Demand Response Programs: Configuring Load as a …...Demand Response Programs: Configuring Load as a Resource for Competitive Electricity Markets Charles Goldman E. O. Lawrence Berkeley

Demand Response Programs:Demand Response Programs:Configuring Load as a Resource forConfiguring Load as a Resource for

Competitive Electricity MarketsCompetitive Electricity Markets

Charles GoldmanE. O. Lawrence Berkeley National Laboratory

[email protected]

NARUC Winter Meeting Washington DC

Feb. 13, 2002

Energy Analysis Department

Overview of PresentationOverview of Presentation

• Key Policy Questions• Types of Demand Response Programs• DR Program Results: 2001• Lessons Learned


DR Programs and Electricity Markets -DR Programs and Electricity Markets -Policy QuestionsPolicy Questions

• How much demand response isneeded?

• What has been performance of marketsin eliciting demand response?

• Is this response sufficient to improvesystem reliability or economic efficiency?(e.g., value & costs of DR “insurance”)


Demand Response Program TypesDemand Response Program Types

• C/I Non-firm Rates- Up-front payment; typically bill or rate discounts for curtailments to

pre-set Firm Service Level

• Direct Load Control- Utility interrupts customer loads (e.g., a/c, water heating)

• Demand Bidding - Call option- Reservation and energy reduction payments

- Customers selects Strike Price. LSE can “call” the customer,requiring them to reduce load or face penalties, when projectedMkt. Price > Strike Price

• Demand Bidding - “Quote option”- Purely voluntary. Customers pledge to curtail loads at specified

time, price (“pay-per-interruption event”)

• Dynamic Pricing (e.g., real-time pricing)


Case Studies of DR ProgramsCase Studies of DR Programs

Independent System Operators

- ISO NE, NYISO, PJM, CA ISO

Utilities

- Ameren, BGE, Cinergy, ComEd, Dominion Virgina,KCPL, Nevada, Otter Tail, NYSEG, PacifiCorp, PGE,PSE, SDG&E, Sierra Pacific, Xcel Energy, SCE, PG&E

Retail Energy Suppliers/Aggregators (e.g., CSP)

- AES NewEnergy, ConsumerPowerLine, Global Energy

Federal Power Marketing Authorities

- BPA


System Events and DR Market Activity:System Events and DR Market Activity:Summer 2001Summer 2001

• 14 programs operated once or not at all

• However, several programs played critical role inmitigating system emergencies

0

5

10

15

20

25

30

35

C3

C4

E1

E2 I1 J1

L2

N2

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N1

O1

P1 Q T

Nu

mb

er

of

Cu

rtaim

en

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ven

ts

Almost Daily

Contingency Programs

Market Programs

Almost Daily


Summer 2001 Wholesale Prices ($/MWH)Summer 2001 Wholesale Prices ($/MWH)

0

200

400

600

800

1000

East Lower MW Upper MW West

Maximum

Average

Post-Caps


Actual Performance of DR Programs:Actual Performance of DR Programs:Summer 2001Summer 2001

• NYISO EDRP provided ~425 MW (L2)

• CAISO only called once (E1,E2)

0

100

200

300

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600

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800C

4E

1

E2 I1 J1

L2

P2

U2 A

C2 D F H I2 L1 O P1 Q

MW

PotentialCurtailableLoad

ActualAverageCurtailedLoad

Contingency Programs

Market Programs


Actual Performance of DR programsActual Performance of DR programs

• Load relief from “market-driven” DR programsis often less predictable than “contingency-related” DR programs

• Why?- - Incentive Mechanisms (e.g., penalties)

- - Low wholesale electricity prices

- - Definitional issues: Potential curtailable load?

Average Values for Case Study Programs

Program Number of Programs

Potential Curtailable Load (MW)

Actual Curtailed

Load (MW)Actual/Potential

Contingency 8 158 84 62%Market 10 204 21 17%

Type


Back-up Generators: Balancing Back-up Generators: Balancing ““reliabilityreliability””and environmental concerns?and environmental concerns?

