Demand Response and Energy Efficiency in the...

Demand Response and Energy Efficiency in the Midwest ISO

_____A Primer

John MooreBruce Campbell

Kevin Murray

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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.

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RTO Boundaries

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TYPES OF DEMAND RESPONSE

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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.

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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

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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 operating 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.

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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

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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 of supplying a range of energy and/or operating reserve, at the choice of 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.

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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.

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TYPES OF DR PRODUCTS

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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.

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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.

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Products & Resources - Summary

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Product EnergyRegulating

ReserveSpin/ Supp.

Reserve Module EEmergency

EnergyDR - Type I X X X XDR Type II X X X X XLMR DR X XLMR BTMG X XEDR X


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 opportunities to integrate demand response into existing MISO markets.

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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

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MISO DR PARTICIPATION

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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.

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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)


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

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Summary

BTMG41%

IL34%

DLC22%

Type I2%

Type II1%

MISO Demand Response Participation

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AGGREGATORS OF RETAIL CUSTOMERS

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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.

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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

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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

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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

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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”

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TRANSMISSION PLANNING

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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.

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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.

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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.

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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.

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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

GW

h

Year

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

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

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But More EE Savings Are Likely

390000410000430000450000470000490000510000530000550000570000

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

GW

h

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)

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•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 EconomicsReview of GEP Report)


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.

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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.

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Conclusion

• For additional information, please contact:– John Moore, ELPC, [email protected]

– Bruce Campbell, EnergyConnect, Inc., [email protected]

– Kevin Murray, McNees, Wallace & Nurick, [email protected]

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