Sioshansi F.P. Smart Grid: Integrating Renewable, Distributed & Efficient Energy
Подождите немного. Документ загружается.
Participation in recent years has been facilitated through enhancements to the interface between
demand response resources and PJM's markets
*
The term “restructured” refers to retail markets in which some or all
consumers can choose an electricity supplier other than the regulated
electric distribution company. The PJM wholesale market encompasses
all or part of 13 states and the District of Columbia in the mid-Atlantic
region of the nation and extends from as far north as Michigan to as far
south as North Carolina and from the Eastern seaboard as far west as
Illinois.
Demand response, PJM market, customer participation
Introduction
Economics and rapidly changing smart grid technology sit at
the heart of the precipitous rise in active participation of
demand response (DR) resources in wholesale electricity
markets.
1
DR activity in the wholesale electricity market
hinges on three things:
1
A demand resource has the capability of reducing usage in response to a
price signal or direction from PJM Operations during an Emergency
Event.
• The price of electricity
• Historically users have paid a flat rate calculated by
averaging the cost. Flat rates do not communicate to the
user how the marginal cost of producing electricity
varies over the course of a day or a year as more
expensive generators are called on to meet the growing
load. Nor do retail rates communicate to the end-use
customer the value of the capacity that is necessary to be
procured to ensure resources are available to serve load
even on the hottest summer days.
• The value of electricity to the user
811
• Since users have not been shown the actual cost of
electricity as it changes from hour to hour and from
season to season, they have not had the ability to
evaluate the value of using electricity relative to the
hourly locational cost revealed by the Energy Market.
When users are able to see and respond to actual
wholesale prices they can then decide to move usage to
different times when prices are lower.
• The cost of getting outfitted to meet the requirements for
market participation
• These costs can include the hassle of arranging for
electric distribution companies to install interval meters
as well as an on-site assessment of load reduction
capability and the installation of control devices to
deploy that capability.
Transparency of wholesale market prices for capacity, energy,
and ancillary services has helped drive DR participation is
PJM's markets. As will be discussed in section “Demand
Response Participation in the Capacity Market”, with the
implementation of the RPM Capacity Market, the
transparency in the price of capacity to achieve resource
adequacy with a loss of load expectation of 1 day in 10 years
became immediately apparent, and the value of DR as a
capacity resource has driven participation. As one electric
distribution company executive stated, “I look at the relative
capital costs of DR at $185/kw, combustion turbines fueled
by natural gas at $1,850/kw and nuclear generation at $5,500/
kw and ask why not install as much DR as possible before
building more expensive generation.”
2
2
812
BG&E V.P. Wayne Harbaugh, dinner speech at Demand Response
Symposium II, May 7, 2007.
Similarly, DR participation in the PJM Energy Market, and its
value for energy reductions, tracks the increase in the price of
energy in wholesale markets that occurred as natural gas and
oil commodity prices and electricity demand rose during the
2006–summer 2008 period as shown in section “DR
Participation in the Energy Market (Day-Ahead and
Real-Time)”. And with the decrease in demand brought on by
the recession and falling natural gas commodity prices
through 2010, DR participation in PJM's Energy Markets has
declined along with the value of energy reductions. DR
participation in the Synchronized Reserve Market and in
Ancillary Service Markets has also shown steady growth over
time, as will be discussed in section “DR Participation in
Ancillary Service Markets”.
Concurrent with these economic trends and increase in
transparency have been the development and evolution of
smart grid technologies ranging from interval meters to
automated controls such as programmable communicating
thermostats. And over time these smart grid technologies
have become increasingly affordable. See Chapter 11,
Chapter 16 and Chapter 18 for a more thorough review of
smart grid technologies. Not surprisingly as the price of
capacity and/or energy has increased and the costs of
metering, communications, automated controls and on-site
generation have fallen the amount of flexibility in electricity
usage increases.
