Barriers to Innovation Panel discussion

Transcription

1 Barriers to Innovation Panel discussion Joel Mickey Director, Market Design & Development 2014

2 U.S./Canadian Bulk Power Grids The ERCOT Region is one of 3 grid interconnections in USA- Canada The ERCOT grid: Covers 75% of Texas land Serves 85% of Texas load >40,000 miles of transmission lines >550 generation units Physical assets are owned by transmission providers and generators, including municipal utilities and cooperatives ERCOT connections to other grids are limited to direct current (DC) ties, which allow control over flow of electricity 2

3 Generation (MW) Peak Day Generation Fuel Mix 80,000 70,000 August 3, ,305 MW Record hourly integrated peak 60,000 50,000 Natural Gas 40,000 30,000 Wind 20,000 Hydro DC Tie Imports 10,000 Coal 0 Nuclear Hour of Day 3

4 BUSIDRRQ BUS (IDR not BUSIDRRQ required) BUS RES(IDR not required) RES Weather impacts on load by customer type Wednesday March 9, :15 PM ERCOT Load: 31,262 MW Temperature in Dallas: 64 Residential 51.2% (~35,000 MW) Wed., Aug. 3, :00 PM ERCOT Load: 68,416 MW Temperature in Dallas: ,000 MW of weather-sensitive load -- 54% of peak Residential 27.4% (~8,500 MW) Small Commercial 25.2% Small Commercial 28.9% Large C&I 43.7% Large C&I 23.7% 3/9/2011 IE 17:15 3/9/2011 IE 17:15 8/3/2011 IE 17:00 8/3/2011 IE 17:00 Customer class breakdown is for competitive choice areas; percentages are extrapolated for munis and co-ops to achieve regionwide estimate Large C&I are IDR Meter Required (>700kW) 15-minute settlement interval demand values 4

5 Annual Energy and Peak Demand ( ) 5

6 Capacity, Demand and Reserves (CDR) February 2014 Wind generation is included at 8.7 percent.* * ERCOT has been analyzing the operational characteristics of wind generation to determine whether it can depend on a higher percentage of installed capacity during periods of peak demand. 6

7 Top Retail Market in the United States and Canada ERCOT competitive retail market #1 in the United States and Canada seventh year in a row Top rankings for both residential and commercial/industrial retail markets in Texas (Annual Baseline Assessment of Choice in Canada and the United States*) Most product offerings (300+) among states assessed 5.9 million residential customers taking competitive electric service *Published annually by Distributed Energy Financial Group, LLC 7

8 Wind Generation Capacity February 2014 Texas is #1 in the U.S. in wind capacity. Our capacity is more than twice the amount of #2 (California) If Texas were a separate country, we d be #6 in the world in wind generation capacity. 8

9 One more way of looking at ERCOT Retail Competitive Choice Competitive Choice vs. Muni/Co-op Load Municipals & Cooperatives Utility a mostly obsolete term Dozens of REPs competing for residential and small commercial accounts Mostly fixed-price offerings with 6-12 month terms; some pre-paid, renewable options Near-universal AMI NOIE 73.7% Restructured in generation, T&D and retail functions separated MWh 12/1/10 thru 8/11/11 Retail Choice 26.3% Muni s and co-ops are still vertically integrated Many have existing and developing smart grid initiatives: -- AMI -- Smart thermostats -- Other DLC Possible triggers: Real-time prices, congestion management, 4CP response 9

10 Demand Response Past & Present

11 Interruptible Tariffs in the regulated world Prior to 2001, ~3200 MW of industrial load provided an emergency interruptible safety net Enrolled customers were required to curtail within 10 minutes when called by ERCOT Also required to have Under-Frequency Relay set no lower than 59.7 Hz Customers year-round electric rates were deeply discounted in exchange for this In May 2000, ERCOT deployed interruptible loads four times during emergency conditions Hot weather event with nearly 20% of generation fleet out for planned maintenance Loads were dispatched by control area (10 at the time) No centralized performance measurement & verification 11

12 Transition to the restructured market In 2002, the restructured ERCOT market was launched Texas Legislature unbundled investor-owned utilities into 3 entities: Generation Retail Transmission & Distribution (still fully regulated) Tariffs (including interruptibles) went away Replaced by competitive retail price offerings ERCOT staff and stakeholders worked to find a market-based alternative to the interruptible tariffs The result: Loads Acting as a Resource (LaaRs) Now known as Load Resources (LRs) 12

