Demand Response: Keeping the Power Flowing in Southwest Connecticut Presented by: Henry Yoshimura Manager, Demand Response ISO New England September 30,

Demand Response: Keeping the Power Flowing in Southwest Connecticut

Presented by:Henry YoshimuraManager, Demand ResponseISO New England

September 30, 2005

Integrating Demand Response into the

Wholesale and Retail Markets© 2005 ISO New England Inc.

Background (the Problem)

• ISO New England is responsible for maintaining reliability of the entire New England electricity grid– Can not allow a serious threat to the region’s

reliability to go unresolved• Prefer the market to address resource scarcities• Wholesale markets not yet sending the right

locational price signals to encourage new investment• Load growth in SWCT has exceeded the capacity of

local generation and transmission to serve load reliably

• New local resources and transmission lines are badly needed, but delayed, creating a “reliability gap”



Southwest Connecticut

LONG ISLAND SOUND

TOWNS

SOUTHWESTERN CONNECTICUT AREA

NORWALK-STAMFORD AREA

CONNECTICUT

SUBJECT

AREA

16 Preferred Towns



Solving the Problem

• Preferred Method: – ISO New England defines the problem

(opportunity), gives the right price signals, gets out of the way and lets the market solve the problem

• Last Resort: – ISO New England intervenes in the market,

issues a RFP and contracts for new resources to solve the problem



Emergency RFP

• RFP issued in December 2003 for up to 300 MW of new emergency resources in Southwest Connecticut for 4 years

• Eligible resources included:– Quick Start Generation– Demand Response– On-Peak Energy Conservation (CLM)

• 34 Proposals (1,084 MW) Received on January 21, 2004– Many offered multiple projects and options



Selection of Projects

• 8 Suppliers Selected by March 2004– Selection criteria: cost, project viability, reliability benefit– Project viability:

• Demand response and CLM: the quality of customer acquisition plan, certainty of savings per customer, acceptability of the plan for reporting savings, persistence of savings over the period

• Generation projects: stage of site acquisition and approval, permitting status, interconnection status, technology risk, and experience of the bidder

– Reliability benefits determined by testing project performance under different scenarios and contingencies

– The final choice of resources was made integrating the results of the cost rankings with project viability and reliability benefits



Contract Terms

• All Selected Resources are either Demand Response or On-Peak Conservation (CLM)

• Performance Based Contracts with 6 Suppliers– 260 MW by Summer of 2007

• Performance Based Payments– $/kW per Month and $/kWh

• Penalties for Failing to Deliver and Perform• 4 Year Term with 5th Year Option• Monitoring and Verification Plan• Cost: Approximately $128 Million over 4 years



Selected Suppliers and TechnologiesSupplier Technologies

Comverge Load Reduction by Residential and Small Commercial Air Conditioner Direct Load Control

Pinpoint Power Emergency Generation and Load Reduction

Conservation Services Group (CSG)

On-Peak Conservation (CLM)

CMEEC Emergency Generation and Load Reduction

United Illuminating Emergency Generation and Load Reduction

EnerNOC Emergency Generation and Load Reduction



Summary of Selected Resources

On-Peak Conservation

2%

Emergency Generation

59%

Load Reduction29%

Emergency Generation & Load

Reduction10%



Why did Demand Response do so well?

• Location, Location, and Location– Resources located in the load pockets

– No interconnection issues

• Price– Mostly incremental investments in metering,

communications and controls

• Permitting– Not an issue for Load Reduction

– DEP Regulations in Connecticut made it easier for emergency generators to participate



Comparing Different Resource Types

• Resources designed to be dispatched for only a few hours over the course of the year are typically the most economic resources to provide reserves– Combustion turbines– Dynamic demand response

• Resources designed to provide energy for many hours are typically too expensive to compete as a contingency reserve resource– Combined-cycle– Energy efficiency



Issues to Address in Order to Allow Energy Efficiency to Compete

• While a potentially valuable resource, energy efficiency does not perform in the same manner as other quick-start capability (i.e., generators or dynamic demand response)– Not dispatchable in real time when needed– Resource performance is typically not measured in real-time– Performance and payment is usually in the form of $/kWh

saved

• Such differences in performance makes apples-to-apples comparisons among differing resources challenging



Placing Energy Efficiency of a Level Playing Field with Quick-Start Capability• The efficiency projects that reduce load across the

entire SWCT peak period should compete– If loads are permanently reduced across the entire peak

period, the need for dispatchable resources to cover operational reserve requirements that are driven by peak load is reduced

– Reducing loads in off-peak periods will not help avoid the need for additional capability

– Since energy efficiency is not dispatchable, loads must be reduced across the entire peak period in order to avoid the need for additional resources to cover the “holes”



Placing Energy Efficiency of a Level Playing Field with Quick-Start Capability (cont)

• Bids by project proponents must be on a $/kW-month basis– Submission of bids from energy efficiency projects

must be comparable to the bids made by other resource types

– No explicit payment for energy savings (i.e., $/kWh saved) as these savings are “paid” through bill reductions

– Payment for verified savings is made on a $/kW-month basis, which is comparable with other resources

Henry YoshimuraISO New England

Office: [email protected]

Documents

Demand Response: Keeping the Power Flowing in Southwest Connecticut Presented by: Henry Yoshimura Manager, Demand Response ISO New England September 30,