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Monday, November 29th 2004
IASTED PES 2004
Clearwater, FL
Tutorial on Demand Response In Deregulated
Electricity Markets: International Experience
Nuria Encinas Redondo
Instituto Ingeniería EnergéticaUniversidad Politécnica de Valencia
Monday, November 29th, 2004
CLEARWATER, FL 2
Table of contents
1. Introduction2. Actual Status
• USA• DR programs
• England and Wales• NETA
• Rest of Europe3. Current Research Efforts
• EUDEEP• IEA DSM, Task XIII, Task XV
4. Conclusions
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1.- Introduction Agents are interested in
Demand Response: Policy Makers And Regulators Market Operators Transmission System Operators Local Network Operators Traders And Retailers Customers
There are still barriers to overcome:
Economical Technical Structural and Legal Ignorance Tradition Financial
World wide efforts are being done to achieve a massive deployment of DR
Actual status Research efforts
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2.- Actual status2.1.- USAFERC: RECOMMENDED ROLE OF ISOS AND RTOS ISOs should facilitate both emergency load management
actions and economic curtailments until market structures and signals are clear.
Many current programs provide subsidies (by necessity) These indicate barriers or muted incentives to participation
Tools to achieve the goal should include: Forward contracts for reliability interruptions Meaningful reward/penalty features Proper valuation of the capacity represented by interruptions
ISOs/RTOs must work with FERC and state regulators to ensure:
Demand response is a part of the standard market design Standardized customer baselining practices Consistent payment approaches
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I- Special pricing options
Provide hourly information to enable customer to modify their consumption according to prices
Small modification from traditional structures Based on Real Time Pricing Special Time of Use
Examples Two part tariff:
• usage at the margin=billed at RT price Encouraging of RT Pricing through incentives:
• Technical assistance• Caps during first months
TOU+especial peak days pricing
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II- Programs offering payments for load reductions
Payments credits in exchange of load reductions in particular periods of time
Different types: Request criteria decided by Program Administrator needs (usually for
emergency)• Voluntary load reductions (without penalizations)• Mandatory load reductions (with penalizations)• Tailored programs (for large consumers)
Request criteria by market price• triggered when market price reaches a limit
– Day-ahead market– Forecast of Real Time price
Programs without notification• Scheduled event days• total monthly reductions
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III- Payments for DG productions
Payments or services in exchange of generation or load reduction using a separately metered self-generator.
Triggering Usually for administrators needs With or without penalizations according to capacity payments
Examples Rolling Blackout protection Capacity Incentives Interruptible service for Stand-by generation
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IV- Programs offering services for participation
Special services for load reductions instead of payments Technical assistance Blackout protection
Examples Optional Bidding Mandatory curtailment Technical assistance incentives
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V- Programs that promote direct market participation
Interface for customers to present their offers of reduction to markets
Administratos acts as tradding agent in markets:• Energy market (day-ahead, hour-ahead)• Balancing market• Reserves market
Usually designed for large customers
Examples Participating load program Balancing up load Replacement Reserve Day-ahead Demand Response Economic Load Response Hourly ahead Dispachable load
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V- Other Programs
Remote controlled thermostats but with possibility of customer overriding Energy Smart Thermostat Program
Profiled responses as market one for aggregators direct load control for final consumer Example:
• Real-time profiled response
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Participation on programs (I)
Enrollments by type of consumers
Enrollments by consumer size
Industrial46%
Manufacturing14%
Commercial21%
Institutional8%
Others11%
> 1 MW53%500 – 1000 kW
27%
100 – 500 kW12%
< 100 kW8%
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Participation on programs (II)Performance System
Category Example Enrolled customer (potential reduction)
Maximum reduction (average)
demand peak
Special Real Time Pricing Real Time Pricing (Georgia Power)**
1700 cut. (5000 MW)
1000 MW 15380 MW Special Pricing Options Special Time of Use
Emergency Demand Response (NYISO) **
1711 cust. (668 MW)
668 MW 30000 MW
Emergency Load Response (PJM) **
(548 MW) (39 MW) 53000 MW
Demand Buy Back Program (PGE)*
26 cust. (230 MW )
(100 MW) 3408 MW Voluntary
Energy Exchange (PacifiCorp) *
44 cust. (67.2 MW)
67.2 MW 8549 MW
Demand Response (01-03, ISO-NE) **
(109.7 MW) 109.7 MW 25500 MW Mandatory
Base Interruptible (SDG&E,SCE,PG&E) *
(41,5 MW) 41,5 MW 44000 MW
Negotiated Buyback (PacifiCorp) *
3 cust (35.1 MW )
35.1 MW 8549 MW
Request decided by Program
Administrator needs
Tailored Negotiated Buyback
(PGE) * 2 cust.
