Using Demand Response to Reduce Power Supply Costs

Transcription

1 Using Demand Response to Reduce Power Supply Costs APPA National Conference June 22, 2010 Richard Sedano The Regulatory Assistance Project Vermont Maine New Mexico California Illinois Oregon Washington

2 About the Regulatory Assistance Project RAP is a non-profit organization providing technical and educational assistance to government officials on energy and environmental issues. RAP Principals all have extensive utility regulatory experience. Richard Sedano was commissioner of the Vermont Department of Public Service from and is an engineer. Funded by foundations and the US Department Of Energy. We have worked in nearly every state and many nations. Also provides educational assistance to stakeholders, utilities, advocates. 2

3 Agenda What is demand response Valuing demand response Issues in implementing demand response 3

4 Context Vibrant interest in demand resources Cost effective compared with supply Less environmental impact than supply Risk management, operational flexibility High volume potential Depends on customers Demand Response is customers voluntarily curtailing usage, benefitting the grid 4

5 Could be turning off Could be turning down Curtailing 30% of lights 4 degrees set back for a thermostat Learn from customer behavior experience Duration of curtailment can t be too long Customer needs to work around or recover 5

6 Supply and Demand Tell the (short run) Basic Story Benefits of Demand Response in Electricity Markets US DOE Feb

7 MW Annual Aggregate Load 25,000 20,000 15,000 10,000 5,000 0 Time 7

8 0% 4% 8% 13% 17% 21% 25% 30% 34% 38% 42% 46% 51% 55% 59% 63% 68% 72% 76% 80% 84% 89% 93% 97% MW The Load Simplified 25,000 20,000 Costliest hours demand response focus from system operator Most polluting hours too 15,000 10,000 5,000 Any hour: customer may choose to respond if a trigger (price signal) is present 0 Percentile 8

9 Day Ahead Electricity Price, $/MW ISO-NE Top 5% of Hours Price Duration Curves ( ), Top 5% of Hours % 1% 2% 3% 4% 5% % of Hours 9

10 Demand Response Features Demand Response helps energy markets Clearing prices lower w/ price responsive demand Demand Response meets capacity requiremts Avoid demand ratchet charges Demand Response provides ancillary services Reliability maintained/enhanced w/ lower cost Supply Demand balance with growing renewables Include, Integrate in Planning Scenarios could reflect DR/EE only solutions 10

11 Benefits of Demand Response Resources Avoided generation capacity costs Avoided energy costs Benefits include reduced losses Deferred/avoided investments in T&D capacity Environmental Benefits, net Reliability Benefits Hard to Quantify Benefits Summarized from a cost-effectiveness process created for PNDRP, the Pacific Northwest Demand Response Project 11

12 Costs of Demand Response Program Administration Including costs of contract DR experts Customer Costs Payments to Customers Reservation, Event, Incentives to sign up Costs have fixed and variable elements and can be factored into IRP-type analysis 12

13 Customer s Deal Not the old rates for interruptible service that were never interrupted Customer expects curtailment At least to test response: customer is a resource Mandatory response pays a reservation charge per kw and then either a set charge or a share of value at the event Voluntary response pays at the event 13

14 Coordination of Energy Efficiency and Demand Response: A Resource for the National Action Plan for Energy Efficiency January

15 What Demand is Responding? Lighting Space cooling Space heating Water heating Industrial process (non-critical) Irrigation At the limit: Whatever customer wants 15

16 Demand Response Potential Planners want to estimate potential Technology Customer behavior Regulation (rate design, utility motivation) Varies by time, season, base customer characteristics Assess baseline, measure departure from baseline (smart grid makes this easier) 16

17 FERC National Assessment of Demand Response Potential June

18 Reliability of Demand Response Mandatory to customer Control from electric system (utility/rto) Could be through a curtailment service provider Radio control Smart Grid Contracts Number of events, frequency, damages Voluntary to customer Statistical performance 18

