Resource Adequacy: The Promise of Demand Response in the ERCOT Market

Transcription

1 Resource Adequacy: The Promise of Demand Response in the ERCOT Market Presented by: John Rossi, SVP, Corporate Strategy, Comverge, Inc. Marianne Carroll, Partner, Brown McCarroll Milton Holloway, President & COO, CCET

2 Content DR Market Potential C&I Look at another market results Suggestions DR Market Potential Residential/Small Commercial Differences between C&I and Res/Sm C Options for Texas

3 Brattle Report Background: How did we get here? Reasons for the decline in generation investment in ERCOT Actions taken by the Public Utility Commission of Texas What was the Brattle Group asked to do?

4 Brattle Conclusions Investor outlook: Cautious, but not unwilling to invest Return expectations No long-term PPAs The energy-only market design

5 Brattle conclusions How does the market influence investment decisions? The System-Wide Offer Cap (SWOC) How high should it go? Relationship with Reserve Margin Reserve Margin What is the right level? Required or Market-Determined?

6 Recommendations and Policy Options The PUC should make a decision on whether the reserve margin is a requirement or a result Policy Options: Energy-only with market reserve margin Energy-only with adders Energy-only with backstop Mandatory adequacy requirement for LSEs Capacity Market

7 Recommendations and Policy Options Evaluation of investor risk in each policy option Other recommendations: Increase SWOC Increase PNM and LCAP Enable additional DR Continue market reforms to address price reversals

8 Market Participant Comments TIEC/Oxy EDF/IPR-SUEZ Other Generators REPs Option 4 Advocates Brattle s Composite Options

9 Two Composite Options Energy-only with Administrative Support (expand DR, limited administrative withholding through operating reserves) A capacity market Texas style

10 Energy-only with Administrative Support Requires a firm, advance commitment to increase operating reserves Based on projected loads and resources What kind of operating reserves, and when to deploy them? No procurement of backstop generation Hogan proposal

11 A Texas Capacity Market 3-year forward auction for 1 delivery year Single region-wide market Demand curve: vertical or sloped? No MOPR, but a statement of principles Align incentives with resource adequacy value Strong scarcity pricing in energy market Cost allocation based on cost causation Managing price shock

12 Where are we now? Hogan proposal being studied Viewpoint of Commissioner Anderson: ERCOT does not have a resource adequacy problem Activities to be undertaken in the first and second quarters of 2013 Legislative intervention? ERCOT s CDR NERC letter to ERCOT

13 The prospects for significant contributions from demand response Other markets have relied successfully on Demand Response for Resource Adequacy Curtail Service Providers (CSP s) have demonstrated the ability to recruit and maintain C&I MW s No open market to date has attracted CSP s for the residential and small commercial sector (only utility programs) Brattle estimates and Comverge has demonstrated: 10-30% residential participation in a properly designed program modeled after successful programs elsewhere in the country 5-10% Small Commercial participation in a properly designed program modeled after successful programs elsewhere in the country

14 PJM Results show DR Reliability PJM portfolio includes 8,000 MW of Demand Response Year by year performance of DR 2012 CSP Event Performance

15 C&I Market Considerations Lessons learned from other markets Allow Back Up Generators to participate Can be used with no impact to customer operations Suitable for automatic dispatch Apply reasonable limits to dispatch (frequency/duration) 50 hours or less per season 6 hours or less per event Provide visibility for investment planning 3-yr forward Auction Loads in SCED could produce additional DR participation but this may not be useful for Resource Adequacy

16 PJM Capacity Resources Types From PJM report: Emergency Demand Response (Load Management) Performance Report 2012/2013, Dec. 2012

17 Faruqui, Direct Load Control of Residential Air Conditioners in Texas, 10/25/2012

18 Residential Market Considerations C&I Economics vs. Residential/Small Commercial C&I has lower initial cost per kw than Residential/Small Commercial R/SC Although over 10% of PJM Capacity comes from R/SC, all of this load comes from utility programs, no CSP direct load Residential/Small Commercial has attractive attributes Main driver of the Texas peak Incremental capacity addition from day 1 Resource increases with temperature 100% automated for fast dispatch and reliability Load only, no generation Available for many hours (>50/yr) Low attrition rate Proven for years across the country

19 Who should run a residential DR program? REP s TDSP s PUC Jurisdiction Limited Fully Regulated Cost Recovery System Effectiveness Communications Competitive Pricing Limits Ability to recover the DR investment Deployment can occur wherever customers take the deal. ERCOT wide but wide geography increases installation costs Broad range of options, Paging, SMT System, WiFi, Broadband, Cellular Ability to structure rates to allow recovery through Adders, Riders, or other Components Concentrated geography allows for targeted deployment where needed Leverage SMT infrastructure and/or use another low-cost network (e.g. paging) for rapid dispatch Energy Efficiency Overall Cost to TX Can Offer program in response to a new TDSP Standard Offer Program REPs could combine marketing & incentives with other offers thus dramatically reducing overall cost Ability to design standard offer program for REP s or other 3 rd parties. More PUC Oversight. TDSP s or subcontractors must mount marketing campaign and provide viable incentives, thus increasing overall cost

20 REP vs. TDSP REP has potential for lower cost program due to synergies with ongoing marketing efforts and potential for bundled incentives. REP could offer price responsive programs by leveraging Smart Meter data. The key difficulty is dealing with customers who move to another REP. TDSP has the advantage of captive customer base but no marketing or pricing flexibility.

21 Elements of Residential DR Program Program Optimization: Real-time data for intra-event optimization Ongoing analysis for continuous program improvement Customer Experience Customer Engagement: 75 million customer interactions 5.5 million devices deployed Customer Experience Energy Sciences: 10,000 M&V points and 20,000 HAN devices read in real time, 24x7 Customer Experience Customer Experience Customer Experience Customer Experience Marketing Recruitment: 1.2 millionth recruitment in Q Control Operations: 225 Control Events in ,000 MWh in 2012 Customer Experience Customer Experience Call Center: 360,000 transactions in 2012 Field Force: 220,000 installed in ,000 per month peak

22 Conclusions Brattle recommended two constructs to add Demand Resources for Resource Adequacy 1. Energy only market with support for DR 2. TX capacity market Option 2, alone would provide C&I load Based on PJM results, some form of option 1 would be required for Residential and Small Commercial participation

23 Q & A Marianne Carroll Partner Brown McCarroll mcarroll@brownmccarroll.com John Rossi SVP, Corporate Strategy Comverge, Inc. jrossi@comverge.com Milton L. Holloway, Ph.D. President & COO Center for the Commercialization of Electric Technologies (CCET) mholloway@electrictechnologycenter.com