Demand Response, Planning, and Regional Markets

1. Demand Response, Planning, and Regional Markets NASUCA Conference June 30, 2009 Joe Rosenthal, CT OCC

2. Types of Demand Response • Direct Load Control (system turns down AC, lights, etc., without involvement of retail customer) • Emergency Generation • Curtailment (e.g. customer manually turns a machine off)

3. Why Seek Demand Response? • Because of the potential cost savings and environmental benefits. • Doesn’t generally rely on an expensive hard asset. • Doesn’t use fuel.

4. Promote real-time pricing and/or direct load control programs for customers, allow them to keep the resulting energy savings, wait a while, then reduce forecasts of needs, or Allow DR participation as a capacity resource. Ways to Account for/Promote Demand Response

5. DR as Capacity Resource, Part I • If you’re getting paid like a generator, you had better be able to act like one: • Respond when called a reasonable number of times per year, or pay the price. • Your environmental permit limitations (emergency generators) or business deadlines (curtailment) are not our problem.

6. DR as Capacity Resource, Part II • Key question: what is the baseline usage – can’t generally judge the reduction without a baseline. • In the absence of an accurate baseline figure, the public may be buying air.

7. Planning, IRPs and DR • Even in restructured states like Connecticut, there has been a return to some electricity resource planning. • It is perfectly legitimate to incorporate some demand response into electricity planning, for cost and environmental reasons, however...

8. For Planning, Note that DR May Have a Short Duration • If you plan for a power plant, you have a power plant for 40-60 years. • A direct load control unit in, say, a supermarket chain may last a good long time (10 years?) • Other forms of DR? (Anybody’s guess)

9. Must Use Current Data to Estimate T&D Savings • If it is claimed that DR will save $X in T&D costs, make sure that the data is fresh. Otherwise, the transmission line you are allegedly avoiding may be in active construction.

10. Try to Coordinate with ISO • You (a State) may think that DR can meet a given % need and avoid a transmission line or power plant, but your ISO may disagree. • Who wins? Probably ISO, in which case you may pay for both. • Coordinate up front if possible.

11. Need Time-Based Rates (for Select Customers) to Maximize DR • Larger customers in particular will likely respond to price signals. • Questions: How does this fit in with retail supply offerings? If the State insists that certain customers be given price signals, should a retail supplier be allowed to smooth those signals out? If so, does that impact planning and potentially strand new metering infrastructure?

12. An Aside on the “Overpayment Problem” for DR in Energy Markets • For planning purposes, note that it is generally considered that DR will be overpaid if it is paid the same energy clearing price as a generator; • The problem arises from the fact that the (customer savings from not using X kwh) + (DR program payment for not using X kwh) will be greater than the clearing price (probably about twice as much). • This could skew planning and resource development if not dealt with appropriately.

13. The Ultimate Long-Term Question In the long-run, will the non-use of power, such as DR, be considered, for planning purposes: • A power resource like generation or transmission resources, or • An activity that reduces a customer’s usage and bill and reduces the overall usage forecast? One may be tempted to say “both,” but caution is warranted for the reasons described above.