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A Common Framework for Defining and Measuring Retail Demand Response Prepared for NAESB Meeting, February 12, 2009 Prepared by Bernie Neenan EPRI.

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Presentation on theme: "A Common Framework for Defining and Measuring Retail Demand Response Prepared for NAESB Meeting, February 12, 2009 Prepared by Bernie Neenan EPRI."— Presentation transcript:

1 A Common Framework for Defining and Measuring Retail Demand Response Prepared for NAESB Meeting, February 12, 2009 Prepared by Bernie Neenan EPRI

2 Copyright 2009 Electric Power Research Institute Contents I. Importance of Demand Response Performance Measurement II. DR Categorization III. Demand Response Meter and Validation (M&V) Methods IV Glossary These materials were assembled to support the NAESB retail demand response EM&V standards development process

3 I. Importance of Demand Response Performance Measurement

4 Copyright 2009 Electric Power Research Institute Demand Response Differs from Energy Efficiency Basic character –energy efficiency is the result of an investment that produces a a sustained, virtually irreversible change in the premises electricity consumption –demand response is a behavior driven by exigent circumstances Temporal character –energy efficiency measures produce impacts that may vary daily or seasonally, but in predictable ways –as long as the participant has a off-switch, the demand response behavior can change unexpectedly or be erratic over a day, month, season, years Event driven –an energy efficiency measure performs without any directive action –activating a demand response behavior involves the effective price reaches a threshold (which is customer-specific) or an event is declared (which depends on the realization of some specific system state)

5 Copyright 2009 Electric Power Research Institute Todays demand response IRC 2007 summary of ISO/RTO reported about 20 GW demand response in U.S. –Represent 80% of electric demand –Includes some partially-aligned utility program resources (CA, MISO states, SWPP) FERC 2006 census reported about 32 GW of demand response in the U.S., including –states not part of an ISO/RTO –municipal utilities EEI reported about 30 GW in 2000 using FERC Form I data ISO/RTO Council, Markets Committee. October 16, 2007. Harnessing the Power of Demand. Available from www.isorto.org.www.isorto.org Federal Energy Regulatory Commission. August 2005. Demand Response and Advanced Metering. A report to Congress. Staff Report, Docket No: AD-06-2-000 New survey from FERC just completed

6 Copyright 2009 Electric Power Research Institute ISO/RTO Demand Response Resources by Category Capacity – fulfills load serving entities installed capacity requirements Ancillary Services – ISO/RTO dispatchable operating reserves. Energy Price – curtailment offers bid into real-time and day- ahead energy markets Energy-Voluntary – ISO/RTO supplement operating reserves

7 Copyright 2009 Electric Power Research Institute ISO/RTP DR Resources as % System Peak ISO/RTO Council, Markets Committee. October 16, 2007. Harnessing the Power of Demand. Available from www.isorto.org.

8 Copyright 2009 Electric Power Research Institute Peak Capacity Potential - FERC

9 Copyright 2009 Electric Power Research Institute Demand response resource utilization - FERC

10 Copyright 2009 Electric Power Research Institute Peak Capacity Realization by Program Type

11 Copyright 2009 Electric Power Research Institute II. DR Categorization

12 Copyright 2009 Electric Power Research Institute Overview Demand response is a behavior; it is a change in electricity consumption induced by the change in the price the consumers pays for electricity, or by some other inducement. That change can be manifested as: –Reduced (increased) consumption confined to the period of the price –Reduced (increased) consumption during the period of the price change accompanied by increased (decreased consumption in the periods before and/or after that period Demand response plans are bundles of pricing and other features that fully specify what the consumers pays of electricity.

13 Copyright 2009 Electric Power Research Institute Demand Response Programs Viewed from the Wholesale Perspective – Load as a Resource Source: North American Electric Reliability Corporation (NERC). December 2007. Data Collection for Demand- Side Management for Quantifying its Influence on Reliability, Results and Recommendations. Princeton, NJ. NERC_DSMTF_Report_040308.pdf.

