A National Perspective On Demand Response

Ahmad Faruqui, Ph.D.

March 3, 2008

California Energy Commission

Sacramento, California

2California Energy Commission

DR is widely deployed across the country but it is mostly triggered during emergencies

• According to a FERC survey, 234 US electric utilities offer DR programs

• A DOE study suggests that some type of DR program exists in 42 of 50 states:

Source: DOE Federal Energy Management Program Website. http://www1.eere.energy.gov/femp/program/utility/utilityman_energymanage.html

EE and DR Programs

EE Programs Only

DR Programs Only

No Energy Management Programs

3California Energy Commission

NERC has quantified the impact of emergency-triggered DR by region

4California Energy Commission

NERC acknowledges that these self-reported DR estimates may overstate actual capability

Source: 2007 NERC Summer Assessment, 2007 FERC Assessment of DR & Advanced Metering

Demand Response by NERC Region

5California Energy Commission

FERC data shows that the DR mix is heavily tilted toward emergency-triggered programs

0%

20%

40%

60%

80%

100%

NE

NY

PJM

MIS

O

SP

P

ER

CO

T

CA

ISO

Economic

Emergency

Percentage of DR by Type

6California Energy Commission

California dispatched the most DR during the heat storm of 2006

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

NE NY PJM MISO SPP TX CA

% of peak

Peak Reduction from DR in 2006

7California Energy Commission

Additional DR comes from dynamic pricing programs aimed at customers > 500 kW

• This amounts to approximately 1 percent of US peak demand which

► When added to DR coming from reliability-triggered programs, this amounts to some 3.5% of US peak demand

• Much of the price-responsive DR originates in the regions east of the Mississippi River

► Duke Energy► Georgia Power Company► Tennessee Valley Authority

• There is additional DR in restructured power markets in Texas, New York, New England and PJM that feature hourly pricing as the default service

► Customers can opt to energy service providers for hedged pricing products

8California Energy Commission

A forthcoming EPRI-EEI study suggests that DR can lower peak demands by 10%

Source: EPRI/EEI National EE and DR Potentials Study: Preliminary Results

Maximum Achievable Potential Peak Reduction From DR

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1,000

1,200

1,400

2005 2010 2015 2020 2025 2030

Year

Fo

reca

sted

US

Pea

k D

eman

d (

GW

)

10% reduction in peak

US demand forecast (no DR)

US demand forecast (with DR)

3.5% reduction in peak

9California Energy Commission

Dynamic pricing will soon be offered in mass market, as AMI spreads nationwide

Source: UtiliPoint International, 2007 FERC Assessment of DR & Advanced Metering

Number of Utilities Announcing AMI Deployments

10California Energy Commission

To assess AMI economics, several dynamic pricing pilots are being carried out

11California Energy Commission

Across these pilots, there is compelling evidence of strong demand response potential

Percentage Reduction Estimates from Reviewed TOU Pilot Programs

0%

5%

10%

15%

20%

25%

30%

35%

Ontario- 1 Ontario- 2 SPP PSEG PSEG ADRS- 04 ADRS- 05 Gulf Power-1

Pilot Program

% R

edu

ctio

n i

n L

oa

d

TOU TOU w/ Tech

12California Energy Commission

Higher impacts are observed for dynamic pricing rates than for TOU rates

Percentage Reduction Estimates from Reviewed CPP/PTR Pilot Programs

0%

10%

20%

30%

40%

50%

60%

Pilot Program

% R

edu

ctio

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oa

d

CPP PTR CPP w/ Tech

13California Energy Commission

Multiple barriers are impeding the wider deployment of price-responsive DR

• Lack of state-federal regulatory coordination • Disconnect between retail and wholesale power

markets• Retail rate freezes and wholesale price caps• Lack of AMI and enabling technology• Customer fear of price volatility• Unimaginative program designs• Aggregators not allowed into the market

14California Energy Commission

How does California compare with the rest of the country?

• ISO/RTO based reliability-triggered programs► California is on par with the rest of the US

• Price responsive retail and wholesale DR► California lags the country

• Dynamic pricing for large power customers► California lags the country

• Dynamic pricing for the mass market► California has conducted the most comprehensive pricing

pilot in the country► It is moving faster than the nation with AMI deployment