Technical devices, economic signals and customer attitude impact on Demand Response

1. Technical devices, economic signals and customer attitude impact on Demand Response October 15, 2012 Colette Lewiner

2. Status on the EU energy efficiency 2020 objectives • June 13, 2012 new Energy Efficiency Directive: • 17% decrease of EU’s primary energy consumption by 2020 instead of 20% • Requirement for Utilities to make energy savings equivalent to 1.5% of their annual sales each year from 2014 to 2020 EU-27 primary energy consumption Source: BP statistical report 2012, European Environment Agency, Eur’Observer – Capgemini analysis, EEMO14

3. In countries as France and Japan, peak shaving is a key issue during extreme weather conditions • The French electricity peak load reached 102,100 MW at 19:00 • Nuclear plants’ availability largely contributed: 59,165 MW (55 reactors out of the 58 were in operation) • France imported 7,845 MW from all its neighboring countries (max 9,000 MW) • On EPEX Spot, day-ahead electricity prices jumped to €1,938/MWh • RTE activated it EcoWattdemand response program in Brittany and PACA regions which resulted in a consumption reduction of respectively 2% and 3% • EnergyPool curtailed 20 MW of industrial consumption which have been used for Brittany region • In 2011, net new generation capacities have been added: • 850 MW of CCGT • 1,250 MW of renewable energies • 450 MW of fossil-fired plant have been decommissioned • New housing heatinggas is regaining market share: close to 60% compared to less than 40% for electricity in 2011 (2008 electrical heating market share was 70%). This has decreased the potential electricity demand at peak hours by 450 MW • Buttariff-related demand response capacities have decreased from 6,000 MW in 2004 to 3,000 MW in 2011 Generation mix on February 8, 2012 at 19:00 Source: RTE • A holistic approach to manage the peak load needs to be implemented. It should encompass: • Generation capacities development (including incentives for peak power) • Demand response: tariffs or other types of demand response programs • Incentives for energy savings • Grids reinforcement

4. Pilot programs results on peak shaving • Several means exist for peak shaving and energy savings, that can be combined or not: • Dynamic tariffs (that should be further developed with the mass roll-out of smart meters) • Automation such as smart thermostat, smart appliances, in-home displays or web-based consumer portal • Demand management programs such as customers alerts, social networks communication or feedbacks through bills, web, SMS, smart phones % peak shaving observed in various pilots worldwide % peak shaving Range of peak shaving Source: Capgemini Consulting Peak shaving: the use of displays helps but the customers’ behavior is key

5. Demand response potential for EU-27 by 2020 • In Capgemini Consulting’s Demand Response (DR) study*, the potential of peak shaving and energy savings is modeled on the basis of a baseline scenario: • GDPgrowth 2010-20: 1.8% in average • CAGR electricity consumption 2010-20: 0.7% • Some existing energy efficiency programs such as Grenelle de l’Environnement or White Certificates • Assumptions are made on: • Regulation (norms and standards, energy efficiency objectives, tariffs and incentive policies) • Market design (possibility to monetize DR on wholesale markets, contracts optimization, capacity markets) • Smart meters penetration and functionalities (for the households segment) • And typical DR offerings are modeled with hypothesis on their adoption by customers Demand Response study 2012 results snapshot Forecast scenario (dark bars) Dynamic scenario (light bars) Dynamic scenario % peak shaving % energy saving CO2 emissions saving (in Mt) 14% 2% 7.6 • 1 Normative hypothesis: 1 kWh saves 700g CO2 (average European value considering avoided peak capacity is mainly gas-fired plants) • 2 Expressed in equivalent of avoided consumption of large size cities (2 mio inhabitants and 150,000 commercials, average consumption of 8.2 TWh/year) • 3 Expressed in equivalent of avoided construction of power plants (500 MW) Source: Capgemini Consulting Our study shows that peak shaving potential is significant while electricity savings potential is more limited • *Demand Response study 2012 - Capgemini Consulting, VaasaETT and Enerdata

6. Clients marketing and segmentation is key for successful Demand Response • EXAMPLES OF SEGMENTATION CRITERIA • Sociological (behaviors…) • Psychological (awareness to technology …) • Economical (power purchase, energy bill …) • Technical (type of heating system, of housing, …) Customers awareness-raising is key for a sustained customers’ behaviors change

7. 80% of electricity customers in EU Member States should have smart meters by 2020. All countries required to perform cost benefit analysis by September 2012 In September 2011, France has decided the mass roll out of 35 million meters from 2013 to 2020 but the starting date will be delayed. 4 technologies experimented for gas smart meters (18,500 meters) in France. Final mass roll-out decision should be taken in 2013 Smart meters could be a Demand Response enabler Electricity and gas smart metering projects in Europe Mass roll-out finalized Mass roll-out by 2020 well-engaged Mass roll-out probably not completed by 2020 FI NO SE EE LV DK IE LT UK NL PL DE BE LU CZ SK FR AT CH HU SI RO ES IT In Europe the Value Chain unbundling regulation, impacts negatively the return on smart meters investment and slows down decisions BG PT GR Source: ESMA, GEODE – Capgemini analysis, EEMO12, updated March 2012

8. Time-of-Use tariffs are important DR triggers: Ontario example Lessons learned Regulated Time-of-Use tariffs (c$/kWh) • 2.4% peak shaving (on a 6-hour period, from 11:00 until 17:00) • 5.7% peak shifting (on a 3 or 4-hour period) • Off-peak consumption shifting hardly quantifiable • 6% consumption reduction • Some peak consumption reductions haven’t been reported (notably lighting) during off-peak periods • This dynamic tariff has an indirect effect on consumption patterns • 3% savings on bills under the dynamic tariff (compared with the standard tariff) • 75% customers have made bills savings SUMMER WINTER WEEKEND HOLIDAYS The dynamic tariff is promoted as a tool allowing customers to analyze their consumption and control their bills This program resulted in peak shaving as well as peak shifting

9. Visual tariff signal has also a significant impact on DR: Energy Orb example Many technical devices exist to trigger consumption reduction. They are often expensive and their profitability remains to be established. Customers are reluctant to invest in these equipments and services and consumption reductions are not always fitting their expectations “Energy Orb” from PG&E (Pacific Gas and Electricity) is a visual indications to clients involved in energy demand management programs The device alerts business customers before and during an energy consumption reduction period