LONG-TERM RESOURCE ADEQUCY: DEMAND
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Transcript LONG-TERM RESOURCE ADEQUCY: DEMAND
LONG-TERM RESOURCE ADEQUACY:
DEMAND-RESPONSE OPTIONS
ERIC HIRST
Consultant in Electric-Industry Restructuring
Oak Ridge, TN
[email protected]
www.EHirst.com
November 2002
THREE PROBLEMS WITH THIS
ASSIGNMENT
Concept of long-term resource requirement is
antithetical to competitive markets
– What other products are purchased so far ahead of
use with such ambiguous product definition?
– For what other products does government
mandate purchase?
FERC’s proposed long-term resource adequacy
(LTRA) requirements, in SMD NOPR, vague and at
odds with other parts of SMD
FERC’s opposition to ISO ICAP programs unclear
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ASSIGNMENT IS SIMPLE IN ONE SENSE
Demand-response resources/programs developed for
shorter term should qualify as long-term resources
– No need to develop new programs to ensure LTRA
Challenge is to treat demand resources comparably
(not necessarily identically) to supply resources
– ISO operating and market rules accommodate
supply idiosyncrasies, need to do same for
demand resources
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KEY RESOURCE COULD BE DEMAND
CURVE FOR CONTINGENCY RESERVES
MAXIMUM PRICE ($/MW-hr)
1000
800
600
400
200
ISO Implementation
in Summer 2002
0
0
NYISO
500
1000
RESERVE AMOUNT (MW)
1500
2000
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ISSUES TO CONSIDER ...
Forecast horizon
Certification requirements
Qualifying resources
– Interruptible loads and direct-load control
– Dynamic pricing
– Load participation in contingency-reserve markets
– Energy efficiency
Seasonal v annual requirements
RTO role in markets
End-use infrastructure requirements
– Metering and communications
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… ISSUES TO CONSIDER
RTO resource rights
Retail customer/LSE obligations
Minimum resource size
Customer baseline level
Payments
– Capacity
– Energy
Penalties
Other ??
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UNCERTAINTY OVER RESOURCES
INCREASES WITH FORECAST TIME
Plans
??
Financing
Siting & Permitting
Fuel supply
Labor supply
Equipment deliveries
Transmission
interconnection
Etc
Planned outage
Forced outage
Fuel prices
Electricity prices
Physical
resources
Forced outage
Three years
0208
One year
One month
Operating day
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WHAT CONSTITUTES CERTIFICATION
AND WHEN?
Resource Plan (long-term)
– How does RTO review and approve plan?
– Return to the days of utility IRP?
Physical Resource (short-term, e.g., month ahead)
– Demonstration of actual load reduction within time
limit (ramp rate), metering and communications
equipment
– Annual or seasonal demonstration or delivery
when called upon
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WHICH DEMAND RESOURCES CAN
QUALIFY?
YES
– Interruptible loads and
direct-load control
(participants in existing
DR and ICAP
programs)
– Bids into contingencyreserve markets
NO
– Dynamic pricing ?
Probably not
– Energy efficiency,
passive nature
prohibits system
operator dispatch of
resource
These “resources” show
up in load forecast
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DEMAND RESPONSE MORE
VALUABLE AS LOAD REDUCTION
Consider LSE with 100 MW peak demand, 15%
reserve requirement, and 10 MW of contracted load
reduction
If the 10 MW qualify as LTRs, then LSE needs another
105 MW of qualifying resources
If the 10 MW reduce peak demand, then LSE needs
only 103.5 MW of qualifying resources
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HOW TO TREAT SEASONAL LOADS?
Some load reductions are weather or season
dependent
Some are coincident with system peaks
How to value such time-dependent load reductions?
– Calculate annual value based on hourly values of
system LOLP and potential load reduction, similar
to traditional utility system planning
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METERING AND COMMUNICATIONS
DEPENDS ON TYPE OF RESOURCE
Interruptible Load
Meters: hourly
Contingency Reserves
Meters: 1-minute recording
Communications: Receive,
confirm, and act upon RTO
instructions (pager,
telephone, email, fax)
Communications: Receive
and act upon RTO
dispatch instructions
Does RTO need to know
load response in real
time?
Does RTO need to know
load response in real
time?
Who pays for this equipment?
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RTO RIGHTS
Number of times per year (or season)
Maximum duration of each interruption
Minimum advance notice
– These limits generally do not apply to generators
and reduce the value of demand resources
Point in emergency sequence (OP-4) that resource is
called
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LSE/CUSTOMER OBLIGATIONS
Prompt reporting of availability status
Maintenance of metering and communications
equipment
For participation in contingency-reserve markets,
submission of daily availability bids ($/MW-hr)
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PAYMENTS AND PENALTIES
LTRs (both supply and demand) receive monthly or
annual reservation/capacity payments, $/MW-month
When dispatched, supply paid for energy at spot
energy price and load does not pay for unconsumed
energy at same price
(Ruff argument, no double payment)
Noncompliance vs. underperformance penalties
– Stiff noncompliance penalty is quid pro quo for
capacity payments
– Underperformance penalty should be cost based
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MANY OF THESE FACTORS APPLY TO
OTHER DEMAND-RESPONSE PROGRAMS
Minimum resource size
Aggregation
Frequency, duration, advance notice of deployment
Customer baseline level
– Easier to determine for contingency reserves
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COMPARISON AMONG DR TYPES ...
Interruptible
load
Contingency
reserves
Dynamic
pricing
Energy
efficiency
Qualify as LTR
Yes
Yes
No - ?
No
Performance
requirements
Reduce demand
by contracted
amount when
called by RTO
Hourly
Bid into DA
reserve
markets
Metering
requirements
Communication
requirements
1-minute
Ability to receive and confirm
operator requests
None
Hourly
None
Ability to
receive DA
and RT
hourly prices
None
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… COMPARISON AMONG DR TYPES
Interruptible
load
Contingency
reserves
Dynamic
pricing
Energy
efficiency
Advance notice
30 to 120
minutes
10 to 30
minutes
Customer
discretion
None
Duration of
response
Up to several
hours
1 hour
Not applicable
Baseline
Same as for
existing
programs
Yes, long term
Simpler
Not applicable
Yes, day
ahead
No
Capacity
payment
Energy payment
Penalties
No
Same as for generation
Not applicable
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MY BOTTOM LINE
LTRA is a political necessity because of aversion to
price spikes and deficiencies in current market
designs
LTRA not compatible with competitive wholesale
energy markets
Demand resources can and should qualify as LTRs
and participate in such markets
– Build on experience with existing ISO and utility
programs
– Ensure comparability with treatment of generation
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