The value of DR participation in PJM's markets should be
reflected in the revenues paid to DR participating in each of
these markets. As Figure 17.1 clearly shows, DR is receiving
813
the majority of its value as a capacity resource (in gray) to
help ensure resource adequacy. DR receives only a small
fraction of value for providing energy reductions in the PJM
Energy Market, and during 2009 and 2010 revenues from
providing Synchronized Reserve have exceeded those
revenues from providing reductions in the Energy Market
outside of emergency conditions.
Figure 17.1
Estimated DR revenues by PJM market.
Source: PJM
The purpose of this chapter is to recount the experience of the
PJM Regional Transmission Operator (RTO) in enabling DR
participation in its Energy, Capacity, and Ancillary Service
Markets and to report the current state of DR participation
ranging from self-scheduling an economic reduction in the
Energy Market to clearing MW of load reduction capability in
the three-year-forward RPM Capacity Market auctions.
814
Figure 17.2 shows the footprint and vital statistics of the PJM
regional market as of June 1, 2011, with the integration of
First Energy's American Transmission System, Incorporated
(ATSI) and Cleveland Public Power (CPP). Overall, PJM is
the largest wholesale power market and centrally dispatched
system in the world as of the writing of this chapter, and is
vital to the production of almost 20% of U.S. GDP.
Figure 17.2
PJM footprint and key statistics.
The remainder of this chapter is organized around market
opportunities for DR and the relative value of DR as reflected
by the revenues paid to DR shown in Figure 17.1. Section
“Entities that Participate as DR in PJM's Markets” quickly
reviews the entities that can participate as DR in PJM's
markets. Section “Demand Response Participation in the
Capacity Market” describes DR participation in the RPM
Capacity Market with a brief history of DR participation as a
815
capacity resource prior to RPM. Section “DR Participation in
the Energy Market (Day-Ahead and Real-Time)” provides a
short history of DR participation in PJM's Energy Markets
and describes the mechanisms by which DR currently
participates in PJM's Day-Ahead and Real-Time Energy
Markets. Section “DR Participation in Ancillary Service
Markets” summarizes DR participation in Ancillary Service
Markets. Section “Administration of DR in PJM's Markets”
briefly outlines how PJM administers DR participation in its
markets, and section “DR Participation Going Forward:
Current Issues related to Demand Response” concludes with
an examination of current and emerging issues facing DR
participation in PJM's markets.
Entities That Participate as DR in PJM's Markets
When one thinks of demand response (DR), it is natural to
envision the end-use customer, whether it is a household a
commercial customer, or an industrial customer that is
engaged in reducing energy usage. However, these customers
(with a few exceptions) are taking electricity service at the
retail level and PJM operates at the wholesale level.
Consequently, there needs to be a third party that stands
between the end-use customer at the retail level, that is an
active participant in PJM's markets at the wholesale level.
Moreover, this party must be a member of PJM in order to
participate in PJM's markets.
There are three types of entities that are PJM members that
can participate as DR: Load Serving Entities (LSEs),
Electricity Distribution Companies (EDCs), or Curtailment
Service Providers (CSPs). LSEs are PJM members that
aggregate and/or serve end-use customers at the retail level.
LSEs may wish to participate as DR in PJM's markets as a
816
means to hedge exposure to the costs of contracting for
capacity to ensure resource adequacy or to engage in load
reductions in the energy market to reduce their exposure to
periods of high energy prices.
EDCs are PJM members that own or lease distribution
networks at the retail level and deliver energy to end-use
customers. In many cases EDCs are also LSEs and have the
same types of incentives to participate as DR in PJM's
markets. EDCs, as the distribution network operator, may also
wish to provide DR as a capacity resource to PJM as a by
product of maintaining reliability on their distribution
networks by ensuring their network assets will not be
overloaded on peak days.
