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
3 © 2013 George Gross, All Rights Reserved
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
5 © 2013 George Gross, All Rights Reserved
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
6 © 2013 George Gross, All Rights Reserved
DSM PROGRAMS’ LOAD SHAPE OBJECTIVES
strategic conservation
load shifting
valley filling
flexible load shape
peak clipping
strategic load growth
7 © 2013 George Gross, All Rights Reserved
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
8 © 2013 George Gross, All Rights Reserved
DEMAND RESPONSE RESOURCES (DRRs)
generation resources
price-sensitive passive loads
market clearing transmission scheduling
DRRs
9 © 2013 George Gross, All Rights Reserved
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
10 © 2013 George Gross, All Rights Reserved
THE TRANSITION TO DRRs
1993 2003 2013
energy efficiency and conservation programs
time-based pricing
active demand response resources
legacy DSM programs
11 © 2013 George Gross, All Rights Reserved
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
13 © 2013 George Gross, All Rights Reserved
ELECTRICITY MARKET CLEARING $/MWh
MWh/h ℓ*
λ*
high willingness-to-pay of fixed loads
market equilibrium
!
14 © 2013 George Gross, All Rights Reserved
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'
15 © 2013 George Gross, All Rights Reserved
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
16 © 2013 George Gross, All Rights Reserved
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
18 © 2013 George Gross, All Rights Reserved
DRR PROVISION OF CAPACITY-BASED ANCILLARY SERVICES
response time in minutes
30 10 0
regulation
supplemental/non-spinning reserves
load following; spinning reserves
120
19 © 2013 George Gross, All Rights Reserved
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
20 © 2013 George Gross, All Rights Reserved
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
21 © 2013 George Gross, All Rights Reserved
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
22 © 2013 George Gross, All Rights Reserved
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
23 © 2013 George Gross, All Rights Reserved
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
24 © 2013 George Gross, All Rights Reserved
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
26 © 2013 George Gross, All Rights Reserved
DRR IMPLEMENTATION DRIVERS
DRR implementation
advent of aggregators
environmental concerns
policy initiatives
reliability
smart grid technologies
27 © 2013 George Gross, All Rights Reserved
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.
�
28 © 2013 George Gross, All Rights Reserved
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
29 © 2013 George Gross, All Rights Reserved
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
30 © 2013 George Gross, All Rights Reserved
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:
31 © 2013 George Gross, All Rights Reserved
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
32 © 2013 George Gross, All Rights Reserved
AGGREGATOR SERVICES aggregator
information flows
$$$ flows ancillary services
electricity curtailment
capacity
ISO/RTO electricity consumers
33 © 2013 George Gross, All Rights Reserved
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
34 © 2013 George Gross, All Rights Reserved
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
35 © 2013 George Gross, All Rights Reserved
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
36 © 2013 George Gross, All Rights Reserved
FERC Order No.
745
FEDERAL REGULATORY INITIATIVES ON DRR
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
37 © 2013 George Gross, All Rights Reserved
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
FEDERAL REGULATORY INITIATIVES ON DRR
FERC Order No.
719
2005 2008 2011
EPAct
38 © 2013 George Gross, All Rights Reserved
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
39 © 2013 George Gross, All Rights Reserved
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
40 © 2013 George Gross, All Rights Reserved
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
41 © 2013 George Gross, All Rights Reserved
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
42 © 2013 George Gross, All Rights Reserved
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
44 © 2013 George Gross, All Rights Reserved
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
45 © 2013 George Gross, All Rights Reserved
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
47 © 2013 George Gross, All Rights Reserved
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
48 © 2013 George Gross, All Rights Reserved
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
49 © 2013 George Gross, All Rights Reserved
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
50 © 2013 George Gross, All Rights Reserved
EXAMPLE: 7 – BUS SYSTEM
51 © 2013 George Gross, All Rights Reserved
REFERENCE CASE: NO DRR CURTAILMENT
52 © 2013 George Gross, All Rights Reserved
20 – MW CURTAILMENT AT BUS 3
higher prices
lower prices
20 MW curtailment
lower costs
THE IMPACTS OF THE
DRR PAYBACK EFFECTS
54 © 2013 George Gross, All Rights Reserved
DRR WITH ENERGY RECOVERY
MWh/h
h
system load
DRR curtailments
DRR energy recovery
55 © 2013 George Gross, All Rights Reserved
h
DRR-modified system load
reduced system peak load
increased system base load
MWh/h
DRR WITH ENERGY RECOVERY ACTS
56 © 2013 George Gross, All Rights Reserved
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
57 © 2013 George Gross, All Rights Reserved
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
58 © 2013 George Gross, All Rights Reserved
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
59 © 2013 George Gross, All Rights Reserved
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
60 © 2013 George Gross, All Rights Reserved
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
61 © 2013 George Gross, All Rights Reserved
-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
62 © 2013 George Gross, All Rights Reserved
-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 %
63 © 2013 George Gross, All Rights Reserved
S 57 RESOURCE MIX
nuclear hydro/renewable coal oil natural gas
price-based loading order
$$$
$
52 %
26 %
9 % 6 %
7 %
64 © 2013 George Gross, All Rights Reserved
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 %
65 © 2013 George Gross, All Rights Reserved
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:
66 © 2013 George Gross, All Rights Reserved
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
68 © 2013 George Gross, All Rights Reserved
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
69 © 2013 George Gross, All Rights Reserved
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
70 © 2013 George Gross, All Rights Reserved
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
71 © 2013 George Gross, All Rights Reserved
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
72 © 2013 George Gross, All Rights Reserved
COLD STORAGE LOAD
Source: Case Studies, EnerNOC, http://www.enernoc.com/our-resources/case-studies
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
73 © 2013 George Gross, All Rights Reserved
MANUFACTURING LOAD
Source: Case Studies, EnerNOC, http://www.enernoc.com/our-resources/case-studies
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
74 © 2013 George Gross, All Rights Reserved
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
75 © 2013 George Gross, All Rights Reserved
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