RELIABILITY BENEFITS OF PRICE RESPONSIVE DEMAND ERIC HIRST
RELIABILITY BENEFITS OF PRICE -RESPONSIVE DEMAND ERIC HIRST Consultant in Electric-Industry Restructuring Oak Ridge, TN Eric@EHirst. com www. EHirst. com April 2002
WHAT IS BULK-POWER RELIABILITY? n NERC: “Degree to which performance of … system results in power being delivered to customers within accepted standards and in the amount desired. ” n Adequacy (planning): enough generation and transmission resources installed to meet projected needs plus reserves for contingencies n Security (operations): system will remain intact even after sudden disturbances (e. g. , lightning or generator outage) n Adequacy and security are both substitutes and complements 2
TWO UNIQUE FEATURES OF BULK-POWER SYSTEMS n Near-real-time balancing of generation and load (electricity flows at speed of light) n Passive nature of transmission (few valves or booster pumps) Generators (and dispatchable load) primary resource to maintain reliability in real time 3
CAN WE RELY ON SPOT PRICES TO BALANCE GENERATION AND DEMAND? 4
CURRENT POLICIES LIMIT DEMAND PARTICIPATION n NERC Policy 1 limits spinning reserve to “unloaded generation that is synchronized …” – At least 50% of contingency reserves must be spinning n But NERC Disturbance Control Standard calls only for 15 -minute recovery with no intermediate response n Demand exclusion affects reliability and economic efficiency – Limits amount of reliability resources – Raises cost to maintain reliability n Proposed Policy 1 changes are technology neutral 5
DEMAND EXCLUDED FROM LUCRATIVE RESERVE MARKET 6
MUNICIPAL WATER SYSTEMS COULD PROVIDE SPINNING RESERVE n Water treatment/pumping = 3 - 4% of U. S. electric use n Storage in pipelines and tanks makes spinning reserve feasible – could provide up to 50% of U. S. spin needs n Adjustable speed drives would – enable provision of spin – improve efficiency of water operations – eliminate congestion concerns – improve local voltage regulation n Other customers with storage also good candidates 7
RETAIL LOADS SHOULD BE ABLE TO PARTICIPATE IN ALL WHOLESALE MARKETS n Day-ahead energy and congestion management n Day-ahead ancillary services – Spinning reserves – Nonspinning reserves – Replacement reserves Loads should be able to set prices, not just be price takers! n Real-time (intrahour) energy and congestion management n Involuntary load interruptions 8
DAY-AHEAD MARKET SHOULD TREAT DEMAND SUPPLY EQUALLY 9
DAY-AHEAD ANCILLARY SERVICE MARKETS SHOULD ALSO INCLUDE DEMAND n Regulation - not likely a good candidate for demand n Spinning reserve n Supplemental reserve n Replacement reserve Loads should be able to provide these services n Intrahour energy imbalance and congestion management not likely a good candidate for demand 10
LOADS SHOULD (AND DO) PARTICIPATE IN ICAP MARKETS n Fundamental question over usefulness of installedcapability requirement in competitive energy markets – does capacity per se have any value, unless it can be turned into energy at a known strike price? n Need to overcome problems associated with past utility interruptible contracts: discounts more than a reliability service n On the other hand, PJM Active Load Management program provides resources 11
PJM LOAD RELIEF CUT ELECTRICITY COSTS BY $10 MILLION 12
ISSUES ON DEMAND PARTICIPATION IN RELIABILITY MARKETS n n n n n Meters (frequency, who pays) Communications (one or two way, how often) Aggregation Advance notice Frequency of response Duration of response and recovery times Penalties Payments for capacity and/or energy Baseline 13
INVOLUNTARY LOAD INTERRUPTIONS UNCOMPENSATED n Last resort, interrupt loads to protect power system: – rolling blackouts, under-frequency and under-voltage relays n Generators paid for contingency reserves, so loads should be paid for bulk-power interruptions n If loads paid, say, $1000/MWh-interrupted, some customers will pay more to avoid interruptions and others will accept less to be interrupted – lead to interruption markets 14
OPTIONS TO CONSIDER n Should NERC and NPCC review reliability standards to ensure equal opportunity for retail loads? n Who should educate consumers on how bulk-power systems and markets work, and on opportunities for their participation in these markets? n Should RTOs pay retail customers for involuntary load interruptions? n Should RTOs run separate markets for demand resources or single, integrated set of markets? 15
Program and Policy Issues n How should ancillary service markets be organized to realize the potential value of demand-side resources? n Direct ISO-customer contracts, or only through LSEs? n Coordinating regional DR reliability programs with legacy interruptible contracts n Does DRR qualify as “installed capability”? n How to recognize the unique characteristics and needs of loads? n Limits on types or amounts of back-up generation? 16
Program and Policy Issues n Can the rules permit participation by, and compensation to, aggregated small loads? n What actions should STATE regulators take to enhance customer participation in reliability DRR? n How to develop Curtailment Service Providers? n Target levels? How do we know we are succeeding or failing? n Lessons from New York, PJM? 17
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