Utility Benefits of Demand Response Trevor Lauer DTE Energy Marketing Executive Conference Coeur d’Alene, Idaho

2 Why Does a Utility Value Demand Response? Virtual Power Plant Capacity Value Optionality Value Customer Satisfaction Technology Development and Deployment Demand Response A Utilities Perspective

3 Demand Response Direct Load Control vs. Passive Control Demand Response (DR) – An action taken to reduce load when: Planning tool to reduce capacity purchases Contingencies occur that threaten supply-demand balance Market conditions occur that raise supply costs Direct Load Control Utility has physical control to interrupt or reduce customer load Control device at customer premise Rate incentive to customer Examples include: Interruptible Air Conditioning Interruptible Water Heating Passive Load Control Customer controls load reduction based on notification from utility Rate incentive to customer Rate penalties for failing to curtail load Examples include: Industrial Interruptible Supply Primary Interruptible Supply Direct Load Control vs. Passive Load Control

4 Value of Demand Response to the Utility – A Virtual Power Plant Peak Day Generation Shortfall Analysis Hour

5 - Demand Response programs have a lower $ / KW cost than other options, such as Capacity Only payments or building a new Peaking CT, when levelized from 2009 – Demand Response lowers DTE’s capacity purchases and reserve margins. Value of Demand Response to the Utility – Low Cost Capacity

6 Value of Demand Response to the Utility – Optionality Value MISO Capacity Market < $75> $90 $ per MW Average Cost of Interruption

7 Value of Demand Response to the Utility – Improved Customer Satisfaction Overall customer satisfaction for Demand Response customers is greater than customers on standard tariffs. Data from 2007 Residential Customer Attitude Survey

8 Value of Demand Response to the Utility – New Technology Development (AMI) AMI Enabled Smart Meters Real Time Load Monitoring Customer Communication Vehicles In-Home Display Smart Appliances Thermostat Gas Meter Home Gateway Home Area Network

9 Value of Demand Response to the Utility – A Win – Win Situation Customer Wins Utility WinsDemand Response Value √√ Customers get the lowest cost alternative for capacity √√ Utilities gain a planning advantage for summer capacity purchases while maintaining system stability √√ ISO/RTO’s get a resource that can be counted on in the case of a system emergency √√ State Regulators get a well designed program that customers enroll in and are satisfied with