KEY ISSUES AND CHALLENGES IN THE DEEPENING …flueck/chicago_pes/2012/IEEE PES Chicago Mar 2013 -...

presentation by George Gross

University of Illinois at Champaign-Urbana at the IEEE Distinguished Lecturer Program

IEEE Power and Energy Society Chicago Chapter March 13, 2013

KEY ISSUES AND CHALLENGES

IN THE DEEPENING PENETRATION OF

DEMAND RESPONSE RESOURCES

© 2013 George Gross, All Rights Reserved!

2 © 2013 George Gross, All Rights Reserved

OVERVIEW

  We focus on the key developments in the

implementation of demand response resources or

DRRs, with special attention to their economic

and policy aspects

  We highlight recent demand response challenges

in the integration of deepening levels of DRR

penetration and success stories


OUTLINE

  DSM: the predecessor to today’s DRRs

  Demand response: motivation and capabilities

  Key demand response drivers

  DRR challenges and limitations

  DRR contributions

  Concluding remarks

FROM DEMAND-SIDE

MANAGEMENT TO DRRs


DEMAND-SIDE MANAGEMENT

  In the regulated environment, the term demand-side management (DSM) was used to refer to the implementation of programs that modify the demand of the system

  In practical terms, a DSM program is any measure that influences load on the customer side of the meter

  In analogy to supply-side resources, demand-side resources can be targeted for base, intermediate and peaking applications


DSM PROGRAMS’ LOAD SHAPE OBJECTIVES

strategic conservation

load shifting

valley filling

flexible load shape

peak clipping

strategic load growth


EVOLUTION OF DSM

1973 1983 1993

full-scale conservation programs

load management

rebates/incentives for purchases of efficient

equipment

utility investments encouraging the purchase of high-efficiency equipment


DEMAND RESPONSE RESOURCES (DRRs)

generation resources

price-sensitive passive loads

market clearing transmission scheduling

DRRs


NATURE OF DRR

  The objective of demand response is to make the load an active participant in balancing electricity supply and demand around the clock via side-by-side competition with supply-side resources

  DRRs curtail their loads in response to incentive payments to induce lower electricity consumption at specified times

  DRRs are attractive alternatives to supply-side resources to meet the supply-demand balance


THE TRANSITION TO DRRs

1993 2003 2013

energy efficiency and conservation programs

time-based pricing

active demand response resources

legacy DSM programs


DRR ACTIVITIES

valley filling peak

clipping load shifting flexible load

shape

DRRs help to balance the supply and demand around the clock and in ancillary service provision

market clearing transmission scheduling ancillary services

DRR ECONOMICS


ELECTRICITY MARKET CLEARING $/MWh

MWh/h ℓ*

λ*

high willingness-to-pay of fixed loads

market equilibrium

!


HOUR h DRR CURTAILMENT MARKET IMPACTS

λ'

impact of hour h DRR curtailment

ℓ*

λ*

$/MWh

MWh/h

Δℓ

reduction in market clearing price

ℓ'


PJM NODE LOADS AND LMPs IN THE WEEK OF AUGUST 9, 2010

MWh/h $/MWh 200

160

120

80

40

0

14,000

12,000

10,000

8,000

6,000

4,000 1 24 120 96 72 48 144 168

loads

LMPs


DRRs ARE ATTRACTIVE

  Jon Wellinghoff, Chairman, FERC: “There are

tremendous benefits from demand response at

very low costs, costs much lower than we can put

any supply in place. This is the first fuel.”

  Jim Rogers, CEO, Duke Energy: “The most

environmentally responsible plant you build is the

one that you don't build.”

