Potential Cost Savings in MISO from Demand Response

1
Potential Cost Savingsin MISO from Demand
Response

• MWDRI Steering Committee
• September 24, 2007

2
Purpose of study Its Helpful to Quantify DR
Benefits

• Identify the Potential Capacity and Energy Cost
  Savings and Avoided Generation due to demand and
  energy reductions at various participation levels
• Identify impacts on Emissions from demand and
  energy reductions
• Allocate benefits of demand reductions to states
  and regions and demonstrate merits of regional
  cooperation

3
Methodology

• Use the MTEP 2008 Assumptions and apply demand
  and energy reductions to the 20 year study period
• Run Base Case and Benchmark against
• All modeled cases include Legacy Demand
  Response
• MW values reported in the 2007 Module E as
  interruptible and Direct Load Control are applied
  each year of the study period.
• Reduce the growth rate of demand only, then both
  demand and energy (10 cases)
• Reductions are from .1 to .5 from base growth
  rates
• Run models on a regional level and present
  results on MISO as a whole and at the state level
  using a load based multiplier

4
Limitations of Study

• Does not include the Cost of demand response in
  the model
• Results identify potential cost savings
• The outer limit of What would you be willing to
  pay?
• Models given reductions in demand and energy
  growth rates. Does not identify the potential
  for demand response.
• No specific type (DLC, Demand Bid etc.) of demand
  response is modeled, only demand and energy
  reductions
• Production costs are based on an economic
  dispatch without transmission system constraints
• However, benefits are benchmarked from the
  reference case, which identify the impact of
  demand and energy reductions
• Models and Results only represent MISO companies
• Potential benefits for Demand Response to load
  served outside the MISO market are not captured

5
Presentation of Results

• The Study Results are data intensive. In
  consideration of various audiences interested at
  different levels of interest the results are
  presented in 2 sections
• By MISO Footprint
• By State
• Focus on case DE5 with 0.5 demand reduction
  and 0.5 energy reduction from reference case
  growth rates

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Results for the MISO Footprint
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Results from ReducingDemand and Energy (All MISO)
Demand Reduction Only
Demand and Energy Reduction
REF Reference Case Demand Energy are from
2007 Module E forecasts by each company Demand
Reduction Difference in Demand from Reference
Case Energy Reduction (Cases DE1-DE5 Only)
Difference in Energy from Reference Case 20 Year
Demand Reduction Percent decrease in Demand
Demand Reduction / Reference Demand 20 Year
Energy Reduction - Percent decrease in Demand
Energy Reduction / Reference Energy
8
Demand Reductionsfrom Base Case (All MISO)
Demand Reductions from Base Case
12,613
9,906
9
Generation Expansion (All MISO)
Queue Generation includes only generation in
the Midwest ISO Queue with a signed
Interconnection Agr. Wind Additions were fixed
at 12,600 MW to meet state mandates (Wind
contributes 15 to Reserve Margin Requirements
and Runs at a 40 Capacity Factor for new Wind
units and 33 Capacity Factor for existing Wind
Units)
10
MISO Queue with Signed IA
11
Reductions in Emissions from Reducing
Demand,Energy (All MISO)
Change in Emissions from Reference Case
Reference Case Emissions Scenario
Emissions Percent Emission Reduction 100 x
Change in Emissions / Reference Case
Emissions Average Emission Reduction Change in
Emissions / (1, 2, 3, 4 or 5 Respective of the
scenario modeled)
12
Capital Production Costs(All MISO)
Note Production Costs Include costs for all
emissions except CO2. Production costs with a
CO2 tax are on the next slide. Average Cost
Savings Total Cost Savings / (1, 2, 3, 4 or 5
Respective of the Scenario Modeled) Maximum
Demand Response Value 1000 x Total Cost Savings
/ Demand Reduction in the Scenario
13
Reference Installed Capacity Cost Data No AFUDC
(/kW) - 2007s
Maximum Demand Reduction Value/kW Case D5
849 Case DE5 1971
Source Vermont Deliberative Polling Reference
Document
14
ReferenceCost of Demand Response v. Peaking
Capacity

• Peakers cost roughly 75/kW-yr (50-110)
• Capacity in excess markets can be cheaper
• Typical Demand Response Program Costs
• Direct Load Control 55/kW/yr
• Demand Bid/Buyback 25/kW-yr or less
• Interruptible rates 50/kW-yr
• Source Quantec, Demand Response Proxy Supply
  Curves 2006
• Energy Efficiency also cheap

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Case DE5 Summary

• Compared with REF case in 2027
• Peak is 12,600 MW lower, -9
• 66,000 fewer GWh used, -9
• 14,800 MW of new generation avoided
• Additional 35,200 MW still needed
• Significant emissions savings from energy
  reductions
• PV savings from production cost reductions and
  capital cost reductions equal to 24.9 B

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Conclusions

• Reducing the energy growth in addition to demand
  growth adds to effective demand reduction
• Capacity Value of Load Reduction gtgt Cost of DR/EE
• Demand-only reductions result in more emissions
  produced because older less efficient units are
  running more and more energy is needed, requiring
  more combustion.
• There are regional differences in the benefits of
  demand response. Regions with a higher reserve
  margin benefit less with demand only reductions
  because the demand reductions do not defer
  capacity build until later years. With Energy
  reductions, the benefits are more uniform.

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Results by State
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Methodology to RepresentDemand Response By State

• State Representations are derived from regional
  results using the following methods
• Regional Averages represented at state level
• Load Based Multiplier
• This is a representation of the load in each
  state as compared to MISO as a whole.
• The load participation of a company by state was
  developed from company websites and from company
  representatives and is summarized in the
  following two tables
• Data is in supplemental slides

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Potential Cost Savings By State (Calculated using
Load Based Multiplier)
Cost Savings does not include a Cost for Demand
Response Program or a Tax on CO2
Emissions Savings are based on load served by
MISO within each state additional savings could
be gained by other load serving entities
20
Total sums approximately to the 24.9 billion
from slide 12
21
Maximum DR Value By State(Calculated From
Regional Average)
Source From Regional Expansion with values
applied to the state level. IN OH have a load
weighted calculation since they are in multiple
study regions. Note Values do not include a
Cost for the Demand Response Program or a Tax on
CO2 Emissions
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On Mutual Benefit of Reductions among All States

• States are within MISO and three sub-MISO
  regional markets
• Individual state actions affect regional markets,
  are diluted from state perspective
• States get full benefit of their demand resources
  if all states are producing demand resources
• Brattle Report for MADRI illustrates this
  possible further work for MISO

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Central Region Reserve Margins After Expansion
Note No Firm Transmission is included in the
Central Region Reserve Margins After Expansion
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East Region Reserve Margins After Expansion
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West Region Reserve Margins After Expansion
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Regional Background Information on Demand
Response, Reserve Margins andAllocation to
States
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2007 Demand Response Levels
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2007 Demand Response Levels
Source 2007 NERC Reliability Assessment Source
2007 MISO Module E
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2007 Demand Response Levels
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Central RegionGeneration Reductions
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East RegionGeneration Reductions
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West RegionGeneration Reductions
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Company Demand Distributionby State (In Percent)
Source Midwest ISO
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Calculation of Load Based Multiplier
Load Based Multiplier Total MISO Demand in
State / Total 2008 MISO Peak Demand