14 Copyright 2009 Electric Power Research Institute Demand response products from a wholesale market perspective Demand Response Plans Autonomous (Firm Service) Dispatchable (Conditional Service) Autonomous – load changes undertaken by consumers based on the prices or price schedule that determines what they pay for electricity Dispatchable – the ISO/RTO induces load changes to achieve specific objectives. Inducements include call-option participation payments with noncompliance penalties, and event performance payments

15 Copyright 2009 Electric Power Research Institute Demand Response Categorization – ISO/RTO perspective Demand Response Plans Dispatchable Capacity Emergency Energy Ancillary Services Autonomous TOU RTP CPP VPP Customized Hybrids Non-time varying

16 Copyright 2009 Electric Power Research Institute The 1st order distinction Autonomous – comprised of utiltiy rate tariffs and competitive retailer service offers. –ISO/RTO has no jurisdiction over how these rates are set and who pays them, and no access to any terms that are not public –but as part of its market management obligations is required to anticipate their impact –one of each may be applicable when the customer purchases unbundled commodity service from a competitive retailer and pays retail tariff rates for wires services. Dispatchable –they provide ISO/RTO the right to impose different price or availability condition on consumers that creates a settlement outside of or overrides their retail rate or service terms –Consumers can participatory directly with the ISO/RTO or through an aggregator –Aggregator terms of service can differ from those of participant-specific basis

17 Copyright 2009 Electric Power Research Institute Autonomous Time-of-use (TOU) - price schedule that has higher energy prices for a block of hours of the day corresponding to the use of higher cost supply Real-time pricing (RTP) – a new hourly price scheduled is issued for each day the day prior, corresponding to wholesale market prices, or streaming real- time price are issued that reflect the wholesale real-time market Variable Peak Pricing (VPP) –.off-peak prices are set in advance, and peak prices are posted daily based on the corresponding wholesale hourly prices Critical Peak Pricing (CPP) - A provisional price schedule (uniform or TOU) is applicable except when the retailer invokes its re-pricing option to raise the price in specified hours Basic premise – firm service, firm pricing. Consumers receive firm prices for energy and capacity from their retail provider(s) that apply to all consumption of kW and energy, respectively. ISO/RTO can not dispatch, but must anticipate these load changes ensure it meets the market demand. See the definitions and description in the next section Hybrids (CPP) – Numerous variations on these designs are possible, but they share the same fundamentals

18 Copyright 2009 Electric Power Research Institute Dispatchable Basic premise – firm service, conditional pricing. Consumers receive prices for energy and capacity from their retail provider that apply to all consumption of kW and energy, respectively, except when the ISO/RTP exercises its right to alter those prices in pre-determined ways. Structure – because demand response at the wholesale level is integrated into the market operation, demand response is treated as a resource alternative, and therefore designs must correspond to the wholesale market structure. That structure provides four point of integration that define the structure and provisions of the designs

19 Copyright 2009 Electric Power Research Institute Dispatchable designs Capacity - fulfills a load serving entitys (retailer) obligation as a market participant to secure capacity rights (kW) of qualified generation resources at a specified level. Commonly referred to as planned capacity requirement because it relates to securing capacity in excess of load obligations to take into account generation availability over a wide range of demand circumstances Energy – serves as an additional source of generation capability (kWh) to provide energy to meet market demand on a daily (day-ahead market) and hourly (real-time market) basis. Ancillary Services –generation capacity (called operating reserves), above what is needed to serve forecasted load on a daily basis, that is assigned a stand-by mode and can be activated to produce energy rapidly (from 30 to five minutes or less). Emergency – resources that the ISO holds in reserve for situations where operating reserve shortfall are forecast, and these resources are dispatched to reinforce system reliability

20 Copyright 2009 Electric Power Research Institute Wholesale Market Demand Response Program Categories Retail Pricing Plans CapacityEnergyReservesRegulationEmergency Traditional Utility Pricing – Non-time Differentiated Flat bill per Month None - no explicit correspondence intended Uniform Rate per kWh Volume-graduated (up or down) Time-Differentiated Pricing Time of Use (TOU) LowModerate None – No explicit correspondence intended in the design of current programs None Critical Peak Pricing: Day-Ahead HighLow/Moderate Variable Peak Pricing (VPP) Moderate to High None Real-Time Pricing: Day-Ahead (RTP-DA) Moderate to High Low/Moderate Peak-time Rebate (PTR) High Real-time Pricing: Streaming (RTP-S) Moderate to High Moderate/High Curtailable Loads: Participant dispatched HighLowHighNoneHigh Direct Load Control: externally dispatched High Mapping Retail Pricing Plans into RTO/ISO Wholesale Market Demand Response Programs