ADDITIONAL DRR CAPABILITIES


DRR PROVISION OF CAPACITY-BASED ANCILLARY SERVICES

response time in minutes

30 10 0

regulation

supplemental/non-spinning reserves

load following; spinning reserves

120


CONVENTIONAL GENERATION REGULATION ANCILLARY SERVICE

Sour

ce: E

nerN

OC

, “Th

e Po

tent

ial f

or D

eman

d R

espo

nse

to A

id in

the

Inte

grat

ion

of R

enew

able

Res

ourc

es”,

Apr

il 20

11

generator AS response profile


DRR PROVIDED REGULATION SERVICE

Sour

ce: E

nerN

OC

, “Th

e Po

tent

ial f

or D

eman

d R

espo

nse

to A

id in

the

Inte

grat

ion

of R

enew

able

Res

ourc

es”,

Apr

il 20

11

DRR AS response profile


RESERVES – SHORTFALL DURATION CURVES

Sour

ce: N

atio

nal R

enew

able

Ene

rgy

Labo

rato

ry (N

RE

L) “

Wes

tern

Win

d an

d So

lar I

nteg

ratio

n St

udy”

, May

201

0

reference level reserves levels

hour

ly c

ontig

ency

rese

rves

shor

t-fal

l (M

W)

number of hours


ECONOMIC LOAD PARTICIPATION

  The NREL study investigated the costs of providing additional spinning reserves   each additional 5 % increment of committed

spinning reserve is increasingly expensive   additional spinning reserves can reduce but

not eliminate contingency shortfalls   Demand response is considerably more economic

than spinning reserves and can result in major savings as it is more cost-effective to have DRRs address the hours of contingency reserves short-falls rather than increase reserves for 8,760 hours


DRRs FOR DEEP WIND PENETRATION INTEGRATED INTO THE GRID

day

frac

tion

of p

eak

load

1.0

0.5

0

load

load minus wind output

large ramp up required

Adapted from: M. Lange & U. Focken, “Physical Approach to Short-Term Wind Power Prediction”, Springer, 2006

large ramp down required


MISALIGNMENT OF WIND OUTPUT AND LOAD: DRR OPPORTUNITIES

0

50

100

150

200

250

win

d po

wer

out

put (

MW

)

24 48 72 96 120 144 168 3000

4000

5000

6000

7000

8000 lo

ad (M

W)

hour

wind power

load

DEEPENING DRR PENETRATION


DRR IMPLEMENTATION DRIVERS

DRR implementation

advent of aggregators

environmental concerns

policy initiatives

reliability

smart grid technologies


THE SMART GRID�

The smart grid represents a modernized electricity delivery system that monitors, protects and automatically optimizes the operation of all its interconnected elements – from the central and distributed generator, through the high-voltage transmission grid and the distribution network to industrial users and building automation systems, to energy storage devices and to end-use consumers and their thermostats, electric vehicles, appliances and other devices.

�


THREE SALIENT ASPECTS

  Combined digital intelligence and real-time

communications: to improve the operations/con-

trol of the transmission and distribution grids

  Advanced metering solutions: to replace the

legacy metering infrastructure

  Deployment of appropriate technologies, devices,

and services: to access and leverage energy

usage information in smart appliances and in the

integration of renewable energy


CUSTOMERS AND THE SMART GRID�So

urce

: NIS

T F

ram

ewor

k an

d R

oadm

ap fo

r Sm

art G

rid

Inte

rope

rabi

lity

, http

://w

ww.

sae.

org/

smar

tgri

d/ni

st_s

mar

tgri

d_in

tero

pera

bilit

y.pdf


ADVANCED METERING INFRASTRUCTURE (AMI ) EVOLUTION

0

10

20

30

40 2006 2008 2010 2012

Sour

ce: A

sses

smen

t of D

eman

d R

espo

nse

and

Adv

ance

d M

eter

ing,

F

ER

C 2

012,

http

://w

ww.

ferc

.gov

/lega

l/sta

ff-re

port

s/12

-20-

12-d

eman

d-re

spon

se.p

df

AM

I pen

etra

tion

(%)

survey year:


ROLE OF AGGREGATION

  An aggregator is officially called a curtailment

service provider

  Such an entity is authorized to act as an

intermediary between the ISO/RTO and electricity

consumers to deliver demand response

capabilities to meet ISO/RTO needs in its markets


AGGREGATOR SERVICES aggregator

information flows

$$$ flows ancillary services

electricity curtailment

capacity

ISO/RTO electricity consumers


2011 STATS FOR THE TWO LARGEST AGGREGATORS

aggregator Comverge EnerNOC

demand portfolio size (MW ) 4,564 7,100

annual portfolio growth (%) 22 34

revenues (million $) 136.4 286.6

annual revenue growth (%) 14 2.1

Source: Global revenues from demand response services $1.3 billion in 2011, http://www.pikeresearch.com/newsroom/large-global-vendors-will-account-for-a-growing-share-of-the-demand-response-market-over-the-next-five-years