19 Reliability Factors Can operator count on demand response? Persistence over a series of events Operating decisions to ration resource Customer acceptance over time Fair (and perceived fair), understandable terms Automation (set it and forget it) Smart grid, radio Contracts with liquidated damages (mandatory) Statistical estimates (voluntary) 19

20 Utilities Test Demand Response Performance PJM RTO wide test for demand resources Result: 118% compliance This means that when the simulation occurred, PJM saw 18% more demand response than it expected. 20

21 Demand Response Elements: Event and Trigger Demand Response happens with an event Reliability problem, operating condition Price spike Customer value assessment And is released by a trigger Contract or tariff may make it automatic Or customer receives notice and chooses Why does the customer choose curtailment? How does the customer curtail? 21

22 BID PRICES ($/MWh) Tilting the Demand Curve Price- Responsive Demand Bid Inelastic Demand 20 Supply Bid ENERGY AMOUNT (GW)

23 Conceptual Framework for Spot Price Energy Benefits Demand With Curtailment Demand Without Curtailment P 1 Benefit to Non-Curtailed Loads Benefit to Curtailed Loads P 2 P* Supply Underlying Demand Curve Brattle Group Q* Q 2 Q 1 Quantity

24 Including Demand Response Northeast RTOs in Capacity Markets Bid-based capacity markets for future years Demand Response fully qualified to bid With criteria for qualification and performance with liquidated damages Any place with a capability responsibility can award capacity value to demand response (and energy efficiency also) 24

25 Utility ISO/RTO Delivery of Demand Response Curtailment Service Provider Where allowed Market maker and specialist w/ customer relation Keys: Optimize DR quantity; sell customer on curtailment value and convenience Customer behavior awareness 25

26 Energy Efficiency: Close Cousin of Demand Response Benefits of Demand Response in Electricity Markets US DOE Feb

27 Watts per Square Foot Combined Commercial Cooling and Lighting Loadshape Baseline, Load Management (STDR), and Energy Efficiency Baseline Load Management Efficient Hour Optimal Energy 27

28 Watts per Square Foot Combined Commercial Cooling and Lighting Loadshape Baseline, Load Management (STDR), and Energy Efficiency Baseline Efficient Efficient and Load Mng Hour 28

29 Pitfall for Demand Response: Dirty Back-up Generation What happens to curtailed demand? Gone Shifted in time Substituted with on-site generation What if: Proliferation of on-site generation A potential source of pollution, unless Output standards can guard against negative outcome environmental regulators concerned 29

30 From ISO/RTO Council 2009 State of the Markets Report Presently, 31,695 MW of demand response are available in ISO and RTO markets, up from 17,146 MW at the end of Such gains represent 6.6 percent of 2008 peak electricity demand within the regions combined. Demand response capacity resources have nearly tripled in the New England ISO and PJM territories, and resources providing ancillary services accounted for more than 4,000 MW at the end of Such an infusion of demand response resources has aided in providing greater grid reliability, mitigation of generation market power, and an overall decline in fueladjusted power prices in organized wholesale markets. 30

31 Utility Issues with Demand Response Reduced need for large assets Reduced sales Relationship with customer changes Understanding how to do demand response well and executing Pricing retail rates that shows system savings Technology enabling tech helps Information management 31

32 Looking Ahead Demand Response can help manage proliferation of intermittent resources (a lot of wind and solar!) Especially if enabled by smart grid Especially if customers get used to being treated as a resource for some key end uses where 99.9% reliability for 100% service is not really as important as we have thought 32

33 Demand Response Key Federal Reports See DOE report to Congress in response to EPACT 2005: February 2006 See FERC national assessment of demand response potential: June 2009 And just released: National Action Plan for Demand Response from FERC 33

34 Thanks for your attention RAP Mission: RAP is committed to fostering regulatory policies for the electric industry that encourage economic efficiency, protect environmental quality, assure system reliability, and allocate system benefits fairly to all customers.