21 Copyright 2009 Electric Power Research Institute III. Demand Response Meter and Validation (M&V) Methods

22 Copyright 2009 Electric Power Research Institute Challenges from Tomorrows Demand Response Lots of new sources of DR Demand Response vs. Energy Efficiency Measurement EE is a sustained change in electricity consumption pattern EE impact varies predictably EE involves technology DR is a behavior driven by exigent circumstances DR is inherently variable DR involves people

23 Copyright 2009 Electric Power Research Institute Who is Responsible for, or Concerned about, Demand Response EM&V Protocols? Technology Firms CSPs FERC Utilities ISO/RTOs PSCs NAESB IRC NARUC State Agencies EPRI EVO LBNL North American Energy Standards Board National Association of Regulatory Utility Commissioners Curtailment Service Providers ISO/RTO Council Public Service Commissions Federal Energy Regulatory Commission Lawrence Berkeley National Laboratory Efficiency Valuation Organization

24 Copyright 2009 Electric Power Research Institute Who is responsible for or concerned about demand response EM&V protocols? ISO/RTOs through ISO/RTO Council and National Action Plan for Energy Efficiency Utilities with affiliated and non-affiliated programs State agencies –California PUC –California Energy Commission –New York State Energy Research and Development Authority NERCs Demand-side Management Task Force (DSMTF) NAESB initiative on standards for M&V protocols Curtailment Service Providers (CSPs) Competitive retailers FERC is developing as framework to assist program designers in determining which protocols are best suited for the a specified demand response pricing plan DR EM&V

25 Copyright 2009 Electric Power Research Institute NAESB Demand Response Standards Initiative NAESB set about to develop standards for measurement and versification, including standards for the CBL Current standards focus is more limited telemetry timeline for event definition glossary of terms The problem is setting a CBL standard is that whatever method is established, a large number of programs would be out of compliance compliance could be not be quickly achievable Customer Baseline Load (CBL) The level of load the participant would have used during an event, had that event not transpired It can take on one of several forms pre-determined exigent conditions device-specific DR EM&V

26 Copyright 2009 Electric Power Research Institute NERC Demand Response Protocols Development NERC is working with ISO/RTOs to define protocols for characterizing participation reporting event performance This could provide a comprehensive database linked to the demand response products they support capacity energy price energy emergency ancillary services However, the effort does not extend to common protocols for measuring performance Its not clear if and how these data will be made available supplant individual ISO/RTO FERC filings on demand response Supplement ISO/RTO filings and reporting DR EM&V

27 Copyright 2009 Electric Power Research Institute Framework for Establishing M&V Methods for Retail DR Basic M&V methods –FPL –Pre-specified CBL –Dynamic CBL –Device CBL –Distributed Generator CBL Additional Considerations –Weather adjustments –Aggregations Sampling –Tailored CBLs –After-the-fact adjustments This is meant to mutually exclusive and exhaustive at the fundamental level of functional measurement These are not necessarily applicable to all

28 Copyright 2009 Electric Power Research Institute EM&V for Demand Response – a Product- based Taxonomy Firm power level – the utility establishes for each customer an indicative coincident demand level and the participant elects how much of that indicative demand it will curtail during events. Pre-specified CBL – the utility establishes a CBL for every possible event period in advance and the participant elects by how much it will reduce its usage during an event, regardless of when it occurs. Deemed device response – the utility deems the level of reduction associated with a controlled device under any event circumstances Event-driven CBL – the CBL is established based on event conditions, and the participant elects by how much it will reduce its usage during an event, regardless of when it occurs Metered Output – the utility establishes a method for determining normal output of a designated on-site generation device, and the participant elects the level of output it will operate the device during events. CBL – customer baseline load FPL – firm power level Deemed – pre- determined by an established ICD – indicative coincident demand DR EM&V

