november 2001 christensenassociates rtp as a demand response program – how much load response can...
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November 2001CHRISTENSEN ASSOCIATES
RTP as a Demand Response Program – How Much Load Response Can You Expect?
Peak Load Management AllianceFall Conference
November 2001Steven Braithwait
Christensen Associates
November 20012CHRISTENSEN ASSOCIATES
Christensen Associates
Economic and engineering consulting for energy industry
25 years of experience in designing and evaluating retail pricing strategies – – TOU (traditional and competitive)
– Real-time pricing (NiMo, Georgia Power, KCP&L)
– Market-based interruptible load programs
November 20013CHRISTENSEN ASSOCIATES
Sound Bites from Yesterday
“Square peg in round hole” Customers aren’t generators
Trends in DR programs?Look at competitive markets
“Dollars on the table”Focus on NEW $$$ from efficient pricing
“Keep it simple”Here are tomorrow’s prices, you decide…
November 20014CHRISTENSEN ASSOCIATES
Topics
Real-time pricing as a DR program
Capturing the benefits of DR and RTP
Evidence of RTP load response
Technology facilitates residential “RTP”
November 20015CHRISTENSEN ASSOCIATES
What is Real-time Pricing (RTP)?
A market-based pricing strategy – Customers face hourly spot market prices– Advance notice – day-ahead; hour-ahead– Price protection through hedging/price caps– Works in regulated and competitive markets
A demand response program
– RTP customers provide load reductions at times of high wholesale prices
November 20016CHRISTENSEN ASSOCIATES
RTP at Georgia Power Company
1,700 C & I customers
5,000 MW (80% of C & I sales)
Day-ahead (75%) & hour-ahead (25%)
Load response: 500 – 1,000 MW (at prices of $500 – $2,000/MWh)
November 20017CHRISTENSEN ASSOCIATES
Benefits of Demand Response
Connects wholesale and retail markets
Demand response at high prices can reduce wholesale price spikes
November 20018CHRISTENSEN ASSOCIATES
Connected Markets: Demand Response Yields Lower Wholesale Prices
$/MWh
GWh
Qnormal
Retail Price
Pnormal
Qspike
Lnormal
Dnormal
E
Pspike
Lhot
WP
B
Qhot
PhotE´
Dhot
A
November 20019CHRISTENSEN ASSOCIATES
Capturing the Benefits of DR
To capture benefits, the amount of demand response must be measured and anticipated (e.g., in unit dispatch and power purchases)
November 200110CHRISTENSEN ASSOCIATES
Measuring Non-RTP DR
DR programs pay for “performance”
However, cannot “measure” performance (i.e., load reductions) by metering
Load response (LR) must be estimated:
LR = Baseline load - Actual load
Problems in estimating CBL; $$ at risk
November 200111CHRISTENSEN ASSOCIATES
Measuring and Forecasting RTP Load Response
For billing: No “verification” problem – RTP customers pay for what they consume
For forecasting:
– Develop load response model based on analysis of historical experience
– Advantage of aggregating over customers
November 200112CHRISTENSEN ASSOCIATES
RTP Load Response Curve for Georgia Power (Load Response as a Percent of Total RTP Load)
0%
5%
10%
15%
20%
25%
30%
35%
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000
$/MWh
% L
oa
d R
ed
uc
tio
n
November 200113CHRISTENSEN ASSOCIATES
Evidence of RTP Load Response
Georgia Power Real-Time Pricing (RTP) – 1,700 large C & I customers; 5,000 MW of load
Duke Power Hourly Pricing – 100 large industrial customers; 1,000 MW
GPU Energy “Critical price” TOU– 1997 residential pilot program
November 200114CHRISTENSEN ASSOCIATES
Summary of RTP Price Responsiveness
Significant, consistent load response
Small to modest price elasticities
Wide range across customer types
Most price responsive customers:
– Electricity intensive (e.g., most intensive industrials; residential customers with most major appliances)
– Enabling technology (e.g., own generation; storable production process; automatic controls)
November 200115CHRISTENSEN ASSOCIATES
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour
Nor
mal
ized
Loa
d
0
2
4
6
8
10
12
14
16
Lo
ga
rith
m o
f P
ric
e (
$/M
W)
Highest DA prices
Load onhighest-price day
GP RTP Load Response (DA): Very High-Price (Load response = 500 MW; 20% of reference load)
November 200116CHRISTENSEN ASSOCIATES
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
HA OSG - I Non-Int - I OSG - C Non-Int - C
Moderatelyhigh price
Veryhigh price
Diversity of Customer Price ResponsivenessPrice Elasticity by Customer Type and Price Level
November 200117CHRISTENSEN ASSOCIATES
Duke Power RTP Load Response (per Tom Taylor, Rates and Regulation)
100 industrial customers; 1,000 MW
Total load response when Price > $.25/kWh– 200 MW, or 20% of expected load
20 customers reduced load by > 5%
Significant price elasticities for 25% of customers
November 200118CHRISTENSEN ASSOCIATES
GPU “Critical-price” TOU RateEffect of Technology on Load Response
TOU rate, plus critical price ($.50/kWh)
Interactive communication system– customers pre-select thermostat settings and
circuit priority at different price triggers– utility can send critical price signal
Similar programs at AEP, Gulf Power
November 200119CHRISTENSEN ASSOCIATES
“Critical-price” TOU Rate Design
0
0.1
0.2
0.3
0.4
0.5
1 8 14 18 20 24
Critical price
Rate 6173
Rate 9122
Standard Rate
November 200120CHRISTENSEN ASSOCIATES
Residential TOU Load Response – Critical Price Day
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Ave
rage
Hou
rly
Usa
ge:
kW
h/h
r.
ControlTreatment
OPS
Peak
SOP
November 200121CHRISTENSEN ASSOCIATES
Conclusions
RTP offers demand response in a natural retail market setting
Methods are available for anticipating RTP load response at different price levels
Evidence is available on amount of RTP load response to expect
November 200122CHRISTENSEN ASSOCIATES
For Additional Information:
Customer Response to Market Prices – How Much Can You Expect When You Need it Most?, Steven Braithwait and Michael O’Sheasy, EPRI Pricing Conference, July 2000.
Residential TOU Response in the Presence of Interactive Communication Equipment, Steven Braithwait, in Pricing in Competitive Electricity Markets, Ahmad Faruqui, Ed.
The Choice Not to Buy: Energy Savings and Policy Alternatives for Demand Response, Steven Braithwait and Ahmad Faruqui, in Public Utilities Fortnightly, March 15, 2001.
Contact:Steve Braithwait ([email protected])Christensen Associates608-231-2266
November 200123CHRISTENSEN ASSOCIATES
Types of Demand Response Programs
Demand-side bidding – customers bid load reductions into the wholesale market
“Buy-back,” or pay-for-performance interruptible – Suppliers buy load reductions, relative to baseline, at
price tied to market price
Real-time (hourly) pricing– Full-time
– Part-time; whenever cost exceeds specified level
November 200124CHRISTENSEN ASSOCIATES
How to Estimate Reference Load?
Historical load on same day-type (e.g., summer Tuesday, with “hot” weather)
Rolling average of loads on “non-event” days (e.g., previous 10 weekdays)
Average load in previous hours (e.g., previous 3 hours)
Key objective – avoid “gaming” possibilities
November 200125CHRISTENSEN ASSOCIATES
“Disconnected” Electricity Markets: Fixed retail price no demand response
$/MWh
GWh
Retail Price
Pnormal
Qnormal
Lnormal
Pspike
Qspike
Lhot
WP