Demand Response in Albertas Wholesale Electricity Market

1
Demand Response in Albertas Wholesale
Electricity Market

• Demand Response Working Group
• Kick Off Meeting- September 3, 2008

Laura LetourneauDirector Market Services
2
Agenda

• Meeting Objectives
• Introductions (interests experience)
• Terms of Reference - structure, transparency,
  scope, rules for engagement
• Industry/Business Model for Demand Response in
  Alberta
• Presentation
• Background and Context
• Demand Response Overview
• Alberta Facts
• Challenges Opportunities
• Next Steps
• Finalize Terms of Reference
• Evaluate Alberta Demand Response programs and
  results
• Assess other markets programs and results
• Assess Demand Response challenges/limitations/barr
  iers to success
• Industry/Business Model current, options,
  proposed

3
Background Context
Laura LetourneauDirector Market Services
4
Electric Industry Evolution
AESO formed
5
Industry Model Post-Restructuring
6
Industry Structure
Electric Utilities Act
Minister of Energy Appoints AESO Board members ,
MSA AUC Chair
Market Surveillance Administrator (MSA)
Balancing Pool
Alberta Electric System Operator
Alberta Utilities Commission (AUC) Regulates AESO
Load Settlement
Wholesale Energy Market
Transmission
Real-time Alberta Electric System Operator
7
Alberta Electric System Operator

• Independent
• Not-for-profit with a public interest mandate
• Holds no commercial interests independent of
  the market
• Impartial no affiliation with industry
• Governed by independent board
• Regulated by Alberta Utilities Commission
• Transmission Tariff
• ISO Rules OPPs
• Revenue
• energy trading charge
• transmission tariff (load settlement)

8
Key Agencies Roles

• Alberta Utilities Commission (AUC)
• Independent, quasi-judicial agency of Alberta
  Government
• Approves ISO Rules Operating Policies and
  Procedures
• Regulates transmission reinforcements/upgrades
  and tariffs
• Approves environmental and siting for generation
  projects
• Approves the distribution and regulated rate
  option tariffs
• Market Surveillance Administrator (MSA)
• Performs on-going monitoring of Albertas
  electricity markets to ensure fair, efficient and
  openly-competitive operation of the markets
• Monitors compliance with all rules, laws and
  regulations and manages non-compliance and
  penalties (resolves issues before complaints)
• Balancing Pool
• Markets unsold Power Purchase Arrangement (PPA)
  capacity
• Manages the unsold PPAs and ultimately returns
  profits to Alberta consumers

9
AESO Mandate

• Reliability of the Electric System
• coordinated operation of the power grid and make
  sure that the supply and demand are in constant
  balance
• Open, non-discriminatory access to the
  Transmission system
• Plans Transmission System - ensure important
  infrastructure keeps pace with growing demand and
  supply
• supports reliability
• enable fair, efficient and open competition
• facilitates investment in both load and
  generation
• Fair, efficient and openly competitive (FEOC)
• operate the market ensuring a fair, efficient and
  openly competitive wholesale market for all
  participants

10
AESO Roles Responsibilities

• Ensure safe, reliable and economic operation of
  the power system by dispatching merit order
  (generators price-responsive bids)
• Connects customers (supply load) designs and
  administers tariff for system access
• Contracts with TFOs for service provide
  direction to transmission facility owners to
  coordinate operation of the transmission system
• Schedules generation and loads to provide system
  services (AS) - procured through service
  contracts or tariff
• Dispatches merit order for reserves
  (reg/spin/supplemental)
• procured from independent third party market or
• over-the-counter arrangements and used to
  maintain required reserves
• Calculates and communicates the pool price
• Settlement load, energy market and transmission

11
Hourly Real-Time Market
12
Demand Response Overview
Laura LetourneauDirector Market Services
13
Demand Response Drivers

• Aging industry infrastructure and the pace of
  Generation, Transmission or Distribution
  investment may contribute to
• shrinking reserve margins and
• increasing congestion and reliability events
• Increasing prices and price volatility super
  peaks
• associated with congestion,
• load characteristics and
• concentration of supply resources
• Increasing overall demand coupled with reduction
  of incentives for efficiency

14
Benefits

• More Resource Options
• reliable and efficient operation of the system
  and market,
• increases liquidity and mitigates potential
  market power
• Shift and Reduce
• Flattens load dampens price spikes
• Shifting peak use to off-peak use flattens load
  profile and reduces price spikes during
  scarcity/high prices
• Conservation and efficiency
• Reduced use/demand
• Shifting resources to lower cost resources
  increases market efficiency