13 Load Resource participation in ERCOT Load Resources are currently eligible to provide Ancillary Services in ERCOT By summer 2014, they will be eligible to submit bids into the Real-Time Energy Market Security Constrained Economic Dispatch (SCED) Vast majority of participation to date has been in Responsive Reserve Service (RRS) RRS participation requires: Full-time telemetry to ERCOT Ability to curtail at least 100 kw of Load within 10 minutes of an instruction Under-frequency relay Ancillary Services are paid a capacity payment from the Day- Ahead Market, regardless of whether they are deployed Average ~ $10-$12/MW/Hour for RRS in ERCOT in

14 LR Deployments LRs providing RRS can be deployed in 4 ways: 1. Automatic trip based on UFR setting ( 59.7 Hz) 2. Verbal dispatch by ERCOT during Energy Emergency Alert 3. Verbal dispatch by ERCOT during frequency event reportable to NERC 4. Verbal dispatch by ERCOT to solve a local congestion issue (location-specific) LRs are typically deployed 2-4 times per year 14

15 Current ERCOT DR Summary Load Type Service Requirements Description/Notes Load Resources (LRs) Controllable Load Resources (CLRs) Responsive Reserve Service (RRS) Regulation Service Responsive Reserve Service Interval metering Telemetry Under-Frequency Relay (instantaneous trip) plus 10-minute ramp capability ERCOT Qualification Interval metering Telemetry Ability to move load in both directions in response to AGC-type signals Governor-type frequency response ERCOT Qualification Industrial Loads 229 LRs with >3000 MW of total registered capacity LRs limited to 50% of total RRS Dispatched during Energy Emergency Alert (EEA) or automatically due to frequency drop Industrial Loads and storage devices with sophisticated control systems and ramping capability Must move automatically in both directions Very limited participation Emergency Response Service (ERS) Resources 10-minute special emergency service open to DR and DG 30-minute & Weather- Sensitive pilots also underway Interval metering 10-minute ramp capability (30-minute version in pilot stage) ERCOT Qualification Mid- to large commercial & industrial Loads; open to aggregations, including residential Procured 3 times per year for 4-month Contract Terms Dispatched during EEA Retail Loads Voluntary Load Response (to Market Price, 4CP signals or other factors) Load reduction technology or ability to curtail Retail contract with DR incentives or 4CP T&D tariff Ability to predict 4CP intervals Not dispatched by or reported to ERCOT ISO May include dynamic pricing (Time of Use, Critical Peak, Real-Time Pricing) May be executed via centrally dispatched load control 15

16 DR available for ERCOT dispatch (summer peaks 2013) Service MWs Notes Load Resources providing RRS <1400 Capped at 1400 MW (half of total hourly RRS procurement of 2800 MW) Less than 1400 MW cleared most hours ERS ~435 Includes 10-minute ERS + 30-minute pilot Procurement varies by Time Period; less than 400 MW available during summer peak 2012 TDSP Load Management Programs ~240 Summer peak hours only Dispatched concurrently with ERS through agreements between ERCOT and TDSPs 2,000 MW of dispatchable DR: < 3% of ERCOT summer peak 16

17 MWs Load Resource Participation Currently 217 LRs registered with a total of 2,900 MW of DR capacity Load Resources Registered and Qualified for ERCOT AS Market Apr-02 Apr-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 17

18 Load Resource Types & Eligible Services (as of 6/1/14) LR Type Qualification Non-Controllable Load Resource (NCLR) Eligible Service NCLR Under-Frequency Relay + 10-minute response RRS ( 50%) Controllable Load Resource (CLR) CLR Primary Frequency Response (PFR) & respond to Reg deployments Reg-Up Reg-Down CLR PFR & follow SCED 5-minute dispatch RRS CLR Follow SCED 5-minute dispatch Non-Spin Aggregated Load Resource (ALR) may be a CLR or an NCLR. 18

19 DR and the Smart Grid

20 DR is one of the fastest growing resources in the U.S. Slide courtesy of Ryan Hledik, The Brattle Group (Sept. 18, 2013) Source of generation capacity data is Ventyx Energy Velocity Database Demand response data from FERC 2013 Assessment of Advanced Metering and Demand Response Energy efficiency data based on actual peak reduction estimates from EIA-861 Summer capacity is total for generating units classified as operating with commercial online date before January 2012 Assumes 50% peak coincidence for solar and 25% peak coincidence for wind; all other types assume 100% availability for simplicity 20

21 The national landscape of demand response (DR) Peak Demand Reduction Capability (as Reported to FERC) Reported Potential Peak Load Reduction as Percentage of Total Peak Load Share of State Peak 0% > 0% > 2.1% > 4.2% > 6.3% > 8.4% > 10.5% > 12.6% > 15% This amounts to 53 GW of peak reduction capability (6% of U.S. peak) Slide courtesy of Ryan Hledik, The Brattle Group (Sept. 18, 2013) Source: Derived from reported DR capability in 2010 FERC Assessment of Demand Response & Advanced Metering and state system peak projections in 2009 FERC National Assessment of Demand Response Potential Note: For further discussion, see Kelly Smith and Ryan Hledik, DR Drivers, Public Utilities Fortnightly, January

22 The current DR program portfolio is fairly diverse U.S. DR Programs (Share of MW) Comments Direct Load Control 17% Time-Varying Rates 8% Other 3% Other Incentive- Based 26% 53 GW of peak reduction ~6% of U.S. peak Only 20% residential The rest is split between commercial, industrial, and wholesale Interruptible Load 21% Emergency Demand Response 25% Slide courtesy of Ryan Hledik, The Brattle Group (April 25, 2012) Source: Adapted from 2010 FERC Assessment of Demand Response & Advanced Metering 22

23 Advanced Metering Infrastructure (AMI) Estimated Penetration of Advanced Metering, 2012 Source: Assessment of Demand Response and Advanced Metering. FERC. December < gov/legal/staff- reports/ demandresponse.pdf> By 2020, the U.S. electric power sector is expected to add ~65 million advanced meters (which would reach ~47% of U.S. households) and ~40-80 GW of wind and solar capacity Slide courtesy of Ahmad Faruqui and Wade Davis, The Brattle Group (July 23, 2013) Source: Mass Market Demand Response and Variable Generation Integration Issues. Lawrence Berkeley National Laboratory. Oct

24 Grid Modernization Index (GMI) Texas and California tied for #1 ranking (83 of 100 points) based on grid modernization policies and activities GridWise Alliance and Smart Grid Policy Center studied 41 states and District of Columbia Highest-ranking states typically: Belong to Regional Transmission Organization (RTO) or Independent System Operator (ISO, such as ERCOT) Have Renewable Portfolio Standards Have higher scores for cybersecurity and data privacy Have residential/commercial smart meters, top 10 = 60% or more 24

25 The Smart Grid in ERCOT Investor-owned Transmission & Distribution Utilities in ERCOT have installed nearly 6.7 million smart meters since 2010 Covers 97.5% of all customers in these areas Enabled by legislation and rule providing for accelerated cost recovery Several municipally-owned utilities and electric cooperatives are also installing smart meters 25

26 Voluntary/economic DR in ERCOT Load reductions in anticipation of 4 Coincident Peaks (4CP) Transmission tariffs based on usage during June-Sept. monthly system peak intervals Applies to 11,000+ large customers with IDR meters Also applies to Muni and Co-op boundary meters Dynamic pricing (e.g., real-time / block & index / peak rebates) Initiated by customer or thru direct load control by LSE or third party based on retail agreements Voluntary customer response to news & social media appeals ERCOT and PUC asked for help on 14 days in Summer 2011 Follow us on Twitter and Facebook New & improved phone app now available 26

27 Wholesale market prices Escalating offer caps in the energy-only market 2002: $1, $1, $2, : $3, : $4,500 June 2013: $5,000 June 2014: $7,000 June 2015: $9,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Series2 ERCOT System-Wide Offer Caps Applies to offers for energy (MWh) and Ancillary Services (MW) Possible role for DR as an insurance policy for both LSEs and Generators 27

28 Price duration curve $/MWh Load Duration SCARCITY PRICING INCIDENTS $/MWh % Hrs % Hrs $<0 - $ % 97.7% $50 - $ % 1.4% $100 - $1, % 0.9% $1,000 - $2, % 0.03% $>2, % 0.01% % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Time Equal To or Exceeding Graph: North Load Zone Settlement Point Prices,

