Transcript Monitoring Analytics Power Point Template

Demand Response: Next Steps
OPSI Annual Meeting
October 1, 2012
Howard J. Haas
Defining the Goal: Demand Response
• A fully functional demand side of the electricity
market means that end use customers will have
the:
• the ability to see real-time energy price signals in
real time
• will have the ability to react to real-time energy
prices in real time
• will have the ability to receive the direct benefits or
costs of changes in real-time energy use.
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Defining the Goal: Demand Response
• A fully functional demand side of the capacity
market will be able to see current capacity prices
will have the ability:
• to react to capacity prices
• to receive the direct benefits or costs of changes
in the demand for capacity.
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Defining the Goal: Demand Response
Price
S=D*
D
MC
S
DWL
PW
P*
MB
PR
S = DR
MW* MWR
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MW
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Demand Response: Work in Progress
• Market failure when behavior is inconsistent with
the market value.
• Occurs because:
• Customers do not know the market price
• Customer do not pay the market price
o
Do not benefit from response at market price
• Disconnect between wholesale markets and retail
pricing
• Assumes behavior would be different if prices
and the costs of consumption were directly linked
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Demand Response: Work In Progress
• Today, most end use customers do not face the
market price for energy or capacity:
• Locational marginal price of energy (LMP)
• Locational capacity market clearing price.
• Most end use customers pay a fixed retail rate
with no direct relationship to the hourly
wholesale market LMP, either on an average
zonal or on a nodal basis.
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PJM’s Demand Response: Interim State
• PJM’s demand side programs, by design, provide
a work around for end use customers that are not
otherwise exposed to the incremental, locational
costs of energy and capacity.
• PJM’s programs are a transitional step towards a
fully functional demand side for its markets.
• The complete transition to a fully functional
demand side will require explicit agreement and
coordination among the Commission, state public
utility commissions and RTOs/ISOs.
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PJM Demand Response Programs
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Energy Demand Response Program:
Issues
• In PJM’s Economic Load Response Program
• LMP signal is zonal not nodal
o
Nodal is the right price signal
• Measurement challenges
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Energy Demand Response Program:
Issues
• Order 745; March 15, 2011: Distorts energy price
signal to load
• Net Benefits Test:
• Pass the test
o
Get Full LMP vs. LMP-Generation Component of Rate
• Fail the test
o
No payment (retail rate savings)
• Double payment to LMP wholesale customers
o
o
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Already getting the marginal signal: LMP savings
Paying LMP on top of realized savings is double
payment
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Capacity Demand Response Program:
Issues
• PJM’s Load Management (LM) Program
o
MW equivalence issue
– Limited vs. Summer Only vs. Annual
• Should have Annual Only
• Current products distort capacity market price
– Need Subzonal Designation
• Subzonal dispatch, with target of nodal dispatch
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Capacity Demand Response Program:
Issues
• PJM’s Load Management (LM) Program
o
o
Emergency vs. Economic (not a scarcity trigger)
– Not offsetting emergency MW
Minimum Dispatch Price
– $1,000
– $2,700?
– No reason to pay minimum dispatch price
• No call on the economic capacity they are surrendering
• Should be paid: LMP – Generation Component of Rate
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PJM’s Demand Response: Goal
• Transition to a structure where customers do not
require payments to have an incentive to respond
to energy or capacity prices.
• Real time nodal price transparency
• Direct reduction in Capacity Obligations (save on
the margin)
• Still a role for third party aggregators/retailers to
provide options
o
o
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Active load response
Fixed price options
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Demand Response: Goal
• No need for programs if retail markets reflected
hourly wholesale prices and customers received
direct savings associated with reducing
consumption in response to prices.
• No need for a PJM Economic Load Response
Program
• No need for extensive measurement and
verification protocols.
• In the transition to that point, however, there is a
need for robust measurement and verification
techniques to ensure that transitional programs
incent the desired behavior.
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