1. National Town Meeting on Demand Response Session A – Estimate It, Measure It, Verify It Demand Response Coordinating Committee (DRCC) Renaissance Washington Hotel Washington, DC June 2-3, 2008 By:Daniel Violette, Ph.D. Summit Blue Consulting Boulder, Colorado 80302 E-mail: dviolette@summitblue.com 1

2. Recent Trends in DR Six trends should increase the dispatchability and reliability of DR programs – four are discussed here: 1.Increased automation of a customers’ load response. 2.Increased focus on firm reductions in DR programs. 3.More accurate estimation of delivered load impacts. 4.Challenges in estimating DR Potential in markets. 5.Diversification in program participation and management of large customer impacts. 6.Target marketing of DR to provide higher benefits. Situation Assessment: –Currently facing increases in plant capital costs and fuel prices -- along with needed expenditures on infrastructure (T&D as well as fuels transportation). –May mean that the traditional approach to meeting future growth in electricity will not work -- Unlike the past, the industry may not be able to just build its way out of future supply issues. –An increased ability for the demand-side of the market to respond to price and resource scarcity will help ensure overall market efficiency. 2

3. Trend 1: Increased Automation of DR Residential loads are already largely automated through DLC programs. C&I field information: –The fraction of load that is “automatically controlled” is increasing. –Approximately 50% of loads have been automated in recent years with 70% of new loads being automated. –C&I auto-DR rely on buildings that have EMCS that can be used to control space conditioning, lighting, and other end-uses. –Often the load sheds are designed to not impact building or facility comfort or operations. –Need to be able to appropriately value short-response DR, i.e. 10- minute availability, versus longer notice DR. Implication – Synergies between DR and EE programs that address the EMSC system such as C&I new construction, retro-commissioning, or major retrofit programs can produce load-shed capabilities. 3

4. Trend 2: Growing Focus on Firm Reductions Increased emphasis on DR that provides firm capacity to qualify DR for capacity deferrals and T&D deferrals. –Can involve financial penalties (but in new ways). –Not being paid for partial reductions that fall under the target. –Contributions may be derated due to underperformance. –Some customers may be dropped from programs if there is not a good fit. Operational protocols that call for testing of DR program response to accredit MW in a DR program. Aggregators seeking to provide highest value DR and are using approaches that make DR a firm resource. Managing the risk of under performance of DR is improving with more aggregators signing firm contracts. 4

5. Trend 3: Accurately Estimating Impacts Calculating overall program impacts and settlements for customers participating in DR programs is becoming more sophisticated. This includes the use of different baseline options: –Different baselines for different customer segments within a program. –Increasing recognition that a single method for estimating impacts will not apply equally well to all customers. –Programs are already taking this into account. Better baseline methods are being used that are not limited to the traditional “10-day before data.” –Data from both before and after an event are being used, as well as data from the entire season before an event. Planners may want the best program-wide, locationally-based estimates of impacts as possible. –Regression analysis on full season of load data may provide better program impact estimates – but, this method generally will not be appropriate for customer settlements as part of a DR program design. 5

6. Note on Estimating DR Potential Estimating the potential for energy efficiency (EE) is a mainstream planning activity for EE program design. EE and DR pose different challenges for potential estimation: –The interpretation and calculation of certain benefit-cost tests in potential studies have different meanings for EE and DR. –The standard EE approach is to estimated Technical Potential, Economic Potential and Market (or Achievable) Potential. –This can work for DR, but economic potential can be more difficult to assess: ♦ A customer’s DR potential is often determined by their operational flexibility and behavioral factors whose economics are hard to quantify. ♦ Unlike EE, DR cannot generally assume that service levels are constant. ♦ Estimating the value of lost loads to a customer can pose challenges. –A number of DR potential studies have estimated technical potential by “customer type” and then move directly to achievable potential based on observed market data for each customer type. Discussion 6