1 / 15

EnerNOC Response to Proposed DALR Program Changes January 23, 2008

EnerNOC Response to Proposed DALR Program Changes January 23, 2008. Agenda. Summary of proposed program changes Effect of rule change on DALR participation Problem with proposed changes Discussion of changes—what are the options? Approach #1: Raise minimum offer price

howie
Download Presentation

EnerNOC Response to Proposed DALR Program Changes January 23, 2008

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. EnerNOC Response to Proposed DALR Program ChangesJanuary 23, 2008

  2. Agenda • Summary of proposed program changes • Effect of rule change on DALR participation • Problem with proposed changes • Discussion of changes—what are the options? • Approach #1: Raise minimum offer price • Approach #2: Change CB calculation • Approach #3: Limit frequency of cleared DALR offers • EnerNOC-proposed solution

  3. DALR Program Changes - Summary • ISO New England will present a report on January 23, 2008 illustrating that Market Participants can engage in strategic behavior under the current structure of the DALR program • The report shows that participants can earn inappropriate payments by establishing and locking in a high Customer Baseline (CB) • Since the CB is locked over successive clearing days, ISO-NE proposes to index the minimum offer price to the Forward Reserve Fuel Index (FRFI) at a pre-determined heat rate; in January 2008, this new offer price would equal $107/MWh, and would limit the number of consecutive days a resource can clear

  4. Effect of Proposed Program Changes • Based on the current program offer minimum of $50/MWh, in 2007 Market Participants would have cleared in the Day-Ahead market for 2,786 out of 2,805 program hours (99.3% of program hours) • Using historical FRFI values to back-cast the revised minimum offer price, in 2007 Market Participants would have cleared in the Day-Ahead market for 312 out of 2,805 program hours (11.1% of program hours)

  5. Problems with Proposed Program Changes • Since the ISO has not integrated the DALR into the clearing of the day-ahead energy market, DALR load reductions only affect real-time prices • DALR resources reducing consumption in real time prevent the need for dispatch of a higher-cost unit, effectively lowering LMP and reducing overall system cost • By creating a higher threshold for market entry, the ISO is reducing the number of hours during which demand resources are able to exert downward pressure on high energy prices • Resources that have the ability to substantially affect real-time energy prices will not be able to do so in many hours • Procedurally, the proposed improvements to the DALR have not been vetted through the traditional DRWG process

  6. Discussion of Potential Program Changes • Objective: To eliminate potential for strategic behavior while maximizing the value that DALR resources can provide to the market • If the underlying problem is related to a locked CB, then possible solutions are: • Approach #1: Raise minimum offer price, precluding resources from entering market every day • Approach #2: Change CB calculation to force inclusion of recent data after a lengthy locked period (e.g., use 60 most recent days of data with minimum of 30 days data, including program days as necessary) • Approach #3: Limit frequency with which resources can clear in the DALR (e.g., x days per week/month) • Proposal: Use the ISO’s approach, but change threshold heat rate to 10.85 MMBTU/MWh

  7. Approach #1: Raising Minimum Offer Price • Changing the proposed heat rate has a substantial impact on resource clearing frequency • The ISO proposed heat rate of 12.90 MMBTU/MWh significantly limits hours that DALR resources can participate in market

  8. Approach #1: Raising Minimum Offer Price • The impact of a DALR resource (reduction of real-time price) is divorced from the terms of such offer (day-ahead price), but: • Real-time prices vary widely from the corresponding day-ahead price; limiting hours of participation precludes DALR resources from impacting real-time prices

  9. Approach #1: Raising Minimum Offer Price • Question: What is the real-time impact of the DALR program? • Using 2007 ISO-NE control area day-ahead demand/price data and fuel index, calculated implied heat rate as a function of demand • Using results of regression, estimated impact of 1 MW reduction on LMP at various dispatch heat rates • Answer: Real-time demand reductions can impact marginal price at any time

  10. Approach #1: Raising Minimum Offer Price • Question: What is the value of the program to the market? • Using analysis from previous slide, estimated value of reductions on net cost to serve real-time load (~10% according to Annual Market Report) • Note: Assumed that DALR resource was able to respond 24x7 • Answer: Real-time demand reductions substantially reduce the cost to serve load

  11. Approach #1: Raising Minimum Offer Price • Revised proposal: heat rate threshold that limits clearing frequency (allowing baseline to reflect contemporary data), but also allows DALR resources to frequently impact high real-time prices • In 2007, heat rate of 10.85 MMBTU/MWh allows DALR resources to exert downward pressure on 81.5% of real-time prices greater than ISO-proposed energy price • Implies offer clears 27.0% of hours and 49.4% of days • Limits successive clearing (avg. 5.04, max 22 days vs. avg. 3.21, max 17 days under ISO proposal)

  12. Approach #1: Raising Minimum Offer Price • Pros: • Allows DR to continue to exert downward pressure on RT prices • Requires minimal changes to ISO software • Rethinking actual calculation used to determine the minimum offer price will preserve greater program value • Cons: • Fewer participation hours means fewer reductions for the grid • Puts a value on DR, i.e., DR is only a valuable resource at high price levels

  13. Approaches #2 and #3 • Approach #2: Alter CBL algorithm to force inclusion of recent data • For example, baseline incorporates at least 30 of 60 trailing days worth of data, reflecting DALR days as necessary • Do not lock in baselines for DALR cleared days • Approach #3: Impose administrative limit on resource clearing frequency (e.g., x days per week/month)

  14. Pros and Cons of Approaches #2 and #3 • Pros: • If the underlying problem is related to a locked CB, then changing CB or administratively limiting participation more directly address issue • Also addresses locked CB during successive clearing days • Cons: • Altering baseline/offer-clearing algorithm requires significant changes to IBCS-OS and ISO systems • Incorporating event-day data contradicts the definition of the baseline, i.e. the baseline represents what an end-user would haveconsumed if not for DR

  15. EnerNOC Proposed Solution - Summary • EnerNOC believes that Approach #1, revised with a threshold heat rate of 10.85 MMBTU/MWh, best balances the pros and cons of changes to the DALR program for the short term • ISO-NE version addresses potential for strategic behavior, but precludes demand resources from providing system benefit through downward pressure on real-time prices • The revised Approach #1 achieves both parts of objective • In the long term, either Approach #2 or #3 should be considered as a potential solution

More Related