29 Copyright 2009 Electric Power Research Institute Categorizing how Performance is Measured kW Time FPL ICD FPL Event Metere d Non - compliance Pre-Specified CBL kW Time CBL Event Metered Non - compliance Deemed Device Response kW Time Event Metered Deemed Response Implied Load Event-Driven CBL kW Time Event Metered Prior Days Non - compliance Event CBL kW Time Metered Output Event Non - compliance Metered Output Typical Output

30 Copyright 2009 Electric Power Research Institute EPRI Evaluation Framework Categories Firm Power Level Pre-specified CBL Device- Specific Dynamic CBL Net Metered Gen Output Identical NAESB is a Special Case Identical NAESBs sampling category could be used in conjunction with any of these protocols Proposed NAESB Categories Maximum base load Meter before/after Baseline Type 1 Baseline Type 2 Generator Output Identical Comparison of NAESB and EPRI Demand Response Measurement and Verification Categories Unique to retail RTP Conclusion; NAESB proposed standards for wholesale demand response M&V are consistent with those used for retail pricing plans

31 Copyright 2009 Electric Power Research Institute M&V Mapping of Existing Protocols TOURTPCPPVPPCapacityEnergy ANC AutonomousDispatchable FPL Pre-spec CBL Dynamic CBL Device CBL Gen CBL EPRI is mapping utility programs into this categorization scheme to verify and demonstrate its wide-spread applicability

32 Copyright 2009 Electric Power Research Institute IV. Glossary of Electricity Pricing Plans

33 Copyright 2009 Electric Power Research Institute Static Rate Structures Rate schedules establish rates for energy, demand and other charges for a specified period of time, generally a year or more The rate once posted applies to all consumption without restriction to the amount of that consumption, except as specified in the rate

34 Copyright 2009 Electric Power Research Institute Volume-based rates Uniform or Flat rate – a single price ($/kWh) applies to all metered consumption during each billing period. There may be an additional customer charge. Block rate – the rate ($/kWh) varies by the volume consumed during the billing period –Inclining block rate - one rate applies to the first block of kWhs, and a higher rate applies to additional kWhs –Declining Bloch rate - one rate applies to the first block of kWhs, and subsequent kWh pay a lower rate –Three or more blocks can be defined –The block structure may differ by season (inclining in summer declining in winter), or the block sizes can vary seasonally (e.g. the initial rate applies to the first 400 kWh in Summer, but to the first 600 kWh in winter) A

35 Copyright 2009 Electric Power Research Institute Fixed Price Service Levelized Bill – the total cost for service for the year is estimated and 1/12 is assessed each month –Requires an estimate of energy use by month –Tariff rates are applied to the estimates –A balancing account compares the monthly assessment to the bill associated with actual consumption and periodically the levelized assessment is adjusted (up or down) to eliminate the balance. Flat bill of Fixed Bill – a single amount ($/month) is assessed or monthly service, regardless of the level of measured energy and demand. The amount is set for each participant based on historical usage, current rates and a risk premium. Participants whose usage increases may find that the next contract includes a higher fix bill to reflect the growth. A similar adjustment may be may if usage declines. A

36 Copyright 2009 Electric Power Research Institute Demand-based rates Hours use (HU) rate – the aggregate metered kWh for the billing period is partitioned into volume blocks using the maximum metered demand and a declining block rate is applied to each block of energy. Typically two block of energy are constructed: –The first kWh block is defined as the first hhh Hours Use times the months measured maximum demand, where hhh is less than the number of hours in the billing period. –The second block is comprised of the total measured kWh less those allocated to the first block Assume; Measured Max kW = 15 Measured kWh = 8,000 Hours in the month = 720 Rate for first 400 HU = $.10/kWh Rate for next 320 HU = $.05/kWh The first 400 hours use of maximum demand is = 400 * 15 kW = 6,000 @ $.10 = $600 Next 320 hours use of maximum demand is = 8*,000 KWH – 6,000 kWH = 2,000 kWh @$.04 = $200 TOTAL BILL = $600 + $200 = $800 A