ENERNOC DEMAND PORTFOLIO GROWTH

Source: Annual Report 2011, Enernoc, http://files.shareholder.com/downloads/ENOC/2344214133x0x562905/B01582C9-3E7F-4623-BB6C-D43E92ACF0F9/Enernoc_2011_Annual.pdf

2,000

4,000

6,000

8,000

2,000

4,000

6,000

8,000

10,000

12,000 MW under

management

sites under management

410 1,113

2,057

3,566

5,300

7,100

Q1 Q2 Q3 Q4

2006 Q1 Q2 Q3 Q4

2007 Q1 Q2 Q3 Q4

2008 Q1 Q2 Q3 Q4

2009 Q1 Q2 Q3 Q4

2010 Q1 Q2 Q3 Q4

2011

11,400

823 2,195

4,000

6,500

8,600


federal mandate to report on DRR potential and deployment

and to remove market barriers to DRR participation

FERC Order No.

745

FEDERAL REGULATORY INITIATIVES ON DRR

FERC Order No.

719

2005 2008 2011

EPAct


FERC Order No.

745


FERC Order No.

719

2005 2008 2011

EPAct

permits aggregators to bid DRRs on behalf of

buyers; removes barriers to DRR participation in

AS market


requires determination of the threshold price by the net benefits test (NBT ) and the payment to each DRR,

that satisfies the NBT, at the post-curtailment LMP for its accepted

curtailment

FERC Order No.

745


FERC Order No.

719

2005 2008 2011

EPAct


FERC REGULATORY DEVELOPMENTS

key objectives FERC Order No.

remove market barriers 719, 745

allow aggregation 719

provide AS by DRRs 719

incentivize for DRR participation in DAMs/RTMs 745


FERC ORDER NO. 745

  FERC Order No. 745 specified the incentives to the

DRRs for load curtailments in the DAMs

  The Order mandated each ISO/RTO to perform a

monthly net benefits test (NBT ) to determine its

monthly threshold price criterion, to serve as the

trigger for the compensation to each DRR at its

nodal LMP


  The Order represents a significant increase in

DRR incentives over past practices

  These incentives provide major stimulus for DRR

participation in electricity markets

  The Order represents a major push in the encou-

ragement of the implementation of additional DRR

FERC ORDER NO. 745


0

10,000

20,000

30,000

40,000

50,000

2011 – 2012 PJM DRR CURTAILMENTS

implementation of FERC Order No. 745 in PJM

MWh/h

Sour

ce: L

oad

Res

pons

e Act

ivity

Rep

ort N

ov. 2

012,

PJM

, http

s://p

jm.c

om/~

/m

edia

/mar

kets

-ops

/dsr

/201

2-ds

r-ac

tivity

-rep

ort-2

0121

112.

ashx

2012

2011


REPRESENTATIVE STATE – LEVEL TOU PRICING TARIFFS

Arizona 1/3 of Arizona Public Service and Salt River

Project residential customers voluntarily on time-of-use rates

California all three IOUs approved to offer dynamic pricing tariffs in 2013

Arkansas and Oklahoma

state commissions approved residential variable peak pricing on a default basis with the option to

opt-out

Illinois Ameren Illinois and Commonwealth Edison received ICC approval to establish real-time

pricing programs

Connecticut all electric distribution companies must offer

critical peak or real-time pricing programs to all customer classes

CURRENT AND FORECASTED

DRR PENETRATION


0

2

4

6

8

10

12

CAISO ERCOT ISONE MISO NYISO PJM SPP weighted average

2009 2010

EXISTING DRR CAPACITY

% peak load

weighted average

Sour

ce: A

sses

smen

t of D

eman

d R

espo

nse

and

Adv

ance

d M

eter

ing,

FE

RC

201

1, h

ttp://

ww

w.fe

rc.g

ov/le

gal/s

taff-

repo

rts/

11-0

7-11

-dem

and-

resp

onse

.pdf


FERC DRR CAPACITY FORECAST

Source: A National Assessment of Demand Response Potential, FERC 2009,http://www.ferc.gov/legal/staff-reports/06-09-demand-response.pdf

peak

load

(G

W )

