demand responsive load programs

Demand Responsive Load Demand Responsive Load ProgramsPrograms

Charles GoldmanE. O. Lawrence Berkeley National Laboratory

[email protected]

NEDRI/FERC Demand Response Focus Group Springfield, MA

September 19, 2002

mailto:[email protected]

Energy Analysis Department

Outline of PresentationOutline of Presentation

• Wholesale Markets and DR Resources• Program Experience/Results in New

England (& New York)• Demand Responsive Load Program

Strategies- 2003 Programs proposed by ISO-NE- “Strawperson” program designs from

NEDRI Technical Consultants

• Key Policy and Program Design Questions


Wholesale Markets and DR Resources: Wholesale Markets and DR Resources: Objectives, Design Principles, Key IssuesObjectives, Design Principles, Key Issues

WholesaleMarket/ DR

Strategy

DR ProgramObjectives

Design Principles and/or Key Issues

Day-AheadEnergy Market(DADRP)

- Increase competitionamong suppliers

- Put downwardpressure on day-aheadmarket clearing price

- Ensure equitable treatment of supply anddemand-side resources while recognizing thatCustomer Loads are not Generators

- Degree of Integration into ISO scheduling &settlement processes

“EmergencyResources”(EDRP)

- Restore systemsecurity to designlevels and help avoidload shedding

- Resource value/pricing related to customers’value of lost load

Real-time EnergyMarket(RT Price ResponseProgram)

- Put downwardpressure on real-timemarket clearing price

- Customers willingness/ability to respond withlimited notice- Degree of integration into ISO Scheduling

processTargeted LoadResponse forConstrained Area

- Lower locationalmarket clearing price

- Preserve transmissiongrid reliability

- Consider offering higher incentives to reflectvalue of congestion relief


ISO-NE 2002 Program ResultsISO-NE 2002 Program Results

92.2

85.3

6.9

182.9

107.3

75.6

MWMWDemand-Response Class 1Demand-Response Class 1

Price-Response Class 2Price-Response Class 2

241CustomersCustomers

SWCTSWCTAll of New All of New EnglandEngland

Data as of: 07/31/02


Costs and Benefits of NYISO Costs and Benefits of NYISO Programs: Summer 2001 ResultsPrograms: Summer 2001 Results

• Estimated market benefits to all consumers are large relative to incentive costs

• Need standardized methods to evaluate market benefits

Source: Neenan Associates, NYISO PRL Evaluation, 2001

DADRP (million $)

EDRP (million $)

Costs Incentives $0.2 $4 Benefits Reliability - $23 Collateral $0.7 – 1.5 $1-13 Total $0.7 – 1.5 $24-36


ISO- NE Programs proposed for 2003ISO- NE Programs proposed for 2003

• Day-Ahead Demand Response (new)

• Real-Time Demand Response - Based on existing Class 1 program

- DR must respond within 30 minutes and 2 hr of ISO request to interrupt

• Real-Time Price Response- Based on existing Class 2 program

• Real-Time Profiled Response (new)- Non-interval metered loads


Day-Ahead Demand ResponseDay-Ahead Demand Response

• Submit offer in day-ahead market (minimum increment of 1 MW)

• Minimum bid of $50/MWh with maximum bid of $500/MWh

• If resource is interrupted day-ahead, resource is financially bound for accepted interruption

• Resources would be eligible for ICAP credit

• In real-time, deviations from day-ahead are charged/credited at real-time LMP


Day-Ahead Demand Response: Day-Ahead Demand Response: Major IssuesMajor Issues

• Program Duration (2 vs 3 years) and Start Date

• Eligible Participants - Current NEPOOL requirements may serve as barrier to entry

- Create separate Demand Response Provider category

• Role of onsite generation- Consider utilizing “model” rules for local generators (“output-based”)

• Allow participation in multiple DR programs

• Performance Compensation- Pay Higher of accepted bid or DA-LMP (not just DA-LMP)

• Bidding process (whole increments vs. any reduction > 1MW)


Real-Time Demand Response Real-Time Demand Response (“Emergency” Program)(“Emergency” Program)

• DR must respond to ISO interrupt notice within 30-minutes or up to 2-hours

• Require the Internet-based communication system

• Receive real-time LMP for interrupted (measured against the base line) with:

- Guaranteed minimum payment of $150/MWh and $100/MWh for up to 2 hours (for 30 minute or 2 hour notice response)