15
DR Program Categories

• Incentive Programs
• Induce customers to reduce during periods of
  system need or stress with payments rather than
  direct price signals
• Direct load control
• Interruptible/curtailable rates
• Demand bidding/buyback programs
• Emergency demand response programs
• Capacity market programs
• Ancillary services market programs
• Time/Price Programs
• Promote DR based on price - move away from flat
  or average pricing and promote more efficient
  markets that reflect underlying costs
• Time-of-use prices (day, week, season)gt
  differentiate by peak/off-peak or shoulders
• Critical peak/scarcity pricinggt use real-time
  prices during extreme peaks
• Real-time pricing gt links hourly prices to cost
  of power

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Demand Response Continuum
Varied demand response products/services suited
to varied needs
Load Shifting
Conservation
Load Shed
Energy Efficiency
Distributed Generation
Multi-year
Year
Real-Time
Month
Day-Ahead
Timeframe
17
Alberta Facts
Laura LetourneauDirector Market Services
18
Alberta at a Glance

• 9,710 MW peak and 80 LF
• 12,072 MW total generation

Intertie limitations, high load factor and
growing variable resources increase risk of
reliability events and reduces options to manage
it.

• Interties Max Capability
• BC (up to 780 MW)
• Sask. (up to 150 MW)

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Albertas Demand Response

• AESO has implemented a combination of market and
  out-of-market DR programs, some are incentive
  based and others are time/priced based.

• Incentive programs (out-of-market/real time
  emergencies) include
• Voluntary Load Curtailment Program (VLCP)
• Load Shed Service (LSS) (59.5 Hz freq. response)
  
• Interruptible Load Remedial Action Scheme
  (ILRAS)
• Demand Opportunity Service (DOS)

• Time/Price (market) Solutions include
• Operating Reserves (OR)Supplemental
• Price Responsive Loads (PRL)

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Comparing Albertas DR

• FERCs 2007 Assessment of DR
• estimated demand reductions in RTO/ISO regions
  with wholesale markets to be 1.4 - 4.1 of peak
• reductions achieved via a combination of DR
  programs, retail DR, voluntary reductions
• Assessment of Albertas DR
• Most significant demand response comes from the
  approximately 175 - 300 MW of Price Responsive
  Load - 1.8 to 3.1 of peak (9710 MW 07/08)
• Additionally, over 400 MW in VLCP, LSS, ILRAS,DOS
  and OR supplemental service provide additional
  options to managing reliability and ensure a
  fair, efficient, and openly competitive
  electricity market

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Price Responsive Load in Alberta
Price Responsive Load responding to price spikes
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Albertas Price Responsive Load (PRL)
96
69
71
PRL on-line average load reduced by Price Range
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Growth in Electricity Consumption
Unprecedented load growth in Alberta could
potentially outpace market-driven generation
additions resulting in decreased reserve margins
and reduced reliability
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Trends in Alberta System Peak
Winter Summer
Historical Peaks
Albertas peak demand (AIL) and consumption grew
by an average of 4 and 5 per year respectively
(2001-2006)
AESO forecasts (20 years) peak demand to grow on
average by 3.1 per year and consumption to grow
on average by 3.2 per year
25
Price Trends (cont)
System and market conditions can increased
frequency of price spikes
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Price Trends in Alberta
Historical Pool Prices
Historical Price Frequency
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Challenges Opportunities
Laura LetourneauDirector Market Services
28
Challenges Objectives
Generally, Alberta like other markets, may
experience

• Increased risk of reliability events
• demand growth
• delays in transmission and distribution
  infrastructure
• potential misalignment of generation and
  transmission
• increasing variable resources - need for fast
  ancillary services
• Increasing prices and frequency of scarcity
  pricing (price spikes)

To capitalize on the benefits of demand response,
there is a need to explore and analyze the
physical and financial structures within Alberta
identifying demand response opportunities and
options
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The Flow of Power
There will be a need to segment electricity
transactions (physical and financial) in order to
appropriately assign roles and responsibilities.
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Next Steps

• Finalize Terms of Reference
• Evaluate Alberta Demand Response programs and
  results
• Assess other markets programs and results
• Assess Demand Response
• Challenges, limitations and barriers to success
• Industry/Business Model current, options,
  proposed

31
Questions

• For further information, questions or concerns
  please contact
• Laura Letourneau
• Director Market Services
• Alberta Electric System Operator
• 2500, 330 5th Avenue S.W.
• Calgary, Alberta T2P 0L4
• laura.letourneau_at_aeso.ca