37 Copyright 2009 Electric Power Research Institute Demand-based rates Other demand provisions –Billing demand – the demand level used to bill in that month Coincident demand is the level of measured demand at a specified time (for example, between noon and 6:00 p.m. weekdays), which corresponds to when the system peak is established. Non-coincident demand is the highest level of demand measured any time in the month. –Ratcheted demand – the demand used in the month for billing is defined as the higher of that months measured maximum demand or the highest measured maximum demand in the previous m consecutive previous months, where m is the ratcheting factor –Volumetric Block demand- an initial rate applies to the first kkk units (kW) of measured demand and another rate to all additional measured kW Rate ($/kW) can be inclining or declining The structure can involve two or more blocks of demand, and include a ratchet –Contract demand- the consumer specified a level of demand to which applies a base demand charge ($/kWh), and for additional demand pays an incremental (higher usually) rate. These provision are common in supplemental and backup rates A

38 Copyright 2009 Electric Power Research Institute Dynamic Rate Structures

39 Copyright 2009 Electric Power Research Institute Time-of-Use (TOU) Energy consumption (kWh) is paid for according to a rate schedule: –That is posted periodically and applies for a specified time period, typically a year –Applies to all metered energy and demand –But, may be subject to periodic (monthly, for example) adjustments to reflect prevailing fuels costs and other expenditures The rate schedule differentiates the rate paid by: –Time of day – by dividing the day into two or more non-overlapping time periods with a separate price quoted for each period –Season – the definition of the daily time periods, the time period prices, or both vary over seasons. Demand charges may also be included a as part of the rate schedule –Coincident – the demon charge applies to the highest monthly peak demand during the peak period. –Non-coincident – the demon charge applies to the highest monthly peak demand measured during the month A

40 Copyright 2009 Electric Power Research Institute Real Time Pricing (RTP) The participants receives a new hourly rate schedule periodically and that rate applies to all measured usage in the specified hour of the day- –Day-ahead RTP – the hourly rate schedule for each day is delivered to the participants the previous afternoon. –Real-time RTP – the participants pays streaming rates that are determined each hour, in some cases only a few minutes before the hour and that rate may be posted to the participant during the hour to which it applies. Two different rate structures have been employed –One-part RTP – the hourly price posted applies to all metered usage in that hour. There may be other demand-type charges assessed to collect the cost of capacity and other delivery costs –Two-part RTP – the hourly rate applies only to variances in energy usage in that hour from a pre-specified customer baseline load (CBL). Load above the CBL is charged the hourly price and load below the CBL results in a credit based on the hourly rate. The CBL generally is constructed from historical data, but in some cases the participants can select what level of CBL it desires. A

41 Copyright 2009 Electric Power Research Institute Variable Peak Pricing (VPP) VPP is a cross between a TOU and an RTP rate. –A TOU structure is established to distinguish peak hours of the day from off-peak hours –A fixed rate applies to all off-peak energy consumed –The peak rate is posted for each day the previous afternoon as a single price for all peak energy consumed during the peak hours –Generally, the peak price is the average of the day-ahead RTP Prices posted for the peak hours –Possible variations include A different price could be posted for each hour of each day tied to the day-ahead RTP prices Setting the peak prices each hour using the posted real-time RTP prices A

42 Copyright 2009 Electric Power Research Institute Critical Peak Pricing (CPP) CPP is a conventional rate schedule with the provision that under specified conditions for a specifies period (called an event) the schedule rate can be adjusted upwards and that event rate applies to all energy consumption during that period. The base CPP rate can be –A uniform rate –A TOU rate schedule –A day-ahead RTP rate schedule The CPP event rate can be –Established in advance to be a specific level –Established at each event using one of several reestablished levels –Established at each event with only an upper limit on the level of the event rate Events are generally declared a few hours in advance, but in some cases event notice is posted 30 minutes of less in advance, and other the day before C

43 Copyright 2009 Electric Power Research Institute Critical Peak Pricing (CPP), cont Event declaration is usually limited to pre-specified conditions associated with –Capacity shortfalls that jeopardize system or local reliability –High wholesale or equivalent energy prices CPP revenue- neutrality means that the rate schedule is constructed and events are declared such that if a participant elects to not reduce its energy usage during events, the total amount it pays for electricity will not exceed what it would have paid under the base conventional rate structure. As result, those participants that do reduce usage during events pay less, by the product of the amount of energy reduced during events times the event rate, than they would have under the conventional rate structure Revenue neutrality can achieved by.reducing the schedule rate by an amount equal to the number of events that the rate schedule specified can be declared times the hours specified for each event times the event rate. C

