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
2
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
3
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
4
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
5
… ISSUES TO CONSIDER





RTO resource rights
Retail customer/LSE obligations
Minimum resource size
Customer baseline level
Payments
– Capacity
– Energy
 Penalties
 Other ??
6
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
7
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
8
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
9
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
10
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
11
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?
12
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
13
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)
14
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
15
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
16
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
17
… 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
18
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
19