PJM©2013 Economic DR participation in energy market ERCOT April 14, 2014 Pete Langbein.

PJM©2013www.pjm.com

Economic DR participation in energy market

ERCOT

April 14, 2014

Pete Langbein


PJM Opportunity by Wholesale Service

Wholesale Service

Demand Side Response

Energy Efficiency

Price Responsive Demand*

Capacity Yes Yes yes

Energy Yes

Day Ahead Scheduling Reserves (30 min)

Yes

Synchronized Reserves (10 min)

Yes

Regulation Yes

Customer may participate as Emergency and Economic DSR and as EE

*PRD recently approved by FERC


Electric Distribution Company (EDC):

Distribution assets used to distribute the electricity to the customer.

Curtailment Service Provider (CSP):Demand side response activity by the customer.

Load Serving Entity (LSE):

Electricity supply to the customer.

Market Structure – who does what?

End Use

Customer

Energy Efficiency Provider (EERP):

Energy efficiency activity by the customer.


Current (2013) DSR capability ~ 6% of System Peak Load

Represents over 1 million end use customers (~14,000 C&I) across PJM

EE679 MW

Emergency DR(Capacity)8,976 MW

Economic DR Capability(Energy)

2,616 MW~900 MW offered

into energy market on peak day


Evolution of DR in Energy Market

~ 10 Years

Purely voluntary –

any that shows up can only

help

Help balance

power flow and set prices


G&T compensation structure process

• Define LSE, retail contract type, and default G&T rate on registration– RT index (only participate in RT market and receive make

whole payment)

– DA index (only participate in RT market)

– “Fixed” Price (participate in either market)

– Registration default G&T rate applied to hourly settlement

• Registration sent to LSE to review & approve

• Each settlement sent to LSE to review and approve– Ensure G&T is accurate.


Economic DR resources offer into energy market

Market offer ($)

Market offer ($)

Market offer ($)

Small site participation

through aggregation

Generation & small demand resources

in PJM market


Summary of Economic DR offer rules

• DR must have valid registration– Market offers are by Registration or by Dispatch Group

• Dispatch Group = multiple registrations at same price point with one offer curve

• DR energy market participation options– Offer in Day-Ahead market

• if cleared must respond– Dispatch in Real-Time market

• Ability to adjust hourly MW available up to 3 hours prior to operating hour.

– LMP => Net Benefits Test (~$30 mwh) to receive compensation• Actual load reduction must be +/-20% of hourly cleared

or dispatched MW otherwise:– No “make whole” payment up to Offer price– Balancing Operating Charges are applied


Day Ahead Energy Market

• If actual load reductions are less than cleared amount then must buy back at real-time LMP

• If actual load reduction are more than cleared amount then compensated at real-time LMP

• PJM puts in sell offer (negative dec bid) against LSE of record’s account– Intention is to help ensure LSE is not accidently long

to market because of DR load reductions.


Day-ahead vs Real-time energy market participation


Economic Demand Response Dispatched vs SettledReal-Time Energy Market Summary (2013)

Year Month CSP RegistrationsDispatched

(MWh)Settled (MWh) %

Settled Hours Avg MW

2013 1 6 43 1,951 2,054 105% 699 32013 2 2 10 452 733 162% 295 22013 3 3 15 597 962 161% 480 2

2013 4 4 13 685 678 99% 472 1

2013 5 5 31 2,416 3,051 126% 718 4

2013 6 4 38 8,694 8,053 93% 1,068 8

2013 7 11 151 20,445 16,504 81% 3,613 5

2013 8 7 37 11,576 12,445 108% 2,054 6

2013 9 7 61 11,084 10,191 92% 1,329 8

2013 10 3 18 7,860 8,689 111% 1,252 7

2013 11 4 40 6,114 6,662 109% 789 8

2013 12 3 23 6,617 7,197 109% 1,264 6

YTD Totals 78,491 77,218 98% 14,033 6

Average hourly settlement per registration = 6 MW


Economic Demand Response Dispatched vs SettledDay-Ahead Energy Market Summary (2013)

Year Month CSP RegistrationsCleared (MWh)

Settled (MWh) %

Settled Hours Avg MW

2013 1 4 6 5,387 5,233 97% 172 302013 2 4 5 5,403 5,508 102% 183 302013 3 4 5 6,349 6,558 103% 212 312013 4 3 4 5,463 5,410 99% 109 502013 5 3 4 4,569 4,638 102% 157 302013 6 8 19 5,472 5,833 107% 399 152013 7 10 73 10,174 10,352 102% 1,477 72013 8 8 35 3,282 2,669 81% 616 42013 9 9 36 4,677 4,427 95% 512 92013 10 3 6 1,841 2,123 115% 225 92013 11 4 5 1,399 1,676 120% 204 82013 12 6 9 2,056 2,165 105% 284 8

YTD Totals 56,073 56,593 101% 4,550 12

Average hourly settlement per registration = 12 MW


Appendix

• Net Benefits Test


Net Benefits Test

FERC final rule stipulates that DR be compensated full LMP when two conditions are met:1. DR has the capability to balance supply and demand; and2. Payment of LMP to DR is cost effective.

Cleared or dispatched DSR resources balance supply and demand. Payment of LMP to DR is cost effective when the LMP of the cleared or dispatched DSR is greater than or equal to the Net Benefits Price.

The net benefits test to define a threshold point on the PJM Supply curve where the net benefit exceeds the cost to load. The net benefit is the point where elasticity is equal to 1.

• Supply elasticity is defined as the percentage change in quantity supplied divided by the percentage change in price. When the elasticity is less than or equal to one, supply is considered inelastic.

• Generally, an "elastic" variable is one which responds "a lot" to small changes in other parameters. Similarly, an "inelastic" variable describes one which does not change much in response to changes in other parameters.


Net Benefits Test – Supply Curve

To create the curve:

• Use a Supply Curve representative of the study month using the prior year’s curve

• Adjust for resource availability

• Adjust for fuel prices

• Smooth the curve using numerical methods• PJM staff has developed a methodology that results in a curve fit that it believes correlates well to the general shape of the PJM supply curve.

• 𝐿𝑀𝑃= ( − )+ 𝑎 𝑏∗𝑚𝑤 𝑐 𝑑The constants a, b, c, and d vary for each month’s solution.


Net Benefits Test


Net Benefits Test Results

The Net Benefits Test results are calculated monthly and published by the 15th of the prior month, per FERC Order.

The Net Benefits Test results can be found on the PJM website by selecting:markets & operations / Demand Response / Net Benefits Test Results

PJM©2013 Economic DR participation in energy market ERCOT April 14, 2014 Pete Langbein.

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