Presentation on theme: "National Grids Involvement in New Englands Forward Capacity Market Helping to Bring Demand Resources into the Supply Mix Tim Roughan Director, Distributed."— Presentation transcript:
National Grids Involvement in New Englands Forward Capacity Market Helping to Bring Demand Resources into the Supply Mix Tim Roughan Director, Distributed Resources National Grid
Agenda 1. National Grid at a glance 2. The Paradigm shift from demand response programs to wholesale markets 3. National Grids Demand Resource and Forward Capacity Market strategies 4. How do Forward Capacity Market rules affect customers and demand response providers? 5. Whats next?
National Grid at a glance One of the largest investor-owned utilities in the world focused on electric and gas transmission and distribution Headquartered in London, UK $8.1 billion in revenues, fiscal year 2007 London Stock Exchange symbol – NG, NYSE – NGG ~50% UK/US, ~50% Gas/Electric U.S. Business 4.4 million electricity customers in NE and NY, Including 1.1 million LIPA customers. 3.4 million gas customers in NY and NE Approximately 18,000 U.S. employees
The paradigm shift from Demand Response Programs to Wholesale Markets A Forward Capacity Market (FCM) is a natural evolution for Demand Resources such as Energy Efficiency, DLC, and Demand Response assets, allowing them to compete directly with supply resources Capacity and load flexibility has become a commodity with a well defined obligation and value in the marketplace DR Program participants and curtailment services providers need to consider the concept of commodity risk and how it can fit into their business model The shift from Programs to Markets creates significantly longer lead times, commitment periods and performance hours for demand resources The various value streams demand resources create need to be coordinated to achieve their full potential What role should the energy delivery company play in the wholesale capacity and energy markets?
Demand Resource Strategy at National Grid Fully support the inclusion of demand resources in the FCM Active participant on ISO-NE committees and working groups Committed to help make the FCM successful and maximize demand resource participation in it Register our Energy Efficiency Programs in the FCM Register several former non-aggregated demand response program participants in the FCM to help ensure reliability during critical capacity deficiencies Foster stronger linkages between wholesale and retail markets Provide needed Metering and related Services
Experience enrolling Energy Efficiency Programs in the ISO-NE FCM Timeline and Results of First Forward Capacity Auction Show of Interest (SOI) due 2/2007, had to accurately estimate savings through 5/2010 (FCA1 was for capacity to be delivered 6/2010-5/2011) Qualifying Package Due 6/ Metering & Verification Plans, 33 supporting documents, 100MB in 55 electronic files (document >500 EE measures) Received ISO-NE Qualification in 10/2007 Auction held in 2/2008 National Grid cleared 102 MW out of the 32,000+ MW total procurement Expected FCM Revenue for year ending 5/31/2011 is $6.4 million This revenue, net of qualification and other FCM costs, will be reinvested in our efficiency programs and will supplement the existing SBC funding source per regulation Overall effort needed to comply with market rules is significant and compounded by the evolving nature of the New England FCM FCA #2 activities concurrent (SOI due 11/2007) – additional 30 MW Outstanding issues and opportunities Alignment of states M&V requirements with ISO-NE requirements Importance of program stability to allow for accurate forecasting Participating in debate of and keeping abreast of Market Rule Changes Some very large customers want to register their own capacity savings from efficiency projects co-funded by SBC funds.
Demand Response Strategy Coordinate DR efforts as a subset of our overall 20 year award winning DSM effort Leverage energy efficiency program infrastructure to promote and implement DR strategies Perform demand response audits to identify energy efficiency, load management opportunities and develop DR action plans, including auto-DR projects Continue to utilize the ISO-NE Real Time DR for customer and system benefits Price Response Program as a tool to engage customers with the concept of becoming flexible with less critical loads for many hours per year Over 450 customers are enrolled (>10% of customers >200 KW) > $1 million of account credits in past 12 months ISO-NE Real Time (emergency) DR as a regional reliability tool Help customers with significant interruptible loads prepare for the Forward Capacity Market and earn transitional FCM credits now Transition some non-aggregated resources into the FCM Anticipated payments are $300,000 from FCA1 and $500,000 est. from FCA2 (To be shared with participating customers) National Grid currently minimizing commodity risk and focusing on emergency generation resources Many customers will be better off joining an aggregation with another CSP
Demand Response Strategy (cont.) Refine and continue to utilize local Targeted Demand Response (TDR) to enhance local reliability where load growth has outpaced T&D capacity additions Goal is to contract for enough capacity to reduce targeted feeder/transformer peak load by 15% Potentially standardize TDR and integrate it with the FCM resources, offering it as an option to all customers to provide a tool for loading and contingency events. Provide metering and other tools to help customers participate in capacity and energy markets Near real time under the glass metering systems Making near real time load data available to customers Implement new technologies to facilitate DR for all customer types Integration of energy management systems with real time load data and event notification Dispatchable energy storage Smart displays and load curtailment hardware Research, and ultimately seek regulatory approval to deploy, Direct Load Control systems to enable small customers respond to price and/or supply capacity
Implications of FCM Rules for DR Providers Bidding new resources into the FCM involves financial assurance and performance risks, and it also involves significant up-front costs There is a need for participation from the investment community to make it happen Different enrolling providers are approaching risk in different ways, and the various strategies are evolving rapidly. There is significant revenue uncertainty Financial Assurance, Show of Interest, and M & V plans due prior to auction The quantity of new resources to be procured will be variable There is potential for a pro-rating of the value for Emergency Gen and other resources Providers need to estimate enrolled capacity by load zone ~3 years in advance Must deal with rules that also work for traditional generation
Implications of FCM Rules for Customers and DR Providers Long lead times needed for Show of Interest, Qualification Package, and M & V Plans Performance in the FCM will be calculated differently than it was in previous demand response programs Objective is to keep demand resources capacity obligations equivalent to supply resources obligations Average performance over all hours vs. best interval performance Performance hours significantly increased Over performers may share additional payments if there are under performers Allowing energy efficiency to participate will create a new funding mechanism that will enable new, larger, and more comprehensive efforts
Implications of FCM Rules on Customers Longer term contracts will be the norm Customers will likely either have performance penalties or reduced credits to handle performance risk Load shedding demand resources will need to shed load for significantly more hours than in past programs Automated DR will become mainstream, as will leveraging these systems to capitalize on wholesale hourly energy markets
Questions and Discussion For additional questions contact Tim Roughan Director, Distributed Resources (781)