1. Distributed Generation/Demand Resources in ISO New England’s Wholesale Markets 2nd Annual Distributed Energy Conference - Building Resilient Communities Eric Winkler, Ph.D. Demand Resources Department ISO New England May 15, 2008

2. © 2008 ISO New England Inc. Demand Resources Department Presentation Outline Who is ISO New England What are Demand Resources (DR) What are ways that DR can be used How can DR participate in Capacity Markets

3. © 2008 ISO New England Inc. Demand Resources Department ISO New England ISO New England is a regional transmission organization (RTO), serving Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. Operation of New England's bulk electric power system. Development, oversight and fair administration of New England's wholesale electricity markets. Management of comprehensive bulk electric power system and wholesale markets' planning processes that address New England's electricity needs well into the future.

4. © 2008 ISO New England Inc. Demand Resources Department Demand Resource Types Demand Resource measures fit into one of two general categories: –Passive –Active Demand Resources are installed measures resulting in additional and verifiable reductions in end-use demand on the electricity network in New England. –Distributed Generation (passive) –Energy Efficiency (passive) –Load Management (passive/active) –Demand Response (active)

5. © 2008 ISO New England Inc. Demand Resources Department New England Capacity Outlook 2007-2015 Based on the ISO’s Expected Load Forecast, New England will need approximately 200 MW of new resources by 2009 and approximately 4,300 MW of new resources by 2015. Passive DR

6. © 2008 ISO New England Inc. Demand Resources Department New England Load Duration Curve (2006) Active DR

7. © 2008 ISO New England Inc. Demand Resources Department Forward Capacity Market Procure enough capacity to meet New England’s forecasted demand and reserve requirements three years into the future. Select a portfolio of Supply and Demand Resources through a competitive “descending-clock auction” process. –Pay the selected Supply and Demand Resources the market- clearing price subject to performance incentives and penalties. –Provide a long-term (up to 5 year) commitment to Supply and Demand Resources to encourage investment.

8. © 2008 ISO New England Inc. Demand Resources Department Highlights of Forward Capacity Auction The objective was to secure 32,305 MW for the six-state New England region in the 2010 to 2011 timeframe. 39,155 MW of qualified new and existing demand- and supply-side resources competed. The floor price for this auction of $4.50/kW-month was reached in the eighth round, with a remaining excess supply of 2,047 MW. ($1.85B/yr) 2,554 MW of DR cleared in the auction, 70% active 30% passive (<2% DG).

9. © 2008 ISO New England Inc. Demand Resources Department www.iso-ne.com Eric Winkler, Ph.D. ewinkler@iso-ne.com