Welcome to the 1st Monthly Task XIII Teleconference

1
Welcome to the 1st MonthlyTask XIII
Teleconference

• November 16, 2004

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Agenda

• Teleconference Logistics Mark Wright
• Homework 3 Status Update CEs
• Economic Workgroup Status Dr. Dan Violette
  (Summit Blue)
• Market Potential Benchmarking Randy Gunn
  (Summit Blue)
• State of DR Technology Practices Pete Scarpelli
  (RETX)
• Operational Issues Workgroup Pete Scarpelli
  (RETX)
• Task XIII News Events Ross Malme

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Homework Assignment 3

• Purpose
• Market demographic information that will be used
  to complete country comparison charts and as
  inputs to the market potential tools.
• Location
• Task XIII Project Guidebook page 33.
• Due Date
• November 30, 2004
• Status update and questions

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Update on Valuation and DRR Potential
TasksEconomics Working Group Meeting Notes,
Issues and Actions

• By
• Daniel M. Violette, Ph.D.
• Summit Blue Consulting
• November 16, 2004

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Progress Economic Working Group

• Meetings held pertinent to the Economic Working
  Group include
• Initial experts meeting in Valencia, Spain
  meeting (May 11, 2004) resulted in a decision to
  organize a working group that would focus on DRR
  Valuation and Planning and on Resource
  Potential.
• A working group meeting in Copenhagen (August
  17-18 2004 Hosted by Mikael Togeby, Elkraft).
• Meeting in Milan, Italy (September 21, 2004)
  updated work being done and focused on meeting
  with some resource planners.
• Meeting in Atlanta (October 13, 2004) with the
  U.S. Demand Response Coordinating Council (US
  DRCC) to define and address issues.
• Now, we need to prepare for the next Experts
  Meeting in San Francisco in February, 2004.

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Status

• Generally, the objectives of the working group
  have been accepted.
• Discussions have raised issues to be addressed in
  the work products.
• Considerable progress has been made with some
  countries on identifying possible analytic or
  modeling tools that can be used illustrated
  approaches to either valuing DRR or estimating
  DRR potential.
• Next steps require some assimilation of this work
  and some information from IEA Task XIII staff to
  go back out to the countries.
• There are two attachments
• 1) information on resource planning models we
  have received from countries and
• 2) a description of what we have found to be the
  most comprehensive effort at valuing and
  integrating DRR in resource planning.

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Economic Working Group Discussions

• These are issues to be addressed and are not
  necessarily conclusions
• Role of assessing market potential in countries
  for different types of DRR.
• Believed to be important and that cost curves
  could be developed for customer types and
  end-uses.
• Modeling of DRR
• To date, DRR modeled only in simple ways, i.e.,
  essentially by changing the way demand enters
  into resource planning models.
• Need to better integrate with resource planning
  and modeling efforts this is what decision
  makers pay attention to.

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Econ. Working Group Discussions (cont.)

• No DRR companies, i.e., few companies are focused
  on supplying DRR.
• NOTE Recent developments in the New York ISO
  show greatly expanded development of DRR
  aggregators and curtailment service providers.
• Question -- Should we try to come up with
  benchmarks that indicate reasonable availability
  of DRR in markets? Candidate types of benchmark
  targets might be
• 25 of system reserves as DRR
• 5 of peak demand as DRR for risk management.
• If the market is not providing these levels, then
  programs should be developed to attain these
  levels.
• How and by what organization was not specified,
  but it would likely be a governmental entity.

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Econ. Working Group Discussions (cont.)

• What types of DRR should be assessed at in the
  project reports and working papers?
• Many variants of DRR and we can only address some
  subset. What should we address?
• Regarding benefits
• Prices and reliability were clearly important and
  should be the focus.
• Other benefits such as market power, portfolio
  diversity, support for innovation in markets,
  risk management should be addressed, but might be
  difficult.

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Econ. Working Group Discussions (cont.)

• Benefits estimation issues that have come up in
  discussions
• Avoid double counting benefits!
• Appropriately address social benefits, i.e., make
  sure that we not only count the increase in
  consumer surplus (customer benefits) but that we
  also consider losses or declines in producer
  surplus (i.e., lost revenues/profits to power
  suppliers).
• Some considerable discussion was held regarding
  the appropriate counting benefits in a societal
  context.
• There may be a need to address several
  perspectives in the benefit-cost analyses e.g.,
  a private perspective and a market-wide
  perspective.

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Econ. Working Group Discussions (cont.)

• Bifurcation of benefits is seen as a significant
  barrier to investment in DRR. Benefits are split
  among
• consumers,
• distribution companies,
• TD/reliability organizations (e.g., ISOs/TSOs),
  and
• power producers.
• Suggestion from countries -- Look for synergies
  with ongoing research. Examples include
• Consider the recent evaluation of DRR in Denmark.
• Look to existing models for potential case
  studies NOTE Modeling work at Elkraft in
  Denmark could serve as a basis for a case study.

