Floyd Trefny Director of Product Development

1
Future of Demand Response In ERCOT A
Presentation to the Workshop September 15,
2006
Project Number 32853 Evaluation of
Demand-Response Programs in the Competitive
Electric Market
Floyd TrefnyDirector of Product Development
2
Topics

• Market Load Response to Support the Resource
  Adequacy Rule
• Market Load Response and Reliability Load
  Response
• Amount of Price Responsiveness that is needed
• Where could it come from?

3
Market Load Response to Support the Resource
Adequacy Rule

• Necessary Conditions for a Successful Energy-Only
  Market Design
• Adequacy must be able to be treated as a private
  good
• Each individual customer must carry the burden
  for assuring Resource Adequacy
• Consumers must be willing to pay the energy price
  for scarcity or interrupt voluntarily so that
  ERCOT is not forced to de-energize other
  customers on an involuntary basis
• Consumers must be charged proportionally with the
  cost to provide energy
• Adequate Market Load Response must exist to
  respond to high prices
• Free ridership can be overcome if there is
  sufficient voluntary demand response
• Market participants must believe regulators can
  withstand pressure not to mitigate high prices
  due to scarcity

4
Characteristics of Market Load Response and
Reliability Load Response

• Market Load Response
• Private Good, individual providers get a benefit
  only if interrupted
• Provided only by Load
• Responds to high Market Prices
• Amounts needed are determined by a balance of
  market dynamics of supply and demand
• Deployed by individual consumers or by REPs in
  response to scarcity pricing that is so severe no
  other alternative is available to maintain supply

• Reliability Load Response
• Public Good, capacity costs are charged to all
  retail loads
• Generators also may provide and price mitigation
  rules for generators cap prices paid by retail
  customers
• Amount is specified by ERCOT and procured from
  qualified suppliers by bid award
• Amounts needed are determined by engineering
  analysis of the reliability consequences of not
  having supply reserves
• Deployed as a matter of routine control of the
  power grid, e.g. Regulation, Non-Spin, Responsive

The same Load can not be used for Reliability
Load Response at the same time as it is being
used for Market Load Response
5
Required Amount of Price Responsiveness
70,000 -
- 116.7
Market Reserve 2,500 Mw or 4.2
67,500 -
- 112.5
Reserve for Forced Outages LF Error 3,400 Mw
or 5.7
64,100 -
- 106.8
Ancillary Services 4,100 Mw or 6.8
60,000 -
- 100.0
Reserves for Forced Outages Load Forecast Error
Only 5.7 - 3400 Mw of Capacity
Operating Range
30,000 -
- 50.0
3400 Mw of Response is needed for 100 - 150 hours
a year
0 -
- 0
Peak ERCOT Load
6
Load Response OpportunitiesPrepared by DSWG
September 2006
AC Frequency Switch Hot Water Heaters
Similar to Residential
AC Frequency Switch Target loads lt 1 MW Back up
Diesel Pumping Loads
AC Frequency Switch Back up Diesel
LaaR (RRS, NSRS) RGS and RPRS Balancing
Energy Tiered FR RRS from CLRS
On site generation Boiler management Pumping Loads
Smart Meters Critical Peak Pricing Day Ahead
Market Air Conditioners Household Devices
Similar to Residential IDR Meters Day Ahead Market
IDR Meters BUL Back up Diesel Day Ahead
Market Grid Lighting
Day Ahead Market Grid Lighting Chillers and
Coolers
Real Time Response Back Up Diesel Direct Load
Control Day Ahead Market Irrigation
Day Ahead Market Waste Water Pumps Personnel
Hours Grid lighting Thermal Storage
Cost of Meter Sub Metering Issues Incentives
(Landlord) Inconvenience Loss of production Air
Permits Time Response Notification
Mechanism Lack of Firm Price Signals ISO System
Cost to Implement Cost of Meter Forward
Pricing REP or No REP? Cost of Meter
Read Customer Acquisition Fractured Value
Chain Lack of Firm Price Signals ISO System
Cost of Meter Cost of Meter Read Many tenants
lease Customer Acceptance Lack of Firm Price
Signals ISO System Upgrades
Time Response Notification Mechanism Lack of
Firm Price Signals ISO System
TCEQ Permits Metering ERCOT EMS Lack of Firm
Price Signals ISO System
Non Specific Profiles Lack of coordination Lack
of incentive Focus on efficiency ISO System
Reliability Capacity Payments and Firm
Obligation to perform Price Responsive
Energy Payments and Voluntary Performance
Requirements
7
Questions????