1,000

950

900

850

800

750

700

650 2009 2011 2013 2015 2017 2019

no DRR, 1.7 % AAGR

4 % DRR, 1.7 % AAGR

2019 DRR capacity (percent of 0 % DRR peak load)

AAGR: average annual growth rate of demand

9 % DRR, 1.3 % AAGR

14 % DRR, 0.6 % AAGR

20 % DRR, 0.0 % AAGR

38 GW 4 %

82 GW 9 %

138 GW 14 %

188 GW 20 %

FERC achievable participation

range: 4-14 %

DRR LIMITATIONS AND

CHALLENGES


DRR LIMITATIONS AND CHALLENGES

  The potential for DRR implementation is limited

and challenges arise with deepening DRR

penetration

  Policies for incentivizing DRR participation must

be formulated so as to effectively balance the

benefits among all the market players


DRR LIMITATIONS AND CHALLENGES

  DRR curtailments in high-load hours are likely to

be followed by energy recovery in lower-load

hours, the so-called payback effects, with the

associated price impacts

  DRRs cannot provide the system dynamic effects

that generators do and so there are physical limits

to the depths of effective DRR penetration


UNINTENDED CONSEQUENCES OF DRRs

There are instances when the dispatch of DRR

curtailments increases the purchase payments of

the loads not participating in curtailment provision,

rendering those buyers worse off with the DRR

curtailments than without them


EXAMPLE: 7 – BUS SYSTEM


REFERENCE CASE: NO DRR CURTAILMENT


20 – MW CURTAILMENT AT BUS 3

higher prices

lower prices

20 MW curtailment

lower costs

THE IMPACTS OF THE

DRR PAYBACK EFFECTS


DRR WITH ENERGY RECOVERY

MWh/h

h

system load

DRR curtailments

DRR energy recovery


h

DRR-modified system load

reduced system peak load

increased system base load

MWh/h

DRR WITH ENERGY RECOVERY ACTS


PAST DRR STUDIES

  Past DRR studies have quantified the economic

benefits of DRR curtailments without the explicit

consideration of their recovery energy impacts

  The reported economic and emission benefits of

DRRs are not attainable when recovery energy

considerations are taken into account


SIMULATION STUDIES

  We discuss DRR recovery energy impacts with a

series of backcast sensitivity studies for the year

2010 using MISO offer, load, and generation mix

data

  We simulate the day-ahead market outcomes in

2010 under varying DRR penetration levels,

utilization intensity and recovery energy values


SIMULATION STUDIES

  We compare DRR economic/emission impacts of

these cases with respect to the no DRR case

  We use the average locational marginal prices

(ALMPs ) and the average per MWh CO2 emissions

as the basic metrics of comparison


study system name test system

source of offer, load and generation mix

data

S 57 IEEE 57-bus MISO

DRR IMPACT CASE STUDY TEST SYSTEMS


parameter range

DRR capacity 1 – 20 % of peak load

DRR recovery energy percentage

0 – 120 % of curtailed energy

DRR intensity (low/medium/ high)

2, 4, 6 out of 8 potential curtailment hours

DRR IMPACT SENSITIVITY STUDIES


-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2 4 6 8 10 12 14 16 18 20

ALM

P ch

ange

($/M

Wh)

DRR penetration level (% of S57 peak load)

S 57 PRICE IMPACTS UNDER HIGH DRR INTENSITY

with intensive DRR utilization, energy recovery results in uneconomic outcomes at lower DRR penetrations

50 80 100 110 90 120 0 energy recovery %

reference case ALMP: 57.34 $/MWh


-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2 4 6 8 10 12 14 16 18 20

ALM

P ch

ange

($/M

Wh)

DRR penetration level (% of S57 peak load) reference case ALMP: 57.34 $/MWh

S 57 PRICE IMPACTS UNDER HIGH DRR INTENSITY

DRRs become uneconomic for recovery in some

cases at penetrations of 12 % or deeper

onset of diminishing returns of price reductions at or above recovery of 80 % of curtailed energy