44 Copyright 2009 Electric Power Research Institute Peak Time Rebate (PTR) or Peak Time Buyback (PTB) PTR a conventional rate schedule with the provision that under specified conditions for a specifies period (called an event) participants are paid the event rate for energy reductions. The base PTR rate can be –A uniform rate –A TOU rate schedule –A day-ahead RTP rate schedule Most of the other provisions of PTR are similar to those of CPP –Events are declared only under specified conditions –Event rates can be predetermined or set dynamically C

45 Copyright 2009 Electric Power Research Institute Direct Load Control (DLC) DLC involves the participant turning control of a device or devices at its premise (or the entire premise load) to the program operator who can under specified conditions curtail power to that device or those devices. Typically the DLC provision is appended to a conventional rate structure but the participant receives an inducement to allow control over part of its load, such as –A discount on the demand rate –A discount on the energy rate –A discount on both energy and demand rates –A up-front payment –A payment for the amount of energy curtailed during an event –Payment in kind, for example –An programmable thermostat that also serves as the control device A hot water heater that can be shut off remotely The inducement is applied to the amount of load the participant surrenders control of C

46 Copyright 2009 Electric Power Research Institute Direct Load Control (DLC) DLC involves the participant turning control of a device or devices at its premise (or the entire premise load) to the program operator who can under specified conditions curtail power to that device or those devices. Typically the DLC provision is appended to a conventional rate structure but the participant receives an inducement to allow control over part of its load, such as –A discount on the demand rate –A discount on the energy rate –A discount on both energy and demand rates –A up-front payment –A payment for the amount of energy curtailed during an event –Payment in kind, for example –An programmable thermostat that also serves as the control device A hot water heater that can be shut off remotely The inducement is applied to the amount of load the participant surrenders control of C

47 Copyright 2009 Electric Power Research Institute Curtailable Load Programs (CLP) CLPs obligate the participant to reduce a specified amount of usage (kW per hour) under specified conditions (events) Typically the CLP provision is appended to a conventional rate structure but the participant receives an inducement to allow control over part of its load, such as –A discount on the demand rate –A discount on the energy rate –A discount on both energy and demand rates –A up-front payment –A payment for the amount of energy curtailed during an event –Payment in kind, for example C

48 < 15 min Energy efficiency Price-Based Demand Response DA-RTP RTP/CPP TOU Years System planning Months Operational planning Day-ahead Scheduling In-day Dispatch < 15 min System management action Time scale RT balanced and regulated system Induced Demand Response ICAP KWH Bidding Emer DR DLC I/C Load Integrating DR into Electricity Markets

49 Copyright 2009 Electric Power Research Institute Dynamic Pricing – Its About Time 6:00 am 1:00 am 10:00 pm 12:00 pm 8:00 am 12:00 6:00 pm 2:00 pm x.x Indicates the relative price/kWh Higher price ratio 1.2 TOU 3 (7 hr) 1.75 Cover swing hours } } TOU 2S (7 hr) 2.0+ Maximize price ratio } TOU 2 (14 hr) 1.0 1.50 } }

50 Copyright 2009 Electric Power Research Institute Dynamic Pricing – Its About Time (2) TOU 2S (6) 2.0+ VPP (6) 1.1 to 10 Tie daily peak prices to market prices 1.0 RTP Tie all hourly prices to market prices CPP (6) 1.50 or 5.0 One peak price for normal days, and another for extreme days

51 Copyright 2009 Electric Power Research Institute Alternative Designs Evaluated VPP (6) 1.1 to 10 1.0 RTP CPP (6) 1.50 or 5.0 TOU 2 (16 hr) 1.0 1.50 1.2 TOU 3 (6 hr) 1.75 Current Default Block & Swing Dynamic Default Service Alternatives

52 Copyright 2009 Electric Power Research Institute Block and Swing Block and Swing Design Nominate kW (peak and off- peak) to fixed price block (TOP) Variance settled at the corresponding RTP swing price 1.0 RTP 1.2 TOU 3 1.75 Block Load Pricing + Swing Load Pricing


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