FINDING THE VALUE IN DEMAND SIDE RESPONSE 22 May Stephen Woodhouse

Transcription

1 FINDING THE VALUE IN DEMAND SIDE RESPONSE 22 May 2015 Stephen Woodhouse

2 THE NEED FOR FLEXIBILITY IS GROWING With new forms of generation, prices and dispatch patterns will be dictated by wind and solar Projected changes in wholesale prices from 2010 to Four main sources: 1. Flexible generation 2. Increased interconnection 3. Demand Side Response (DSR) 4. Electricity storage Projected generation on a sunny day across N Europe in 2030 Varying types of flexibility are needed Capabilities and system needs will evolve

3 RENEWABLES WILL DECOUPLE DEMAND AND PRICING PEAKS Variability of wind and solar generation will change the nature of peaks and price peaks will be both more variable and less predictable Annual peak occurs at 6pm 8 Example day: Effect of wind means that thermal generation peaks at 10am Demand Wind generation Demand net of wind generation GW Demand Wind generation Demand net of wind generation Hour of the day

4 RELIABILITY WILL BE VALUABLE, FLEXIBILITY WILL HAVE A PREMIUM The world is changing with the implementation of low carbon technologies. More flexibility will be needed on the system, DSR is one source of flexibility which could be used by many purposes and serve multiple parties There are different markets for flexibility which to access? Industrial companies will need to to review processes to find what flexibility is available and what markets it can access Any particular DSR resource may be a candidate for one or more services Simpler, < $ Demanding >$ The different timeframes in which DSR is used by various parties leads to synergies and conflicts in the way in which DSR may be dispatched and for which service

5 FLEXIBILITY BRINGS WIDER SYSTEM BENEFITS BUT THE VALUE IS DIFFICULT TO CAPTURE COMMERCIALLY System benefits need to be accessible to providers of flexibility DSR providers cannot access full benefits Work carried out by Pöyry for UK government showed that DSR could contribute up to 10% reduction in total system costs Inaccessible system benefits However, some benefits are not readily accessible to providers and facilitators of DSR: Network capex avoidance Displaced generation investments The lack of access to revenue streams can make the business case for DSR more challenging Total system benefits of DSR Costs to DSR provider Realised revenue to DSR provider Markets for flexibility are not well developed

6 MARKETS MUST ADAPT TO VALUE FLEXIBILITY European electricity markets must allow trading across all timeframes (including intraday), to permit volume risk to be managed as well as price risk What is the requirement for flexibility? Decarbonisation increases need for flexibility Projected 2030 wholesale electricity prices in Northern Europe Who needs to buy flexible capability? Balance responsible parties, especially RES Projected difference between day-ahead and out-turn (GB) What is the impact of capacity mechanisms? Risk paying for the wrong technology How can flexibility be traded across borders? Implementation of EU Target Model Existing wide capacity mechanism Existing narrow capacity mechanism How much cross-zonal capacity is available for sale in each timeframe? What are the mechanisms and rules for selling cross-zonal capacity? Proposed capacity mechanism How much harmonisation of balancing and imbalance arrangements?

7 ROLES AND RESPONSIBILITIES NEED TO BE DEFINED Contractual and operational arrangements between 3rd party aggregators and other market parties are needed to address the impact of DSR contracts and activations BRP of supplier Supplier TSO Information on aggregator contracts to address impact on load profile Information to address the impact on network operation Consumer Aggregator DSO Day-ahead market Intraday market Balancing market Source: Designing fair and equitable market rules for demand response aggregation EURELECTRIC

8 SUMMARY Predictability will have value in the future energy markets, and flexibility will have a premium DSR has significant economic potential but commercial value is not always easy to find Value depends on price volatility and/or a route to market The introduction of more intermittent generation is increasing the need for flexibility (also for within day balancing) across Europe. In our experience successful DSR requires: Sound understanding of the process flexibility that is available, and when compared to that required by different flexibility markets (wholesale v intraday v balancing v reserve markets have very different values) Building a solid business case that recognises costs and operational implications, revenue potential (from the different markets) and risks (competition, impact of future market design, etc.) A robust route to market (NB: energy companies are not always supportive of demand response) Most of all, the motivation and capital to implement an expensive new process (new process controls, process management, organisational, IT etc.) Motivation can often be triggered by crisis!

9 Contact: Stephen Woodhouse, Phone: