Demand Response and Energy Efficiency in the Midwest ISO _____ A - - PowerPoint PPT Presentation

Demand Response and Energy Efficiency in the Midwest ISO

_____

A Primer

John Moore Bruce Campbell Kevin Murray

1

September 28, 2010

Protecting the Midwest’s Environment and Natural Heritage

Agenda

• Types of Midwest ISO Demand Response (DR).
• Products DR is eligible to supply.

– Energy, ancillary services, capacity, emergency DR.

• Current levels of DR participation.
• Aggregators of retail customers (ARCs).
• How MISO uses DR/EE in transmission planning.

2

Protecting the Midwest’s Environment and Natural Heritage

RTO Boundaries

3

Protecting the Midwest’s Environment and Natural Heritage

TYPES OF DEMAND RESPONSE

4

Protecting the Midwest’s Environment and Natural Heritage

Two General Categories of DR

• MISO has two general categories of demand response.

– DRR Type I and DR Type II resources directly participate in MISO markets.

• Type I and Type II resources are dispatched by MISO.

– Load modifying resources (LMRS) are identified to MISO for planning purposes but are DR managed by electric distribution utilities (EDUs).

• LMRs normally dispatched by EDUs.
• MISO may call on LMRs during emergencies.

5

Protecting the Midwest’s Environment and Natural Heritage

DRR Type I

• A “block” type DR resource

– Generally capable of a single specified reduction – Modeled similar to a generator – Can offer as energy, reserves, can be a capacity resource – Must be directly capable of receiving dispatch instructions from MISO

6

Protecting the Midwest’s Environment and Natural Heritage

MISO Definition of DRR Type I

A resource hosted by an energy consumer, load serving entity or aggregator of retail customers (ARC) within the MISO balancing authority area and that (i) is registered to participate in the energy and

• perating reserve markets, (ii) that is capable of supplying a specific

quantity of energy, contingency reserve or capacity, at the choice of the market participant, to the energy and operating reserve market through physical load interruption, (iii) is capable of complying with the transmission provider’s instructions and (iv) has the appropriate metering equipment installed. – In addition to metering, the Type I resource must be capable of receiving dispatch instructions from MISO through an XML listener.

7

Protecting the Midwest’s Environment and Natural Heritage

DRR Type II

• A “variable” type DR resource

– Generally capable of a range of specified reduction – Modeled similar to a generator – Can offer as energy, reserves, can be a capacity resource – Must be directly capable of receiving dispatch instructions from MISO and meeting setpoint instructions

8

Protecting the Midwest’s Environment and Natural Heritage

MISO Definition of DRR Type II

A resource hosted by an energy consumer, load serving entity or ARC within the MISO balancing authority area and that (i) is registered to participate in the energy and operating reserve markets, (ii) is capable

• f supplying a range of energy and/or operating reserve, at the choice
• f the market participant, to the energy and operating reserve market

through behind the meter generation and/or controllable load, (iii) is capable of complying with transmission provider’s setpoint instructions and (iv) has the appropriate metering equipment installed. – In addition to metering, the Type II resource must be capable of receiving dispatch instructions from MISO through an XML listener.

9

Protecting the Midwest’s Environment and Natural Heritage

Load Modifying Resources

• LMR – A Demand Response or Behind the Meter Generation resource.

– Demand Response - Interruptible load or direct control load management and other resources that can reduce demand during emergencies. – Behind the Meter Generation resource - Generation resources used to serve wholesale or retail load located behind a CPNode (commercial pricing node) that are not included in the transmission provider’s setpoint instructions.

10

Protecting the Midwest’s Environment and Natural Heritage

TYPES OF DR PRODUCTS

11

Protecting the Midwest’s Environment and Natural Heritage

Energy and Capacity

• Energy – Reduction in short term energy use in Real Time or Day

Ahead markets. Results in lower short term prices for all users

• Emergency Energy (Capacity) - Also called reliability or planning
• reserves. Reduces demand when demand threatens to exceed supply.

Used to avoid rolling blackouts.

12

Protecting the Midwest’s Environment and Natural Heritage

Ancillary Services

• Procured by the grid operator to help control and stabilize the grid.