• Resource eligible for ICAP credit

• Call by ISO on a zonal or system wide basis


Real-Time Demand Response: Major Real-Time Demand Response: Major IssuesIssues

• Emergency programs are good marketing platform

• Need higher floor price that better reflects customer value of lost load

- Higher of Real-time LMP or $500/MWh minimum for 30 minute notice or $350/MWh for 2 hour notice

• Eligible Participants (I.e. NEPOOL participant requirements)

• Role of onsite generation

• Allow participation in multiple DR programs


Real-Time Profile ResponseReal-Time Profile Response

• No interval metering required (I.e., residential and small C/I)

• Load capable of interruption on demand (with 30-minutes)

• Aggregated (super-thermostats, pool pumps)

• Receive real-time LMP for interruption (statistically determined) with guaranteed minimum payment of $100/MWh

• Response determined through statistical means (research meters)

• Call by ISO on a zonal basis based upon day-ahead

• Resources would be eligible for ICAP credit


Real-Time Profile Response: Major Real-Time Profile Response: Major IssuesIssues

• ISOs have less operational experience with DR programs targeted at non-interval metered customers

• Resource potential in New England: cost-effectiveness?

• Overcoming technical/market barriers – role of public benefit funds

• “Optimal” program designs- Incentive Payments – NE is low compared to NY and PJM

- Operational Trigger – Emergency vs. Economic

- M&V methodology

- Eligible technologies – Direct load control only (NE) vs un-specified (NY and PJM)


Real-Time Price Response ProgramReal-Time Price Response Program

• Receive real-time LMP for interrupted (measured against the base line) with guaranteed minimum payment of $100/MWh

• Can use Internet-based communication system, Low Tech or Super Low Tech options

• Call by ISO on a zonal basis based upon day-ahead


Real-Time Price Response: IssuesReal-Time Price Response: Issues

• Customer perception of and satisfaction with current operation of the program

• Alignment of program goal/objective with customer perception and marketing

• Overall market size and interest level

• Perceived benefits vs. costs (if have to pay full cost of the IBCS)

- Importance of the “low tech” option


What do customers want in DR What do customers want in DR programs?programs?• Timely and certain payments for performance• Minimal downside risks (e.g. performance

penalties)• Relatively certain stream of benefits in order to

make “business case” for investment• Easy to enroll and participate (Low “hassle

factor)• Useful “toys”: enabling technology that can be

used to manage energy costs • Customized, tailored service offerings• Clear program goals that align with their

business interests or priorities


Key Policy and Program QuestionsKey Policy and Program Questions

• How well have existing ISO-NE Demand Response programs worked?

- Strengths/weaknesses- Suggestions for improvement

• Going forward, what types of PRL programs are needed or desired by end users and other market participants?

• Program objectives - Relative magnitude of demand response resources (DRR) needed to ensure efficient wholesale markets?


Key Policy and Program Questions Key Policy and Program Questions (cont)(cont)• How do you pay for the enabling DR

technology infrastructure necessary to capture consumer market benefits of PRL?

• Is the provision of demand response resources an attractive business opportunity for load aggregators?

- Are there disincentives that limit interest of potential load aggregators?

• What types of customer loads/resources should be eligible to participate in PRL programs

- Role of on-site generation


Background SlidesBackground Slides


Characteristics of Innovative LSE PRL Characteristics of Innovative LSE PRL ProgramsPrograms• Substantial customer response at high

offer prices

• Multiple program options & features offered under a single “brand”

• LSE/customer share benefits (often not transparent to customer)

• Lots of customer care & education

• Use of customer-specific baselines

• Variety of forward contracting options

• Motivated or “incented” LSEs


Transitional Load Reduction Pricing Transitional Load Reduction Pricing (#3)(#3)• Incentives decoupled from wholesale market• Provides opportunity for simpler program

structure and more predictable incentives• Can be achieved through any number of

specific program designs - e.g., load bids with price floors, call-option programs with reservation payments, etc.

• Pros: potential for significant DR impact from risk averse customers

• Cons: less direct impact on market than Options 1 and 2; additional uplift charges; seen as “preferential” to loads


Benefits of PRL ProgramsBenefits of PRL Programs

Collateral Savings

Load Load

Price

Q0 Q2 Q1 Q2 Q1

Supply

Participants DemandP

P2

PL

P1 P1

P2

Price

1

32

4

1

234

Demand (Q1) at Retail rate (P1)Retail demand supplied at higher wholesale price (P2)

Reduction in participants demand due to higher priceLBMP after scheduled load reductionSource: Neenan Associates, NYISO PRL Evaluation

demand responsive load programs

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