DR in competitive electricity markets Sweden Benefits

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DR in competitive electricity marketsSweden -
Benefits

• PLMA/IEA symposium on Demand Response
• September 9-10 2003
• Southgate Towers Hotel, NY
• Margareta Bergström
• Markets for electricity, natural gas and district
  heating www.stem.se

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Vision for DR in the Nordic Market

• To create a sufficient amount of price elastic
  demand in the Spot Market in order to secure peak
  load capacity
  

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Nordel max peak and country peaks TWh/h
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Price-duration-curve jan-okt 2000 price-area
Sweden
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Elspotprices 24 Jan 2000, SEK/MWH, Sweden
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Benefits of DR in theory

• Security of supply
• System security
• Less Market Power
• Less Price Volatility
• Customer Influence

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Benefits Security of Supply

• Its all about who pays!
• After deregulation producers are not required to
  have reserves
  
• So they mothballed 2500 MW of oil condensation
  plants
  
• One nuclear reactor was closed, the next has not
  been closed yet
  
• Extreme peak load
• Dry years

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BenefitsSystem security

• Quick response to avoid breakdown
• For a safe buildup after a breakdown
• Need resources under the control of SO
• Last resort before load shedding

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Benefits Less Market Power

• 3 largest producers account for about 86 of
  production in Sweden
  
• Market share in the Nordic market 31
• Much of the power is sold on bilateral long
  contracts
  
• Available capacity on short notice is very
  limited
  
• DR increases available capacity

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BenefitsLess Volatility

• No problem during the 1990-s
• Excess capacity gave low steady prices
• Wet years
• First price spike 24 jan 2000 a chock
• Area prices
• Winter 2002/3 extreme dry
• Prices never seen before
• Overall increased volatility
• Flexible demand reduces volatility

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BenefitsCustomer Influence

• No use to change supplier when they all offer the
  same conditions!
  
• Customers as direct actors gives them influence
• Barrier in Sweden Big customers get better price
  from dominant suppliers
  
• But, Industry bid gave model for sharing
  benefits
  
• Customers under 135A profiled

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Situation Today

• Limited amount of DR demand contracted from large
  customers by TSO
  
• Pri 1 Bid into spot market on TSO request when
  risk of shortage
  
• Pri 2 As ancilliary resources
• Some customers have dual fuel capability and bid
  flexibly or react to spot prices

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The Swedish end use market

• The end users low incentive for DR
• Can shift suppliers or sign a contract in order
  to lower costs of electricity
  
• Can save electricity
• Dual fuel boilers often on spot price
• Need automatic switch
• Large users high potential but process risk
• Medium and small no good models

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Project Industrybid

• Joint project between TSO, Swedish Energy Agency
  and SwedIndustry
  
• Create possibilities for industry to sell back
  power to the spot market at price peaks
  
• Method
• Create price flexibility if not there
• Most large customers visited
• Master contract designed

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Estimated bid level for DR from large customers
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Households

• Many electric heated - Considerable capacity
• Profiled
• Electricity bill not only electricity
• Typical costs following slides
• The customer can choose supplier and contract
  type
  
• The network owner can design tariffs that are
  reasonable

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Ex Payment to supplier, electrically heated
single-family house, 20 000 kWh
Spot price sep 03 SEK 0,3/kWh, Forward price
winter 2 2003 SEK 0,32/kWh

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Ex Payment to network owner, electrically heated
single-family house, 25 A, 20 000 kWh
The customer may choose TOU tariff, the
distribution fee will then be 0,1036/0,0516
SEK/kWh at peak/off peak
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Ex Single family house, total cost for
electricity, SEK/year(supplier network owner)
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Ex 2 Payment to supplier, electrically heated
single-family house, 20 000 kWh
Spot price sep 03, SEK 309,97, Forward price
winter 2 2003, SEK 318,05 Prices per MWh 8 SEK
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Ex.2 Payment to network owner, electrically
heated single-family house, 25 A, 20 000 kWh
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Single family house, total cost for
electricity, SEK/year, ex 2
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Ex 2a Payment to suppliernetwork owner
electrically heated single-family house, 20 000
kWh when TOU price TOU tariff, no Demand
management
In this case we combine the offer of TOU price
for electricity with the TOT tariff for the
network. Peak/off peak
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Technology is in place, but

• Whats in it for the customer?
• Whats in it for the supplier?
• Whats in it for the grid owner?
• Who needs it?
• Who supports it?
• Who will invest in infrastructure?

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Positive signs

• TSO purchases DR15 MW as peak capacity
• But paid by Balance Providers
• Metering Reform
• Lowered limit for profiling from 200A to 63A July
  1, 2006
  
• All meters read every month instead of every
  year, July 1, 2009
  
• New products on Nord Pool
• Demo projects
• Nordic projects