– Regulation – Ability decrease or increase Demand (or supply) within seconds. Full range capability within 20 minutes. – Spinning Reserves – Ability to decrease demand (or increase supply) within 10 minutes and hold for a specified period.

13

Protecting the Midwest’s Environment and Natural Heritage

Products & Resources - Summary

14

Product Energy Regulating Reserve Spin/ Supp. Reserve Module E Emergency Energy DR - Type I X X X X DR Type II X X X X X LMR DR X X LMR BTMG X X EDR X

Protecting the Midwest’s Environment and Natural Heritage

MISO’s DR Philosophy

• MISO’s philosophy is that it will, unlike other RTOs, not create

“programs” for demand response. Instead MISO will seek to create

• pportunities to integrate demand response into existing MISO

markets.

15

Protecting the Midwest’s Environment and Natural Heritage

Implications of MISO’s Approach

• MISO’s philosophy adheres closely to a generation model that can

result in underuse of DR due to failure to integrate the differing characteristics of DR.

• Compare: PJM allows “voluntary” response to energy prices without

penalty, allowing for the inherent uncertainty in the quantity of reduction

16

Protecting the Midwest’s Environment and Natural Heritage

MISO DR PARTICIPATION

17

Protecting the Midwest’s Environment and Natural Heritage

Summary

• To date MISO has experienced minimal levels of direct DR participation

in MISO markets, relative to other RTOs. – As of May 2010,13 DRR Type I resources had registered with MISO representing 209.5 MW.

• One additional registration was pending representing 1.667

MW. – As of May 2010 there was one DRR Type II resource registered with MISO representing 60 MW.

18

Protecting the Midwest’s Environment and Natural Heritage

LMR Participation

• Legacy DR options available through EDU remain the prevalent type of

DR in the MISO region. – MISO 2010 forecast of 1,811 MW of direct load control. – MISO 2010 forecast of 2,814 MW of interruptible loads. – MISO 2010 forecast of 3,385 MW of behind the meter generation.

19

(Source MTEP09)

Protecting the Midwest’s Environment and Natural Heritage

Legacy Programs

• Legacy utility programs tend to be inflexible “command and control”

type tariff riders

• Many potential DR participants are unwilling to yield such control or

their processes to utilities, indicating that there is an untapped resource available

20

Protecting the Midwest’s Environment and Natural Heritage

Summary

BTMG 41% IL 34% DLC 22% Type I 2% Type II 1%

MISO Demand Response Participation

21

Protecting the Midwest’s Environment and Natural Heritage

AGGREGATORS OF RETAIL CUSTOMERS

22

Protecting the Midwest’s Environment and Natural Heritage

Background

• Through Order 719, FERC directed operators of organized markets

such as MISO to address barriers to demand response and address jurisdictional issues at the retail/wholesale interface.

• While some large retail customers can participate directly in markets,

ARCs can facilitate participation of smaller customers.

23

Protecting the Midwest’s Environment and Natural Heritage

Role of ARCs

• The sole business of many ARCs is to enable DR activity.

– Manage RTO interfaces

• Commitments
• Settlements

– Provide metering

• Utilities are often conflicted by the impact of revenue reductions from

foregone sales

• ARCs are not conflicted

24

Protecting the Midwest’s Environment and Natural Heritage

ARCs in MISO

• Responding to Order 719, MISO has proposed rule changes to FERC

that are intended to remove barriers to ARC participation.

• The changes include:

– Elimination of requirement to be an LSE – Reformed (but perhaps still excessive) market credit requirements – Modifications to technical requirements

25

Protecting the Midwest’s Environment and Natural Heritage

Jurisdictional Issues

• Some utilities and Retail regulators (states, munis, coops) have

asserted that RTO based DR programs may conflict with local regulated DR programs.

• RTOs may not unduly discriminate among market participants
• FERC has provided guidelines for RTOs that are intended to provide

clarity

• Many utilities, including public power, view RTO DR as a threat to

customer control

26

Protecting the Midwest’s Environment and Natural Heritage

Jurisdictional Issues

• Retail customers of Large Utilities are eligible for RTO programs unless

the regulator says otherwise. (Opt out) – Opt out states include MI, IN, KY, WI, IA and MN

• Retail customers of Small Utilities are not eligible for RTO programs

unless the regulator permits participation. (Opt in) – Small utilities sell less than 4 million MWh/yr – about 900 MW peak capacity. – Many self regulating public power entities have declined to “opt in”

27

Protecting the Midwest’s Environment and Natural Heritage

TRANSMISSION PLANNING

28

Protecting the Midwest’s Environment and Natural Heritage

Transmission Planning

• On an annual basis, MISO develops the Midwest ISO transmission

expansion plan (MTEP).