• BUGs are popular load curtailment strategy

• Environmental impacts are major concern,particularly for diesel-fired BUGs

0100200300400500600700800

C4 J1 L2

P2 R

U2 A B

C2 D F G H K L1 O P1 Q T S

Po

ten

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urt

ail

ab

le L

oa

d

(MW

)

Non BUG

BUG

ContingencyPrograms

MarketPrograms


What types of customers participateWhat types of customers participatein DR programs?in DR programs?

• Industrial customers are backbone ofcurrent DR programs in our sample

• Increasing activity by commercial,institutional customers

Industrial50%

Manufacturing

14%

Commercial23%

Institutional9%

Other4%


Current DR Programs target largestCurrent DR Programs target largestC/I customersC/I customers

• Why? - metering, savings potential,transaction costs, program design rules

• Challenge: tapping DR potential ofmedium/small customers

Very Large (>1 MW)

53%

Small (<100 kW)

8%Medium (100-500 kW)

12%

Large (500-1000 kW)

27%


Customer Load Reductions rescuedCustomer Load Reductions rescuedCA during 2001 CrisisCA during 2001 Crisis

• 6-8% reduction in electricity sales; 10% reduction inmonthly peak demand

• Data normalized for weather and economic growth (basedon CEC analysis

0

1,000

2,000

3,000

4,000

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6,000

7,000

8,000

Jan Mar May Jul Sep NovRe

du

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n P

ea

k D

em

an

d (

MW

) a

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ctr

icit

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ale

s (

GW

h)

PeakDemandReduction

ElectricitySalesReduction

= 8.6% average= 7.9% average

= 10.1% average= 6.3% average


Contributing Factors to CA DemandContributing Factors to CA DemandReduction: Role of EE (Summer 2001)Reduction: Role of EE (Summer 2001)

~4000 MW

CEC Peak LoadReduction Program(~100 – 200 MW)

20/20 RebateProgram

Utility Energy EfficiencyPrograms

(~300 MW)

Flex YourPower &

MediaCampaign

Real TimeMeters

Additional ElectricityRate Increases

(~30% average)

CAISO and Utility DemandResponse Programs(~800 MW, 1 event)

Voluntary Conservation andCurtailment Initiatives at Gov’t

Facilities and Private Sector(~300 MW + ?)


Performance of California Load MgmtPerformance of California Load MgmtPrograms during the CrisisPrograms during the Crisis

• Interruptible Rate Programs operated 23 times in 2000 and 30times in 2001

• GOOD NEWS: Critical to avoiding rotating outages on at least fiveoccasions in 2000

• BAD NEWS: Frequent operation caused many customers torefuse curtailment requests and drop out

0

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/200

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4/3/

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7/3/

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Tota

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CPUC Suspended Program Operation

2000 2001

Stage 3 EmergencyStage 2 EmergencyNo Emergency


Summary: DR Industry at CrossroadsSummary: DR Industry at Crossroads

• ISO programs growing in importance; but need towork out ISO roles/responsibilities in DR market

- ISO DR Programs = ~1500 MW (2001) vs ~200MW (2000)

• Near-term outlook for “Market-driven” DR programs isunclear

- New capacity additions + slowing economy =lower wholesale prices forecast for 2002

- Will there be much activity if customers require >$150-200/MWh to bid in large amounts of load

• Ambivalence & regional variations regarding role ofbackup and on-site generators (e.g., diesel-fired)

• FERC Regional RTO Rulemaking – key forum fordefining “rules of the game”


DR Industry: Challenges &DR Industry: Challenges &OpportunitiesOpportunities

• Key role of Intermediaries for long-term viability ofDR market

- Utilities: Incentives to perform??

- Retail energy suppliers: DR is not stand-alone business,so vibrant retail market is enabling condition

- Curtailment Service Providers: niche players? Who willwant to play – ESCOs?

• Reposition existing Utility Load Managementassets

• Recognize that customers are NOT generators;loads are diverse & respond to multiple objectives

• Making the case for “Public Benefits” value of“demand response” market

Documents

Demand Response Programs: Configuring Load as a …...Demand Response Programs: Configuring Load as a Resource for Competitive Electricity Markets Charles Goldman E. O. Lawrence Berkeley