Transcript Forward Capacity Market

National Grid’s Involvement in New England’s
Forward Capacity Market
Helping to Bring Demand Resources into the Supply Mix
Tim Roughan
Director, Distributed Resources
National Grid
Agenda
National Grid at a glance
2. The Paradigm shift from demand response
programs to wholesale markets
3. National Grid’s Demand Resource and Forward
Capacity Market strategies
4. How do Forward Capacity Market rules affect
customers and demand response providers?
5. What’s next?
1.
National Grid at a glance
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One of the largest investor-owned utilities in the
world focused on electric and gas transmission
and distribution
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Headquartered in London, UK
$8.1 billion in revenues, fiscal year 2007
London Stock Exchange symbol – NG, NYSE – NGG
~50% UK/US, ~50% Gas/Electric
U.S. Business
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4.4 million electricity customers in NE and NY,
Including 1.1 million LIPA customers.
3.4 million gas customers in NY and NE
Approximately 18,000 U.S. employees
The paradigm shift from Demand Response
Programs to Wholesale Markets
A Forward Capacity Market (FCM) is a natural evolution for Demand
Resources such as Energy Efficiency, DLC, and Demand Response
assets, allowing them to compete directly with supply resources
 Capacity and load flexibility has become a commodity with a well
defined obligation and value in the marketplace
 DR Program participants and curtailment services providers need to
consider the concept of commodity risk and how it can fit into their
business model
 The shift from Programs to Markets creates significantly longer lead
times, commitment periods and performance hours for demand resources
 The various value streams demand resources create need to be
coordinated to achieve their full potential
 What role should the energy delivery company play in the wholesale
capacity and energy markets?
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Demand Resource Strategy at National Grid
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Fully support the inclusion of demand resources in the
FCM
 Active participant on ISO-NE committees and working
groups
 Committed to help make the FCM successful and
maximize demand resource participation in it
 Register our Energy Efficiency Programs in the FCM
 Register several former non-aggregated demand
response program participants in the FCM to help ensure
reliability during critical capacity deficiencies
 Foster stronger linkages between wholesale and retail
markets
 Provide needed Metering and related Services
Experience enrolling Energy Efficiency Programs
in the ISO-NE FCM
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Timeline and Results of First Forward Capacity Auction
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Show of Interest (SOI) due 2/2007, had to accurately estimate savings through
5/2010 (FCA1 was for capacity to be delivered 6/2010-5/2011)
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Qualifying Package Due 6/2007
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8 Metering & Verification Plans, 33 supporting documents, 100MB in 55 electronic files
(document >500 EE measures)
Received ISO-NE Qualification in 10/2007
Auction held in 2/2008
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National Grid cleared 102 MW out of the 32,000+ MW total procurement
Expected FCM Revenue for year ending 5/31/2011 is $6.4 million
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This revenue, net of qualification and other FCM costs, will be reinvested in our efficiency
programs and will supplement the existing SBC funding source per regulation
Overall effort needed to comply with market rules is significant and compounded by the
evolving nature of the New England FCM
FCA #2 activities concurrent (SOI due 11/2007) – additional 30 MW
 Outstanding issues and opportunities
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Alignment of states’ M&V requirements with ISO-NE requirements
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Importance of program stability to allow for accurate forecasting
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Participating in debate of and keeping abreast of Market Rule Changes
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Some very large customers want to register their own capacity savings from
efficiency projects co-funded by SBC funds.
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Demand Response Strategy
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Coordinate DR efforts as a subset of our overall 20 year award winning DSM
effort
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Leverage energy efficiency program infrastructure to promote and implement DR
strategies
Perform demand response audits to identify energy efficiency, load management
opportunities and develop DR action plans, including auto-DR projects
Continue to utilize the ISO-NE Real Time DR for customer and system
benefits
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Price Response Program as a tool to engage customers with the concept of
becoming flexible with less critical loads for many hours per year
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Over 450 customers are enrolled (>10% of customers >200 KW)
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> $1 million of account credits in past 12 months
ISO-NE Real Time (emergency) DR as a regional reliability tool
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Help customers with significant interruptible loads prepare for the Forward
Capacity Market and earn transitional FCM credits now
Transition some non-aggregated resources into the FCM
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Anticipated payments are $300,000 from FCA1 and $500,000 est. from
FCA2 (To be shared with participating customers)
National Grid currently minimizing commodity risk and focusing on
emergency generation resources
Many customers will be better off joining an aggregation with another CSP
Demand Response Strategy (cont.)
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Refine and continue to utilize local Targeted Demand Response (TDR) to
enhance local reliability where load growth has outpaced T&D capacity
additions
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Provide metering and other tools to help customers participate in capacity
and energy markets
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Near real time ‘under the glass’ metering systems
Making near real time load data available to customers
Implement new technologies to facilitate DR for all customer types
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Goal is to contract for enough capacity to reduce targeted feeder/transformer
peak load by 15%
Potentially standardize TDR and integrate it with the FCM resources, offering it as
an option to all customers to provide a tool for loading and contingency events.
Integration of energy management systems with real time load data and event
notification
Dispatchable energy storage
Smart displays and load curtailment hardware
Research, and ultimately seek regulatory approval to deploy, Direct Load
Control systems to enable small customer’s respond to price and/or supply
capacity
Implications of FCM Rules for DR Providers
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Bidding new resources into the FCM involves financial assurance and
performance risks, and it also involves significant up-front costs
 There is a need for participation from the investment community to
‘make it happen’
 Different enrolling providers are approaching risk in different ways,
and the various strategies are evolving rapidly.
There is significant revenue uncertainty
 Financial Assurance, Show of Interest, and M & V plans due prior
to auction
 The quantity of new resources to be procured will be variable
 There is potential for a pro-rating of the value for Emergency Gen
and other resources
Providers need to estimate enrolled capacity by load zone ~3 years in
advance
Must deal with rules that also work for traditional generation
Implications of FCM Rules for Customers and DR
Providers
Long
lead times needed for Show of Interest, Qualification Package,
and M & V Plans
Performance in the FCM will be calculated differently than it was in
previous demand response programs
 Objective is to keep demand resources’ capacity obligations
equivalent to supply resources’ obligations
 Average performance over all hours vs. best interval performance
 Performance hours significantly increased
 Over performers may share additional payments if there are under
performers
Allowing energy efficiency to participate will create a new funding
mechanism that will enable new, larger, and more comprehensive
efforts
Implications of FCM Rules on Customers
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Longer term contracts will be the norm
 Customers will likely either have performance
penalties or reduced credits to handle
performance risk
 Load shedding demand resources will need to
shed load for significantly more hours than in
past programs
 Automated DR will become mainstream, as will
leveraging these systems to capitalize on
wholesale hourly energy markets
Questions and Discussion
For additional questions contact
Tim Roughan
Director, Distributed Resources
(781) 907-1628
[email protected]