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Econ. Working Group Discussions (cont.)

• Create synergy with ongoing research though the
  use of working papers or draft report chapters.
• Action Item Develop working papers based on
  issues raised, develop initial drafts and
  circulate among members
• 1. Draft paper on the types of DRR that would be
  the focus of the valuation case studies.
• 2. Draft paper on identification of benefits and
  costs, and how to avoid double counting.
• 3. Draft paper on modeling approaches.
• Action Item Better define ways in which
  countries can contribute to the DRR valuation
  case studies
• 1. Develop DRR offer/potential curves (i.e., the
  market potential for DRR in certain end-uses)
• 2. Develop questions that might be addressed by
  country resource planners.

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Econ. Working Group Discussions (cont.)

• Results
• Materials have been received on models have been
  identified that are being used for resource
  planning in the Nordic Countries, and United
  States. (See Attachment A)
• Needed follow-up on whether these models can
  examine aspects of DRR as
• 1. a proxy resource
• 2. address insurance aspects of DRR, i.e., a
  hedge against unexpected events -- fuel prices,
  resource availability (e.g. wind and/or hydro) or
  emergency situations (transmission line failure
  or major supply-side outage).
• Note A leading U.S. provider of resource
  planning models has been contacted about
  performing some case studies comparing DRR to
  supply-side options that can be compared against
  other approaches. (See Attachment B)

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Econ. Working Group Discussions (cont.)

• Goals for economics working group based on
  discussions
• 1. Get working papers out by end of year
• 2. Work on some real case studies assessing DRR
  in early 2005.
• Timeline prior to February Meeting in San
  Francisco
• 1. Based on information received, contact
  countries about specific areas of collaboration
  on the valuation and potential reports December
  1, 2004
• 2. Develop outline of Valuation Case studies with
  request to countries and discussion
• a) on how they would approach the problem
  December 15, 2004.
• b) outline case study parameters for valuation
  January 10, 2005.
• c) discussions with country partners on
  information needs and assistance with case studies

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Econ. Working Group Discussions (cont.)

• Timeline prior to February Experts Meeting
  (cont.)
• 3. Develop outline of Valuation Case studies to
  be presented at the February Experts meetings in
  San Francisco .
• 4. Develop working papers for review on selected
  topics
• Paper 1 Benefit-Cost frameworks from a
  private, market-wide and societal perspective
  (e.g., how to address consumer/producer surplus)
  DRAFT January 15, 2004.
• Paper 2 Define the DRR types to be focused on
  in the analyses and case studies. DRAFT January
  15, 2004
• NOTE Final Deliverable due June, 2005.

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Econ. Working Group Discussions (cont.)

• Summary of Timeline
• December 1, 2004 Contact countries by Memo to
  discuss possible areas of collaboration.
• December 15, 2004 Produce outline of
  approaches for valuing DRR for use in case study
  development and confer with economics working
  group members on approaches to use for case
  studies.
• January 10, 2004 Outline market and technology
  parameters for case studies.
• February 2, 2004 -- Present case studies to be
  developed at the Experts meeting in San
  Francisco.
• In-Progress Economics Group Working Papers
• Paper 1 Benefit-Cost frameworks from a
  private, market-wide and societal perspective
  (e.g., how to address consumer/producer surplus)
  DRAFT January 15, 2004.
• Paper 2 Define the DRR types to be focused on
  in the analyses and case studies. DRAFT January
  15, 2004

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DR Program BenchmarkingUS Utility Demand
Response Survey

• By
• Randy Gunn
• Summit Blue Consulting
• November 2004

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Project Summary

• Summit Blue is surveying about 50 larger US and
  Canadian utilities to gauge the state of the
  practice regarding demand response (DR) there.
• Have completed about 12 surveys to date, and will
  be done by the end of November.
• Surveys focus on the programs conducted, key
  program features and practices, results,
  benefit-cost analysis, market potential analysis,
  and utility staff satisfactions with various
  program aspects.

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Survey Purposes

• Determine DR program impacts obtained by
  top-performing US programs, and features of such
  programs. These results will be used for DR
  potential benchmarking purposes.
• Investigate the methods and models currently used
  for DR potential studies, and how they compare to
  DSM potential studies. This information will be
  used in the DR potential aspect of the project.
• Investigate the methods and models currently used
  for DR benefit-cost analysis. These results will
  document the current state of this practice area.

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Initial Survey Results

• Caveat initial results may not represent the
  final results very well, due to only having
  completed about 25 of the total surveys.
• Almost all of the utilities contacted are
  conducting at least one DR program for
  residential customers and at least one for
  commercial/ industrial (C/I) customers.

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Residential Program Survey Results

• Most prevalent residential DR programs are
  two-part time-of-use rates, and direct load
  control, primarily for central air conditioners.
• DLC rate discounts average about 6/month for 4
  summer months.
• Program participation varies widely for DLC
  programs, from 3 to 25 of eligible customers.
• Participation in TOU rates and other DR programs
  tends to be low, from almost zero up to about 4
  of eligible customers.

