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ISO New England/NEPOOL Demand Response Working Group Meeting

ISO New England/NEPOOL Demand Response Working Group Meeting. Demand Response Department ISO New England, Inc. Holyoke, Massachusetts January 7, 2004. Agenda. Introductions and Update on DR Business Activities 9:00 – 9:10 Day Ahead Demand Response Program Design Concepts 9:10 – 9:40

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ISO New England/NEPOOL Demand Response Working Group Meeting

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  1. ISO New England/NEPOOLDemand Response Working Group Meeting Demand Response Department ISO New England, Inc. Holyoke, Massachusetts January 7, 2004

  2. Agenda • Introductions and Update on DR Business Activities 9:00 – 9:10 • Day Ahead Demand Response Program Design Concepts 9:10 – 9:40 • Performance Evaluation Recommendations 9:40 – 10:25 • Market Impacts / Benefit-Cost Analysis • Program Recommendations - Work Plan • 15 minute interval • Semi Annual Report submitted to FERC 12/31/2003 10:40 – 11:25 • Data Reporting 11:25 – 11:55 • Wrap up and discuss next steps 11:55 – 12:00

  3. IMPORTANT ANNOUNCEMENT • SWCT Gap RFP • Deadline for submission of proposals was extended to January 21, 2004, 3:00 p.m. EST

  4. Demand Response(as of December 31, 2003)

  5. Demand Response(as of December 31, 2003) * Includes former Type 2 - Interruptible Loads ** SWCT assets are included in CT values (SNEW 7 was in 2-Hour, now retired)

  6. Comparison 2002 vs. 2003 Enrollment (12/31/2003) * 22.8 MW in SWCT retired from RT 2-Hour to become a generator

  7. Market Impacts of 2003 Demand Response Program Comparison of Benefits and Costs From RLW Analytics/Neenan Associates Report

  8. Demand Response Program Impacts • What was the improvement in reserves due to the load curtailments? • What is the change in the LOLP that is attributable to the use of demand response resources? • What was the improvement in terms of the expected reduction in the amount of un-served energy due to the load curtailments? • What is the magnitude of a potential outage? • How do consumers value such improvements in reliability? • What is the value of lost load?

  9. Reliability Benefits – VOLL = $2.50/kWh

  10. Reliability Benefits – VOLL = $5.00/kWh

  11. Conclusions – Reliability Benefits/Costs • “Given that the actions taken by ISO-NE system operators during OP4 indicate shrinking levels of 30- and 10-minute reserves in southwestern Connecticut, it is likely that the 80-100 MW of load reduction provided by demand response participants resulted in a reduction of expected unserved energy commensurate with the upper range of the system state variables (the elements of the valuation formula) in the table, and it may have been substantially higher. Thus, even a conservative approach to estimating the B/C concludes that the program provided positive net benefits…. ”

  12. Price Response Program Impacts – Direct • Direct Benefits: • Load curtailments provided by the price program produce bill savings to purchasers of energy in the real-time market. • These savings are defined by the change in LMP times the load purchased in the real-time market during the event.

  13. Slide courtesy of:

  14. Relationship Between Load and LMP Methodology: Estimate the statistical relationship between load and LMP. This supply relationship, which reflects the bid curves that are used hourly to set LMP, is then used to simulate the impact of load curtailments on LMP. Supply Flexibility: The measure of the steepness of the supply curve, which is defined as the percentage change in LMP resulting from a one percent change in the load served.

  15. Price Response Program Impacts – Indirect • Indirect Benefits: • Load curtailments during high price hours reduce the overall volatility of market price. • As the volatility declines, so do the risk premiums that suppliers can charge for hedged supplies. • Methodology: Calculate the affect of the real-time price changes on the monthly average price. The product of the reduction in the average price times the amount of load purchased through bilateral contracts represent a first-order estimate of those savings.

  16. Price Program Benefits to Costs

  17. Conclusions – Price Program Benefits/Costs • “Overall, the program benefits realized by buyers of electricity (and eventually by consumers) exceeded the payments made by ISO-NE to participants by 32%. The relatively low ratio reflects system conditions; prices were generally stable throughout the year. Moreover, prices were relatively low even during events; only about one-third of event hours were above $.10/kWh…. Consequently, customers curtailed in many hours when prices were relatively low, and the market price impacts were therefore small.”

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