(56 MW) 56 MW 3408 MW
Request criteria by market price
Price Response (01-03, ISO-NE) **
(55.81 MW) 25500 MW
20/20 Customer Challenge (PacifiCorp) *
115598 cust. (19.1 MW)
8549 MW
Programs offering
payments for load
reductions
Without notification Scheduled Load Reduction
(SDG&E,SCE,PG&E) * (4 MW) 4 MW 44000 MW
Programs offering payments for DG production Rolling Blackout Reduction
(SDG&E) * (60 MW) 3,031 MW
Programs offering services for participation Optional Binding Mandatory
Curtailment (SDG&E,SCE,PG&E) *
(16,5 MW) 44000 MW
Programs that promote direct market participation
Economic Load Response (PJM) **
(343 MW) (16 MW) 53000 MW
Other Programs Real Time Profiled Response
Program (ISO-NE)***
(142.9 MW) 25500 MW
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Participation on programs (III)
Performance System
Category Example Enrolled customer (potential reduction)
Maximum reduction (average)
demand peak
Special Real Time Pricing Real Time Pricing (Georgia Power)**
1700 cut. (5000 MW)
1000 MW 15380 MW Special Pricing Options Special Time of Use
Emergency Demand Response (NYISO) **
1711 cust. (668 MW)
668 MW 30000 MW
Emergency Load Response (PJM) **
(548 MW) (39 MW) 53000 MW
Demand Buy Back Program (PGE)*
26 cust. (230 MW )
(100 MW) 3408 MW Voluntary
Energy Exchange (PacifiCorp) *
44 cust. (67.2 MW)
67.2 MW 8549 MW
Demand Response (01-03, ISO-NE) **
(109.7 MW) 109.7 MW 25500 MW Mandatory
Base Interruptible (SDG&E,SCE,PG&E) *
(41,5 MW) 41,5 MW 44000 MW
Negotiated Buyback (PacifiCorp) *
3 cust (35.1 MW )
35.1 MW 8549 MW
Request decided by Program
Administrator needs
Tailored Negotiated Buyback
(PGE) * 2 cust.
(56 MW) 56 MW 3408 MW
Request criteria by market price
Price Response (01-03, ISO-NE) **
(55.81 MW) 25500 MW
20/20 Customer Challenge (PacifiCorp) *
115598 cust. (19.1 MW)
8549 MW
Programs offering
payments for load
reductions
Without notification Scheduled Load Reduction
(SDG&E,SCE,PG&E) * (4 MW) 4 MW 44000 MW
Programs offering payments for DG production Rolling Blackout Reduction
(SDG&E) * (60 MW) 3,031 MW
Programs offering services for participation Optional Binding Mandatory
Curtailment (SDG&E,SCE,PG&E) *
(16,5 MW) 44000 MW
Programs that promote direct market participation
Economic Load Response (PJM) **
(343 MW) (16 MW) 53000 MW
Other Programs Real Time Profiled Response
Program (ISO-NE)***
(142.9 MW) 25500 MW
Performance System
Category Example Enrolled customer (potential reduction)
Maximum reduction (average)
demand peak
Special Real Time Pricing Real Time Pricing (Georgia Power)**
1700 cut. (5000 MW)
1000 MW 15380 MW Special Pricing Options Special Time of Use
Emergency Demand Response (NYISO) **
1711 cust. (668 MW)
668 MW 30000 MW
Emergency Load Response (PJM) **
(548 MW) (39 MW) 53000 MW
Demand Buy Back Program (PGE)*
26 cust. (230 MW )
(100 MW) 3408 MW Voluntary
Energy Exchange (PacifiCorp) *
44 cust. (67.2 MW)
67.2 MW 8549 MW
Demand Response (01-03, ISO-NE) **
(109.7 MW) 109.7 MW 25500 MW Mandatory
Base Interruptible (SDG&E,SCE,PG&E) *
(41,5 MW) 41,5 MW 44000 MW
Negotiated Buyback (PacifiCorp) *
3 cust (35.1 MW )
35.1 MW 8549 MW
Request decided by Program
Administrator needs
Tailored Negotiated Buyback
(PGE) * 2 cust.