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Residential Results (2)

• Load reduction impacts from DLC programs surveyed
  to date are smallabout 1-2 of residential peak
  demand. However, we know of at least 1 utility
  that is able to achieve about a 10 residential
  peak demand reduction from DLC.
• A large utility with an active Dual Fuel
  interruptible heating program can reduce their
  overall system peak by about 3 through the
  program.

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Residential Results (3)

• Generally, only programs that were recently
  initiated are still expanding. Others are in
  maintenance mode or declining, due to market
  saturation and/or low spot market electric
  prices.
• About 1/3 of the utilities surveyed have tried to
  estimate their programs long-term market
  potential. Few details about the studies
  conducted are available.
• Most utilities do economic analysis of their DR
  programs in the same way as for DSM programs.

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Residential Results (4)

• Most utilities use integrated resource planning
  (IRP) to incorporate DR program impacts into
  long-term system planning.
• Most utilities are satisfied with customer
  acceptance of their programs, as well as their
  billing and payment processes.
• Most utilities have mixed assessments of their
  current program prices and load reduction
  estimation procedures, and think those aspects of
  their programs should be re-designed. Many also
  want to replace their DLC control technology.

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Commercial/Industrial Survey Results

• The most prevalent C/I DR programs are two-part
  TOU rates, demand buy-back programs,
  traditional interruptible rates, and
  real-time-pricing (RTP).
• Except for TOU rates and DLC programs, most other
  C/I DR programs are targeted towards large
  customers who can reduce their loads at least 100
  kW, and usually much more, during peak periods.
• Program participation rates tend to be low, at 2
  of eligible customers or less, except for
  programs restricted to the largest customers.

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C/I Results (2)

• The largest peak demand reduction impacts come
  from interruptible and buy-back programs.
  Several utilities surveyed can reduce their total
  peak demands by over 10 from one or both of
  these programs.
• Most utilities C/I DR program are in maintenance
  mode due to high market saturations, low spot
  market prices, or other factors. Many newer
  programs are still expanding.

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C/I Results (3)

• Only about 25 of the utilities surveyed report
  having estimated the long-term market potential
  for these programs. Study results were generally
  unavailable.
• Utilities economic analysis of these programs
  were almost evenly divided between DSM style
  benefit-cost analysis, simple comparisons of
  programs costs/kW to the costs of a combustion
  turbine or spot market electric prices, and
  utilities that do not do much program
  benefit-cost analysis.

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C/I Results (4)

• Most utilities use integrated resource planning
  (IRP) to incorporate DR program impacts into
  long-term system planning.
• Utilities are most satisfied with the customer
  relations aspects of their DR programs, but have
  mixed opinions about other aspects of their
  programs.
• Changing program pricing structures and demand
  control technologies were the most frequently
  mentioned desired program changes.

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Conclusions

• These preliminary findings are very tentative due
  to the small number of utilities surveyed so far.
• Were somewhat surprised to find that about 25 of
  the utilities surveyed can reduce their total
  peak demands by 10 of more through their C/I DR
  programs.
• Were somewhat surprised to find the relatively
  small percentages of system peak reductions
  achievable through utilities residential DR
  programs.

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State of DR Technology PracticesOperational
Issues Workgroup

• By
• Pete Scarpelli
• RETX
• November 16, 2004

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State of DR Technology Work Areas

• Work Area 1 DR Technologies Currently in Use
• Create database of technologies utilized (and/or
  needed) to facilitate DR implementation. The
  database will contain information on tools used
  by consumers, tools used by utilities and/or DR
  service providers, and tools used by system
  operators.
• Collect case studies for the technologies
• Work Area 2 DR Technologies in RD
• Create database of organizations promoting DR
  technology RD and some of the technologies they
  are researching.
• Work Area 3 Consumer Marketing Materials
• Create database of consumer oriented DR marketing
  materials.

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State of DR Technology Action Plan
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Operational Issues Workgroup

• Work Area 1 DR Market Designs
• Create database of DR programs from various
  markets w/ review of challenges they encountered
  and how they overcame them.
• Work Area 2 DR Infrastructure
• Description of how DR offered into the
  marketplace and measurement/verification
  techniques used.
• Work Area 3 DR Operating Characteristics
• Description of unique DR operating
  characteristics relative other supply options
• Work Area 4 Regulatory Support
• Describe concerns and goals of regulators related
  to DR

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Operational Issues Action Plan
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Task XIII News Events

• Next Experts Meeting
• February 2-3, 2005, San Francisco, California USA
• Host Demand Response Resource Center
• Future Task XIII Teleconferences
• Third Tuesday of the Monthis this a good day?
• Submit teleconference content/questions by 1st
  Tuesday of month
• EXCO approved opening for Phase Two
  Implementation of Task XIII
• QA