYISO PJM SPP Mean 0,00% 2,00% 4,00% 6,00% 8,00% 10,00% Actual Peak Clipping USA 2010 C&I + Residential Demand Response. Source: FERC

7 Price Volatility - Dynamic Pricing can cut the peaks and fill the valleys Increase Systems Efficiency

8 Demand Response is the Management of decentral flexibility Loads, Storage, and On-site generation resources. Definition (2/2) Demand Response Loads Storage Decentralized On-site generation This include Residential, Commercial and Industrial customers. IMPORTANT: If Commercial/Industrial customers are not enabled Residential customers will not be enabled. It is a regulatory myth that Virtual Industrial Power System Customers are enabled within Demand Response in Europe and if doesn t work for them it will not work for anyone else

9 Commercial Industrial Demand Response the low hanging fruit 2700 TWh Consumption EU 41% Industrial 27% Commercial 30% Residential Aggregator experiences such as Entelios Germany are showing that EU Industries can and are willing to shift Between: 10-30% of their load Source:

10 Emergency Capacity called by operators 7/17/2012: Another 1500MW helps avoid more serious problems

11 Energy Economic Energy Dispatch 8/17/2009: Via phasing, 75MW of expensive generation avoided

12 Aggregation and Reliability

13 Source: FERC Reliability of Demand Response Resources

14 Demand Response Back Office Demand Response Identify Event Notify Curtail Monitor Verify Restore During a period of peak capacity, the grid operator initiates a demand response event and calls the CSP. Operators see need for event The CSP initiates a load curtailment by sending a signal to its customers to reduce their loads by a specified amount. Event calls are made to customers Customers 1:00pm Clients manually shut off lights and other change their devices, or use an Energy Management System ( EMS ). consumption Operators monitor The CSP verifies the status of the load reduction among all customers until it meets the level required response, by the grid then operator. releases customers 3:00pm Clients Customer return systems to load normal returns operation. to normal Normal Operations Demand Response Event Recovery Normal Operations Source: Comverge

15 1 Demand side potential (loads only) from industry and commerce in Germany is estimated around 9 GW. Flexibility Potential Source: FfE, München

16 Aggregators % of Revenue USA Market Product Pecentage Market factors NYISO Capacity 30-50% Reserves 20 30% ISO New England Reserves 25-30% Pilot not open access Capacity 25 40% PJM Capacity 25-50% To participate in an auction have to pay up front three years in advance costs about $25,000-27,000. Aggregator takes risk and a higher % Reserves 20% Sophistacted client and inside retail sectors. They have building management systems in lowers investment and risk for aggregator. Requirements for participation do not include large facility size. ERCOT Reserves 20% The size of LAAR resources high. The customers who are participating are sophisticated and drive prices Capacity Not utility contracts an open market tariff. Low participation - pay as bid.

17 DR Customer Procurement 3 month to 1 year Process Identifying customer Finding responsible party Introductory conversation gage knowledge of the party Doing necessary orientation Preparing a proposal Determining back of the envelope value of the resource Technical review one or two days Term sheeting a relationship: How will they work together (Entering into a competitive process with other aggregators) Create contract Contract goes through legal ( Legal not understand terms) Dealing with vacations and other critical issues influencing performance Dealing with misunderstanding about what might disqualify them After sign a contract deal the multi layers inside the customer Understanding the corporate and reporting structure inside each client: what is there investment in success, incentive structures After mistakes are made, re-educate and motivate customer Maximize customer performance, layer caking into different DR markets Evaluation Adoption Introduction

18 Capacity market has supported the growth of aggregators, who create a wide variety of customer incentive schemes Net result is a large and diverse portfolio of available resources Segments Sources

19 Aggregator Market Activity EED, Regulation and ENTSO-E Network can make this development viable long term REstore IS PT IE ES GB FR NL BE C H NO DK DE SE CZ AT SI IT HR PL SK HU BB ME RS AL MK GR FI EE LV LT BY RO BG MD UA Energia 19