(56 MW) 56 MW 3408 MW
Request criteria by market price
Price Response (01-03, ISO-NE) **
(55.81 MW) 25500 MW
20/20 Customer Challenge (PacifiCorp) *
115598 cust. (19.1 MW)
8549 MW
Programs offering
payments for load
reductions
Without notification Scheduled Load Reduction
(SDG&E,SCE,PG&E) * (4 MW) 4 MW 44000 MW
Programs offering payments for DG production Rolling Blackout Reduction
(SDG&E) * (60 MW) 3,031 MW
Programs offering services for participation Optional Binding Mandatory
Curtailment (SDG&E,SCE,PG&E) *
(16,5 MW) 44000 MW
Programs that promote direct market participation
Economic Load Response (PJM) **
(343 MW) (16 MW) 53000 MW
Other Programs Real Time Profiled Response
Program (ISO-NE)***
(142.9 MW) 25500 MW
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2.2.- England and Wales: NETA
Futures contracts
Spot Markets
Balancing Mechanism
Settlement Mechanism
Long-Term
Short-term
1 hour ahead
After delivery time
Final Program + Adjustment bids and offers
OTC with SO
OTC between parties
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BILATERAL CONTRACTS
Over-the-counter • Forward markets• Direct contracts
The Most Important Power Exchanges: UK Power Exchange (UKPX)
• Futures Contracts• Spot Market
Automatic Power Exchange (UK APX)• Spot Market• Planned: future contracts
International Petroleum Exchange• Futures Contracts
Power Exchanges:•Futures contract•Spot Markets
the same group
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Trading Volumes (Power Exchanges)
During first 2 years only 2% of energy in the spot market
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BALANCING Volumes
During first years only 5% of energy in the the balancing market
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SETTLEMENT MECHANISM
FP
REAL S. Sell Price
FP
REAL
MW
S. Buy Price
System imbalance
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Possibilities for the demand
Power Exchanges and OTC Direct participation in the Short, medium and long term trading
Balancing markets Direct Offers and bids Contract with the SO
Frequency Response: Commercial
• Primary response• Secondary response
Reserves: Fast Reserve (<2min) Standing Reserve (<20min)
Reactive Power: Enhance Reactive Power
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Participation
Offers and bids in balancing market:small participation <1% Ancillary services:
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2.3.- Rest of Europe
Nordic countries (I) Market structure
Involved Countries:• Norway, Sweden, Finland and Denmark
Structure:• Financial markets
• Bilateral contracts (OTC)
• Nord Pool– Elspot: Day-Ahead market
– Elbas: Hour market
• Regulating power market
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Nordic countries (II)
DR possibilities and participation Day-ahead bids: Elspot Hour-ahead bids: Elbas Balancing offers and bids: regulating market Reserves: regulating market
• Fast active disturbance reserve (controllable loads)
• Slow active disturbance reserve
Frequency control (with automatic disconnection of loads)• Frequency controlled disturbance reserve
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3.- Research efforts
3.1.- International Energy Agency Agency objective:
Seek to promote the effective operation of international energy markets and encourage dialogue with all participants
Initially focused on strategic oil reserves
Currently includes:• Fossil fuels
• Electricity
26 Member countries
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IEA Demand-side Management Program
Tasks: Task I: International Database on DSM Technologies and Programs
Task II: Communications Technologies for DSM
Task III: Co-operative Procurement of Innovative Technologies for Demand
Task IV: Development of Improved Methods for Integrating Demand
Task V: Investigation of Techniques for Implementation of DSM Technology in the Market Place
Task VI: Mechanisms for Promoting DSM and Energy Efficiency in Changing Electricity Businesses
Task VII: International Collaboration on Market Transformation
Task VIII: Demand-Side Bidding in a Competitive Electricity Market
Task IX: The Role of Municipalities in a Liberalized System
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IEA Demand-side Management Program
Tasks(II): Task X: Performance Contracting Task XI: Time of Use Pricing and Energy Use for Demand Management
Delivery Task XII: Cooperation on Energy Standards Task XIII: Demand Response Resources Task XIV: Market Mechanisms for White Certificates Trading Task XV: Network Driven DSM
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IEA dsm TASK XIII
Goals Define and build turn-key DRR infrastructure model including Business Model,
Business Rules, Enabling Technology, Standards and Implementation Plan Deliver DRR into “any” emerging or existing liberalized electricity market
Subtask1. Finalize global and country-specific objectives2. Define the DR resource base and market characterization3. Market potential of DRR4. Demand response valuation5. Role and value of enabling technologies6. Characterize priorities and barriers, and develop solutions and recommendations7. Develop DRR network of methods, tools and applications8. Deliver products and Intellectual Property to IEA DSM program and project
participants
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3.2.- EU-DEEP
The birth of a European Distributed EnErgy Partnership that will help the large-scale implementation of distributed energy resources in Europe
A European Project supported within the Sixth Framework Programme for Research and Technological Developement
39 partners and 15 countries
Project begining: January 2004 Finishing: 2007
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DR within EUDEEP (I)
In WP1 Market segmentation.