• Planning has historically been bottoms up with significant reliance upon

information and planning from transmission owners.

• There has been minimal focus of the potential impacts from demand

response.

29

Protecting the Midwest’s Environment and Natural Heritage

Transmission Planning

• MISO does not perform an independent load forecast – instead, MTEP

is based on utility-based forecasts required under Module E of MISO tariff.

• MISO has historically assumed a 1% reduction in peak demand and

sales each year to account for utility DSM programs.

30

Protecting the Midwest’s Environment and Natural Heritage

Global Energy Partners Study

• MISO recently commissioned Global Energy Partners, LLC (GEP) to

estimate energy efficiency results and peak demand savings from utility-sponsored programs.

• MISO wanted to have a more accurate and defensible forecast of peak

demand reduction to incorporate into MISO’s transmission planning process.

31

Protecting the Midwest’s Environment and Natural Heritage

GEP Study Results

• GEP found a significant increase in the levels of energy efficiency and

peak demand reductions from what MISO has historically assumed in its planning process.

• GEP estimated that over a 20 year period, demand savings from utility

programs would increase to just over 20,000 MW and reduce peak demand by 17%. These peak savings are expected to largely offset any increase in actual system peak demand over the study horizon.

• Similarly, energy efficiency savings are expected to reduce energy

usage by an annual level of 58,605 GWH, resulting in only modest growth in overall energy usage over the study horizon.

32

Protecting the Midwest’s Environment and Natural Heritage

GEP EE Results

390000 410000 430000 450000 470000 490000 510000 530000 550000 570000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 GWh Year

Total Projected Energy Sales and Energy Net EE in GEP Scenario, GWh

Total Energy (GWh) GEP Scenario, Energy - EE (GWh)

33

Protecting the Midwest’s Environment and Natural Heritage

But More EE Savings Are Likely

390000 410000 430000 450000 470000 490000 510000 530000 550000 570000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 GWh Year

Total Projected Energy Sales and Energy Net EE in 4 EE Scenarios, GWh

Total Energy (GWh) GEP Scenario, Energy - EE (GWh) GEP Scenario with Fixed Incremental Savings, Energy - EE (GWh) States' average EE potential, Energy - EE (GWh) Best Practices, Energy - EE (GWh)

34

• Savings more likely to continue instead of tailing off after 10 years.
• Savings level likely to be higher than 0.9% maximum GEP prediction.

(Source: 2010 Synapse Energy Economics Review of GEP Report)

Protecting the Midwest’s Environment and Natural Heritage

GEP Study Critique

• Both conclusions in the GEP study differ significantly from the

assumptions that MISO has been reflecting in its transmission planning process.

• The assumptions relied upon by GEP are conservative.

– GEP has publicly acknowledged the conservative assuptions.

• MISO has asked GEP to further assess DR and energy efficiency

projects under additional scenarios.

35

Protecting the Midwest’s Environment and Natural Heritage

MISO Plans for GEP Study

• MISO plans to incorporate the lower demand and energy forecasts into

the five scenarios it plans to model as part of MTEP11.

• Five scenarios include:

– Organization of MISO States (“OMS”) Cost Allocation and Regional Planning (“CARP”) Business as Usual (“BAU”) Future; – CARP Renewable Portfolio Standard (“RPS”) Future; – CARP RPS, Carbon Cap, Smart Grid, and Electric Vehicle Future; – MISO Planning Advisory Committee (“PAC”) BAU with Mid-Low Demand Future; – PAC Carbon Cap and Nuclear Generation Future.

36

Protecting the Midwest’s Environment and Natural Heritage

Conclusion

• For additional information, please contact:

– John Moore, ELPC, jmoore@elpc.org – Bruce Campbell, EnergyConnect, Inc., bcampbell@energyconnect.com – Kevin Murray, McNees, Wallace & Nurick, murraykm@mwncmh.com

37