20 State of the Art Integrated, Automated Demand Response for Control Centers Time Scale of DR Source: LBNL Increasing Interactions with Grid (OpenADR & Smart Grid) Resources Sold Back to Grid Daily Energy Efficiency Daily Time-Of- Use Energy (TOU Rates) Dynamic Peak Load Management (Dynamic Rates) Scheduled Demand Response Real-Time Demand Response (Ancillary Reserves) Regulation (Ancillary Services) Covered by the Network Codes Service Levels Optimized Time of Use Optimized Service Levels Temporarily Reduced Increasing Levels of Granularity of Control Increasing Speed of Telemetry Demand can participate: - 2 second, 30 second, 2 min 1 hour, intra-day...

21 Alstom Grid provides software to integrate DR into market and network operations - PJM manages over 15GW of DR 35% CAGR since new DR capacity market opened in 2007 New Capacity Market (RPM)

22 Emergency Capacity DR is a balancing reserve option but only used a few hours a year to limit market distortion 7/17/2012: 1000MW of economic DR, then 1500MW of emergency

23 Economic Energy DR shifts the supply/demand balance DR can fully participate in energy and reserve markets 7/16/2012: ~500MW of economic DR helps limit price spikes

24 DR Use Frequency Regulation Program Event Frequency 2007-Present. NYISO 10 min non-spinning Reserves. Event Frequency 2007-Present. NYIS Average TOTAL: 111 calls Average TOTAL: 92 Calls 30 min Non-spinning Reserves. Event Frequency 2007-Present. NYISO. Average TOTAL: 13 calls 10 min Spinning Reserves. Event Frequency 2007-Present. NYISO Average TOTAL: 68 calls NOTE: The Annual Frequency range from a maximum of 3 to 14 times annually

25 Market structure

26 Demand Response is greener, faster and more capital efficient than many alternatives; and is a valuable resource of the future energy mix. Five pillars High Flexible Generation Lifecycle CO2- emissions Storage Low Low Demand Response Energy Efficiency Investment / Build Complexity Grid Expansion High Source: Entelios Analysis

27 Market Structure Developed TSO Panasonic Client Industrial consumer TSO Tariffs/sole service Value Areas for Market Players Potential Strategy Risk: Types of Response National Markets Aggregators - Low Potential if this is the only market - Technology Provider: Bundle softwear Use as a differentiator First entrant advantage - Low risk - Money spent developing softwear Poland Italy Spain Slovenia Cyber Grid (sole service) Flexitricity (Tariff) Kiwi

28 Function of Aggregator Value Areas for Market Players Consumer Government Generation ISO/Market Retailer Direct revenue Do-good Use of back-up Generation Control Security of Supply Energy Management Justification Smart System Grid Bidding potential into Value to voters new markets, Avoided investment Lower cycling costs, Green Increase efficiency Increased wind and New communication solar requirements fulfilled Policy affordable, sustainable, reliable Best mix for assets Enlarge market for existing power plants Virtual power plant product Service to customers Control of purchasing risk Green Revenues

29 Requirements for Success

30 DR Success is a Process May need different requirements from different resources to deliver the same product Demand Response Business Regulation Market Design Market development is a process gain one level of uptake then adjust Pay attention to product details and requirements

31 Demand Response Snap Shot A Demand Response Snap Shot How it is now for companies creating Demand Response programs in Europe right now Look at cost effective demand response programs Meant concentrated on Commercial Industrial Demand Response (C&I DR) 1. Describe program 2. Describe main regulatory enablers and barriers. 3. Describe main technological or investment enablers or barriers 4. Provide pro-active suggestions for solutions

32 Main Positive Findings 1) Demand Response can reduce European Peak Consumption by 6-11% 2) No need for large public investment in technological rollout. 3) Immediate earning potential 4) Demand Response directly pays end-consumers. These earning equal an estimated 2+ billion in direct revenue per year to local businesses

33 Main Negative Findings A Repeated pattern of regulatory barriers stretching across most of the European Union 1)Historical tender requirements by TSOs for bidding into the wholesale energy (such as balancing) markets are written for generation not demand side resources. Block demand side resources entering the markets 2) The markets have been set up for valuing energy. Demand response s value lies in flexibility and capacity. Both are undervalued in the markets.