50 80 100 110 90 120 0 energy recovery %


S 57 RESOURCE MIX

nuclear hydro/renewable coal oil natural gas

price-based loading order

$$$

$

52 %

26 %

9 % 6 %

7 %


S 57 EMISSION IMPACTS UNDER HIGH DRR INTENSITY

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

2 4 6 8 10 12 14 16 18 20

chan

ge in

avg

. per

MW

h C

O2

emis

sion

s (%

)

DRR penetration level (% of S57 peak load)

DRR utilization results in increased emissions in nearly all recovery cases

emissions impact below 0.6 %

50 80 100 110 90 120 0

energy recovery %


STUDY FINDINGS AND CONCLUSIONS

  The consideration of energy recovery reduces

drastically the system-wide economic benefits of

DRR curtailments and, below certain penetration

levels, makes curtailments uneconomic

  DRR utilization at medium to high intensity, modest

recovery percentages, and penetrations within the

FERC’s achievable participation range may lead to:


STUDY FINDINGS AND CONCLUSIONS

  uneconomic outcomes or severely diminished

ALMP reductions

  emission increases or severely diminished

emission reductions

  Deepening penetrations of wind generation may

alleviate the severely diminished ALMP and CO2

reductions

DRR CONTRIBUTIONS


VALUE ADDED BY DRRs

  DRRs add value to the electric grid as a cost-

effective and clean resource for providing

“energy” and ancillary services

  The deployment of DRRs presents opportunities

to increase the effectiveness of grid utilization

and address the operational challenges in the

integration of renewable resources


SURPLUS BASE-LOADED GENERATION

0

3,000

6,000

9,000

12,000

15,000

18,000

source: IESO

range of minimum weekly demand

base-loaded generation

average weekly minimum demand

MWh/h


DRRs PROVIDE AS AROUND THE GLOBE

ERCOT Response time: for both responsive reserve and non-spinning reserve, instantaneous or under 10 minutes

Nord Pool Multinational power exchange provides Regulation and Operating Reserves

PJM Response time: 4 seconds to continuous control signal for Regulation, and 10 minutes for Synchronized Reserves

United Kingdom National Grid Short Term Operating Reserves (STOR) Response time: < 20 minutes

New Zealand Fast Instantaneous Reserves: <1 sec response time; Sustained Instantaneous Reserves: <60 sec response time

Sour

ce: E

nerN

OC

, “Th

e Po

tent

ial f

or D

eman

d R

espo

nse

to A

id in

the

Inte

grat

ion

of R

enew

able

Res

ourc

es”,

Apr

il 20

11


COLD STORAGE LOAD

Source: Case Studies, EnerNOC, http://www.enernoc.com/our-resources/case-studies

enterprise Four Seasons Produce, Inc. location Pennsylvania

program EnerNOC DemandSMART

TM, PJM synchronized reserves and emergency load response

curtailment source chiller reductions curtailment range 0.4 – 1 MW annual rebates $ 25,000


COLD STORAGE LOAD


enterprise VersaCold location Ontario, Canada; Pennsylvania

program EnerNOC DemandSMART TM

curtailment source equipment shutdowns, temperature adjustments

curtailment limit 3.2 MW annual rebates $ 160,000


MANUFACTURING LOAD


enterprise Leggett & Platt location Texas and Illinois

program EnerNOC DemandSMART

TM, emergency response service, PJM emergency load response

curtailment source partial/total operational shutdowns curtailment limit 12 MW annual rebates $ 400,000


GOVERNMENT FACILITIES

Source: White House highlights demand response activities, opportunities, Platts, http://www.platts.com/RSSFeedDetailedNews/RSSFeed/ElectricPower/6201047

agency U.S. DOD location throughout the United States

program demand response

curtailment source building energy usage adjustments curtailment limit > 300,000 buildings annual rebates $ 14,000,000


CONCLUDING REMARKS

  DRRs currently play a larger role than at any time

in maintaining the supply-demand balance and in

the provision of capacity-based AS

  Smart grid technology, aggregators and policies

are key drivers in the deepening DRR penetration

  Huge potential exists for DRRs to provide grid

services, such as regulation and load following,

and to play a role in the reliable and effective

integration of renewable resources

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