Transcript Document

PRICE RESPONSIVE DEMAND: LEARNING TO
LOVE SMART THERMOSTATS, EFFICIENT
PRICING, AND TREATING DR AS DEMAND
The State of Demand Response
Organization of PJM States 10th Annual Meeting
Paul Centolella
October 13, 2014
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EPSA v. FERC: Challenge & Opportunity
• FERC can’t regulate or set compensation for Demand Response
(DR): “entails direct regulation of the retail market—a matter
exclusively within state control”
• Agency can’t Infer broad authority to regulate: While DR “affects”
wholesale rates, FERC offered “no limiting principle” and without
boundaries FERC could regulate steel, fuel, and labor markets
• FERC can recognize the impact of DR in wholesale markets – Treat
DR as a variation in demand
• Court distinguished DR compensation from Energy Policy Act’s direction to
eliminate “unnecessary barriers to demand response”
• Decision opens current DR qualification requirements to challenge:
• “[I]f FERC’s arguments are followed to their logical conclusions, price-
responsive demand … would also affect jurisdictional rates … [and]
nothing would stop FERC from expanding this regulation and encroaching
further on state authority in the future.”
• Under EPSA v. FERC, RTOs might well lack authority to apply to
responsive demand the same standards applicable to supply resources
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October 13, 2014
RTO Demand Response Programs: Valuable & Limited
• Limitations:
• Across NERC, all DR programs
account for only 3.8% of total
internal demand
• Programs don’t engage most
customers
• Asset utilization remains
inefficient & did not improve
• Largely focus on peak or
emergency events, not daily
challenges facing grid operators
ISO/RTO Demand Response
Potential
Percent of Peak Demand
• Benefits:
• Potential to reduce ISO/RTO peak
demand: average of 6% in 2012
• Reduced ISO/RTO prices
12%
10%
8%
6%
4%
2%
2011
2012
0%
Baseline Program Issues:
• Baseline administration costs
• Third party aggregation can
increase costs & inconvenience
to customers
• Baselines unduly benefit some
& penalize other customers
• Baselines can be abused
October 13, 2014
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Types of Responsive Demand
• Baseline DR Programs:
• RTO or utility notifies customers of an event and compensates them based
on reductions from usage in a recent baseline period
• Net reductions may be achieved by reducing or shifting demand or with
behind-the-meter generation
• Most RTO DR and utility Critical Peak Rebate programs
• Automated Customer Choice:
• Smart thermostats, building energy management systems, & other smart
devices implement customer preferences
• Some devices use data analytics and can consider expected prices,
weather forecasts, building occupancy, HVAC & building performance, and
customer comfort and savings preferences
• Utility DSM programs, retail supplier service packages, & direct sales
• Variable Pricing:
• Can be 2-Part Price with dynamic price & an insurance mechanism
• If linked to PJM prices may qualify as Price Responsive Demand
• Utility or competitive supplier’s retail price
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Smart Devices: Automation of Customer Preferences
• Just as KAYAK can locate the least expensive air fares or Pandora
can match musical preferences, smart devices can identify the least
expensive times to use power, implement savings strategies, and
match individual comfort preferences
• Devices can optimize all of the time, automatically, in the background,
in near real-time, based on even modest interval-to-interval changes
in conditions and anticipated prices
• Potential impacts:
• Greatly expand demand participation and customer savings
• Improve utility asset utilization on a continuous basis
• Enable the integration of renewable and variable resources
• Provide system operators location-specific, rapidly responding options to
address reliability events
• Costs continue to fall with improvements in information and
networking technologies
October 13, 2014
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Smart Devices: Huge Potential
• Smart devices can provide energy storage on a local and large scale
using the thermal inertia (heating, cooling, water heating, &
refrigeration) and/or flexibility (pumping loads, industrial batch
processes, pool pumps, dishwashers, clothes driers, & charging of
vehicles & battery powered devices) in most energy using devices
• Smart devices can reduce an estimated 20%+ of residential energy
use wasted cooling & heating unoccupied space saving up to $40B/yr.
• Examples:
• With pre-cooling strategies tailored for each customer, Nevada Energy
reduced average air conditioner operating times, during two hour peak
events, to seven minutes or less and achieved demand reductions of 3kW
per home with high levels of customer satisfaction.
• With pre-cooling, Nest achieved an average 55% reduction in residential
air conditioning energy demand, including 50% reductions in 100o+ Texas
temperatures while indoor temperatures drifted up by less than 1.6o
• FERC’s 2009 DR study estimated then-current enabling technologies
with dynamic pricing could reduce US peak demand by 20% by 2019.
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October 13, 2014
Smart Devices
Deployment Path 1:
Utility DSM Programs
Advanced Meters: Not required
Dynamic Pricing: Not required
Cost Recovery: DSM Allocation
Customer Engagement: Limited
Participant Risk: None
• Retail responsive demand
• Deployment by conventional utility demand-side
management program incentives or financing
• Any state and utility could do so with costs and much of
the benefits would be shared through rates
• Programs could target low income customers
• Devices can respond to PJM Day Ahead
• Additional information could be provided by RTO based on RTO
“look ahead” price forecasts & the utility to help position demand
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October 13, 2014
Smart Devices
Deployment Path 2:
Supplier Competition
Advanced Meters: Valuable, not required
Dynamic Pricing: Not required
Cost Recovery: Supplier service pricing
Customer Engagement: Limited
Participant Risk: Limited
• State & RTO collaboration in retail access jurisdictions
• Create incentives for retail suppliers to compete based on
managing customer energy bills
• Suppliers can offer a lower fixed price or other incentives to
customers with smart devices who, for example, provide their
supplier a degree or two of thermostat temperature flexibility
• Market Structure:
• Wholesale settlement based on supplier specific demand profiles
• Interval usage data obtained from AMI, some AMR, or an allocation of
demand to intervals based statistical samples for each supplier
• Ideally RTO would provide information to help position demand
potentially based on RTO “look ahead” price forecasts
• Federal Power Act directs FERC to “facilitate price transparency” and
“provide for the dissemination, on a timely basis of information about
[wholesale] prices … to … the public.”
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October 13, 2014
Smart Devices
Deployment Path 3:
Two Part Dynamic Retail Pricing
Advanced Meters: Needed
Dynamic Pricing: Portion of Rate
Cost Recovery: Various options
Engagement: Incents Behavior
Participant Risk: Personalized
• Retail price responsive demand
• Smart devices enable broader use of dynamic rates that in turn
can incent additional efficient behavioral changes
• Utility could offer on-bill financing to support adoption of smart
devices
• Default rate could become 2-Part Pricing with dynamic (e.g.
RTP) component, plus an insurance component (fixed rate for
specified profile, subscription to a maximum price or call option,
or balanced billing that spreads monthly costs)
• Practice of placing customers on most beneficial rate could be applied
to 2-Part pricing for utility or default service
• When customers have been placed on time-varying rates on an optout basis with appropriate education, a minority of customers have
opted-out and customer satisfaction tends to be high
October 13, 2014
Is Demand Response a “Resource”?
Smart technology has created the opportunity for
Demand Response to be a great deal more than the
RTO Resources to which we are accustomed.
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October 13, 2014
Paul Centolella
180 Clyde St. – Rear
Chestnut Hill, MA 02467
[email protected]
(614) 530-3017