34 Regulatory developments Energy Efficiency Directive: Art 12 7a Subject to technical constraints inherent in managing networks, Member States shall promote demand response's access to and participation in balancing, reserve and other system services markets,. ACER Framework Guidelines: These terms and conditions, 12/25Ref: FG-2012-E-009 Framework Guidelines on Electricity Balancing including the underlying requirements, shall, in particular, be set in order to facilitate the participation of demand response, renewable and intermittent energy sources in the balancing markets, ENTSO-E Network Codes: Creating the framework for realization. They are a single opportunity for opening ALL Balancing Markets to Demand Response in one effort (which will otherwise take decades) See them as a positive historic opportunity to create regulatory unity and open market structures.

35 Requirements for DR participation 1. Comparable treatment for Demand Response recognizing that its characteristics are different to those of supply-side resources 2. The development of open markets and market transparency 3. Ease of access to markets through the removal of existing barriers, creation of appropriate structures 4. Clarity on DR program design elements, to promote customer participation while ensuring the reliability and competitiveness of the resource, and its value to the system 5. Pooled aggregated load treated as a single resource 6. Harmonized market structures which enable Demand Side Participation = The Network Codes

36 Market Trading EED ACER Guideline ENTSO-E NC Important for secure robust Demand Response: 1. Allow for pools of small aggregated loads (increases reliability of resource) 2. Appropriate/fair telemetry, communication, registration requirements 3. Appropriate/fair baseline methodology 4. Appropriate/fair penalty and payment structures (for example reserves) 5. Important to create unbundled products which are granular and allow a range of resource 6. Market structures which reward and maximise flexibility and capacity (robust intraday trading and flexible, dynamic product design. 7. Payment structures which take into account that DR is new build

37 Market Trading EED ACER Guideline ENTSO-E NC Important for secure robust Demand Response: 8. Aggregated load treated as a single pooled resource 9.Regulation should treat the requirements of demand and supply as a norm 10.Regulation may need to include provisions for demand which are different from supply in order to deliver the same resource Baseline measurement Telemetry Requirements Minimum load requirements Performance penalties...

38 What is relevant in a product Standard Market Description of Demand Response: Attention to detail is important a.full Activation Time (call time) b.minimum and maximum quantity c.price of the bid d.divisibility (minimum and max load amounts) e.delivery period (Duration) f.mode of Activation. g.telemetry requirements (accept differences between TSOs) h.penalty requirement (accept differences between TSOs) i.frequency (total number) of activations j.intervals (time) between activations

39 12 Rules for successful Demand Response 1.Aggregated pools of load should be treated as a single resource. This means that all registration, telemetry, compliance regulation... is carried about at the level of the aggregator by the aggregation service provider and NOT by the consumer This is important for ALL consumer groups and it is essential to enable smaller consumers such as small industrial, commercial and residential consumers The prequalification shall take place at the pooled level and not on each individual assets Should be allowed to be pooled according to geography ownership or supplier

40 12 Rules for successful Demand Response 2. Appropriate/fair communication, registration requirements Metering is appropriate to the market requirements Real-time metering takes place at the level of the aggregator If necessary the then passes on the individual measurements of the consumers actions Treat the issue of third party access to the real-time data (both for industrial and residential consumers) Provide and create measurement and verification requirements for residential consumers Secure standardization of communication interfaces are important 3. Appropriate/fair baseline methodology Use an already existing methodology that has been proven to be sufficiently accurate to allow for fair payment and adequate reliability 4. Appropriate/fair penalty and payment structures (for example reserves) Aggregators should be penalized if they do not perform However the penalty structures should take their business model into account