29 Economics Reliability Correlation of energy prices to shortage conditions should provide incentives for economic DR that aligns with grid reliability needs Many large C&I customers have power contracts that promote DR during these periods Residential & small commercial DR has been slower to develop Advanced meter deployment, nearly complete in competitive choice areas, assure that DR actions are recorded REP will benefit at settlement from any such action Should provide incentives for DR to hedge risk during periods of wholesale price spikes 29

30 Challenges to the retail business case Why is mass market DR in ERCOT slow to develop? 1. Retail switching Robust competition encourages short-term fixed price contracts Good for consumer prices but discourages investment in DR infrastructure 2. Overall low prices Marginal fuel for generation in ERCOT is cheap natural gas (helped by fracking technology) Low prices >99% of hours do not encourage investments in efficiency and DR 3. Cost of infrastructure Household HVAC load control (yielding ~1 kw of DR) costs between $300 and $500 Difficult business case in the absence of a rate base, subsidy or other funding source 30

31 Dynamic pricing and behavioral change Gasoline: dynamic Electricity: static % Increase in Price Gasoline Price $/Gal Customer Reaction to Gasoline Price Baseline $3.75/gal Complain, but continue existing consumption pattern 25% $4.70/gal Buy Hybrid Car Wholesale Electricity Price ($/KWHr) Retail Fixed Electric Rate ($/KWHr) $0.025/KWHr $0.1/KWHr $0.031/KWHr $0.1/KWHr Customer Reaction to Wholesale Electricity price No change No Change 100% $7.50/gal Car Pool $0.05/KWHr $0.1/KWHr No Change 125% $8.43/gal Work From Home $0.056/KWHr $0.1/KWHr No Change 4000% $150/gal? $1/KWHr $0.1/KWHr No Change 12000% $450/gal? $3/KWHr $0.1/KWHr No Change 31

32 Incentives for customers to change usage patterns Alternatives to flat pricing in the mass market: 1. Link residential energy prices to prices in the wholesale market Real-time pricing, time of use pricing, critical peak pricing, etc. Not necessary for all customers; just those who can adjust 2. On/Off peak rates (for delivery charge on consumer bill) Delivery charge is collected based on the cost of Transmission & Distribution infrastructure to deliver energy to the consumer This cost is about $0.03/kWh: currently higher than the off-peak price for energy itself, and can be higher than the price of onpeak energy too Infrastructure is designed for peak energy consumption, so if consumption of energy during peak periods is reduced, then delivery charge could also be reduced 32

33 Potential for On/Off peak, dynamic residential pricing Hedging with flat pricing means customers over-pay for electricity the vast majority of hours! 33

34 Potential for On/Off peak, dynamic residential pricing Hedging with flat pricing means customers over-pay for electricity the vast majority of hours! Average Off Peak Price =$.018/KWHr Average On Peak Price =$.029/KWHr 34

35 Load Forecast and Available Resource Capacity Can we close this gap without elasticity of demand? 80 Peak Load Forecast-Mild Weather GW Peak Load Forecast-Typical Weather Peak Load Forecast-Extreme Weather Available Resource Capacity Desired (13.75% Reserve margin) Resource Capacity Year Figure 11 from 35

36 Ideal combination of generation & demand response Peak Demand MW 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Available Demand Response Capacity Available Generator Capacity System Demand Demand Response Deployed 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 36

37 Energy supply curve & inelastic demand curve $/MWHr Demand Curve with no elasticity Market Clearing Point (Price & Quantity) Supply Curve MW 37

38 Energy supply curve and demand curve with some elasticity $/MWHr Demand Curve with some elasticity Market Clearing Point (Price & Quantity) Supply Curve MW 38

39 The Missing Money Current revenues are inadequate to support new generation investment 39

40 Current Activities 1. Resource Adequacy Real Time AS Co-optimization with Operational Demand Reserve Curves to achieve better scarcity/shortage pricing Capacity market to provide forward price signal for new capacity uprate/construction including DR? 2. Demand Response Loads in SCED allow DR to set Real-Time Prices Aggregated Load Resources aggregate residential and small commercial customers 3. Pilot Projects Weather Sensitive ERS Resources targeted for residential aggregations 30 minute ERS Fast Responsive Regulation Service 4. Future Ancillary Services Working with stakeholders on complete overhaul of AS, to better meet the needs of the grid of the future 40

41 Questions? ON OFF 41