• From the customer point of view• Three levels of segmentation:
– First level: Residential, Commercial & Industrial– Second level: economic activity – Third level: Considering uses of energy
Segments potential evaluation (ranking)• Ranking combination of three different rankings:
– Distributed Generation– Distributed Storage– Demand Response
• Characterization of segments also considering DR:– Energy supply, end uses, Demand flexibility, storage options, etc.
Examples Factors: size, attitude, demand flexibility, load patterns, etc.
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DR within EUDEEP (II)
In WP3 Evaluation of Local Trading Strategies
• Impact of DR applications in load curves
• economic apraisal
• Market possibilities
Through modelling of characteristic customersand simulating combinations of strategies: DG+DS+DR
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3.3. EFFLOCOM
Energy eFFiciency and Load curve impacts of COMercial development in competitive markets
A EU SAVE program
6 partners, 5 countriesSINTEF Energy Research, NorwayECO-Tech, NorwayEDF, FranceEnergy Piano, DenmarkElectricity Association, EnglandVTT, Finland
Project period: July 2002-August 2004
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3.4. BusmodBUSiness MODels in a world characterised by distributed generationEU-EESD project Objectives:
Analysis of current methodologies and distributed generation characteristics. Definition of different business scenarios in a deregulated distributed generation electrical
power market. Anticipation of future actors participating in deregualted electricity markets. Design of a methodology allowing feasibility studies related to distributed generation, through
a systematic procedure. 7 partners, 5 countries
IBERDROLA (Spain) LABEIN (Spain) VUA (The Netherlands) ECN (The Netherlands) UMIST (United Kingdom), SINTEF Energy Research (Norway), EnerSearch (Sweden).
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3.5. PIER Demand Response Research Center Promoted by the California Energy
Commission Led by Lawrence Berkeley National Laboratory
Main objective: Develop, prioritize, conduct, and disseminate research
that develops broad knowledge that facilitates DR Activities:
Create a research roadmap for DR in California Establish multi-institutional partnerships Foster connections with stakeholders through outreach
efforts Sustain long-term attention to DR research topics Conduct research, development, demonstrations, and
technology transfer
Research Categories:
Policies, programs, and tariffs
Utility markets, technology, and systems
Customer and end-use technology and systems
Consumer and institutional behavior
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3.7. Demand-Side Working Group (DSWG)
Created and Chaired by Ofgem, UK Objective:
identify and assess any practical and/or commercial obstacles to demand side participation in the wholesale electricity trading arrangements
Activities Reviews and assesses options and potential opportunities for the demand to
participate in wholesale market. Identifies practical and/or commercial obstacles inhibiting effective
demand side participation in the wholesale market; Determines measures for the removal of these obstacles Evaluates and proposes a timescale over which the necessary
improvements to demand side participation in the wholesale electricity trading arrangements can be addressed.
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4. Conclusions Demand Response is an active subject in the energy industry
Stakeholders have been interested and developed DR structures
World wide research efforts try to overcome actual obstacles to reach a massive deployment
Research efforts are focused in the demand-pull approach:
The customer is the cornerstone of DR
IEA, EU Commission
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