41 12 Rules for successful Demand Response 5.Highly important: Create unbundled products which are granular and allow a range of resources to participate, including demand side resources Many markets today combine several types of market requirements into one balancing market (Often these are not markets at all but bi-lateral agreements between players) The bundling means that even if they will only need a resource for a short while (15 min) they will require it to be available for an extended period (16 hours) While a consumer can lower load easily for up to 2 hours 16 hours will be impossible and kill the market. Many such examples could be given and are found in almost every Member State in Europe. Other than the lack of appropriate regulatory structures and proper payment a lack of consumer friendly products is THE main barrier to Demand Response in Europe today. The Network Balancing Codes could start a positive process here

42 12 Rules for successful Demand Response 6.Regulation should treat the respective requirements of demand and supply as a norm. (AS LEGIT) This means that not only the requirements of fossil fuel generation should be treated as the norm by which all other resources should function. Regulation may need to include provisions for demand which are different from supply in order to deliver the same resource Baseline measurement Telemetry Requirements Minimum load requirements Performance penalties...

43 12 Rules for successful Demand Response 7. Market structures which reward and maximise flexibility and capacity (robust intraday trading and flexible, dynamic product design). This can be in the form of Capability Markets, Flexibility Markets, Capacity Markets Important Guidelines The Consumers or aggregators can bid directly into the market in the same manner as generation The markets are pay as cleared to allow for the best compensation of low cost resources That market structures value and pay for flexibility 8. The market designs provide investment stability for existing and new flexible resources This can be in capacity payments, availability payments...

44 12 Rules for successful Demand Response 9. The communication requirements between Balance Responsible Parties (BRP) and Balance Service Providers (BSP) or aggregators should be clear and consistent. They should safeguard the ability of the BRP to stay in balance The should ensure that the BSP, such as an aggregator, can function anywhere in the market and be independent of the BRP. Meaning that while they provide proper information enabling a BRP to stay in balance, they do not have to ask their permission to work 10. Contractual arrangements for aggregators and other market players should be clear and logical. Aggregators and other service providers are new players in the markets and they require new contractual arrangements. These can involve, BRPs, TSO, Retailers, DSO, government (many times with multiple responsibilities to each) If these contractual arrangements are not streamlined and reviewed by the regulator they can become so complicated and expensive that they alone will kill the business case for a demand side service providers. Regulators and policy makers should take responsibility in Member States to ensure consumers are not blocked from the markets in this manner

45 12 Rules for successful Demand Response 11. Encourage dynamic pricing structures for residential consumers in the retail markets (this is not necessary for access to the balancing markets but for the energy markets) 12 Allow aggregated pools of load to be sold into ANY market. Including energy, balancing, ancillarary services, capacity...

46 What is required in a full DR program description Standard Market Description of Demand Response will need to include: (Attention to detail is important - the requirements will need to be consumer and aggregation appropriate) I. Full Activation Time (call time) II. Minimum and maximum quantity III. Price of the bid IV. Divisibility (minimum and max load amounts) V. Delivery period (Duration) VI. Mode of Activation. VII. Telemetry requirements VIII. Penalty requirement IX. Frequency (total number) of activations X. Intervals (time) between activations XI. Call Method (ensuring that the the aggregator is aware of the call

47 Aggregator Market Activity EED, Regulation and ENTSO-E Network can make this development viable long term REstore IS PT IE ES GB FR NL BE C H NO DK DE SE CZ AT SI IT HR PL SK HU BB ME RS AL MK GR FI EE LV LT BY RO BG MD UA Energia Three Years ago this map would have been almost empty 47

48 Smart Energy Demand Coalition Jessica Stromback Executive Director Regus EU Parliament 37 Square de Meeus 1000 Brussels, Belgium Office Mobile jessica.stromback@smartenergydemand.eu

49 Demand response is a $500M market at PJM, providing transmission level Capacity, Energy, and Ancillary Services Capacity payments represent the vast majority of DR revenues

50 Energy markets (bought in day ahead market) Capacity Non-Spinning Reserves: Spinning Reserves: Aut Frequency Reg Event 4-10 sec Demand Response Capabilities