Finally, CSPs are PJM members that specialize in aggregating
DR at the retail level and providing those DR services to
PJM's markets at the wholesale level. A CSP does not have
load-serving responsibilities nor does it own distribution
assets. A CSP has the incentive to provide DR in PJM's
markets based on the economic incentives of payments to the
CSP as the PJM member from PJM's markets, and in
contracts it can negotiate with the end-use customers at the
retail level to split the savings from providing reductions as a
capacity or energy resource.
Participation in PJM's markets as DR comes with one caveat
that stems of the FERC Order 719 proceeding and compliance
filing process at PJM.
3
Order 719 required PJM to also
address the need to more clearly delineate federal and state
jurisdiction over DR activity in the wholesale market. Given
PJM's obligation to administer its tariff in a
non-discriminatory manner, the need for a workable way for
PJM to recognize and implement decisions by retail
817
regulators about demand response participation in the
wholesale market by end-users subject to its jurisdiction
became imperative as the level of CSP activity increased.
PJM proposed a process for ascertaining and implementing
the decisions of Relevant Electric Retail Regulatory
Authorities (RERRAs) affecting participation by
jurisdictional end-users in PJM's DR market opportunities.
4
3
See Wholesale Competition in Regions with Organized Electric Markets,
Order No. 719, FERC Stats. & Regs. ¶31,281 (2008) and PJM
Interconnection, L.L.C., Initial Filing, Docket No. ER09-701-000
(February 9, 2009).
4
PJM Interconnection, L.L.C., Initial Filing, Docket No. ER09-701-000
(February 9, 2009).
As alluded to in the introduction, it is the PJM member
participating in the wholesale market that observes the
transparent prices for Capacity, Energy, and Ancillary Service
and responds to the incentives just described that has led to
increased DR participation in PJM's markets over time,
especially in the RPM Capacity Market that is discussed next.
Demand Response Participation in the Capacity
Market
This section describes how DR participates in the Capacity
Market from the registration process to performance
obligations and testing requirements. The minimum
performance obligation, unchanged since 1991, requires that a
participating end-use site be ready, willing, and able to reduce
energy usage 10 times per summer season for a maximum of
six contiguous hours per event at the direction of PJM
Operations. This section also reviews the impact of the new
818
three-year-forward auction for capacity procurement in 2007
known as the Reliability Pricing Model (RPM) on capacity
prices and the resulting growth in CSP participation in PJM.
The success of the PJM Capacity Market in developing DR
has in turn led to the need to develop two new DR products
also covered in this section.
Resource Adequacy and the Role of DR
PJM is responsible for resource adequacy planning for the
PJM RTO footprint. In carrying out this responsibility, PJM
develops load forecasts by EDC zone and RTO-wide, with
input from the member EDCs including historical load data.
In determining the peak load forecast PJM develops an
“unrestricted peak load” forecast that does not account for DR
that instead would be included as capacity (supply) for
purposes of meeting resource adequacy requirements that
ensure a loss of load probability of one day in 10 years. PJM
also is responsible for determining the installed reserve
margin (IRM), which along with the forecast peak load
determines the resource adequacy requirements for a given
Planning Year. PJM's own load forecast can be affected in
two ways by an end-user's deployment of load reduction
capability: (1) if the end-user simply deploys its load
reduction capability during PJM's 5 coincident peak hours,
which usually occur late in the afternoon of summer
weekdays, then its reduced load will lower PJM's forecasted
peak loads; or (2) if the end-use site participates as Load
Management in the capacity market, an adjustment will be
made to PJM's forecasted peak loads. In either event, the
demand response will serve to lower the amount of generation
resources needed for resource adequacy.
819
Brief History Before RPM
Prior to the implementation of the RPM Capacity Market in
2007, PJM operated a Capacity Credit Market that started in
1999. The Capacity Credit Market was a voluntary market for
market participants to exchange capacity resources on a daily,
monthly, or annual basis. DR participated in the old Capacity
Credit Market construct under what was known as Active
Load Management (ALM). DR participating as ALM would
allow the LSE that had submitted the ALM to reduce its
capacity obligation and therefore reduce its share of the cost
of maintaining resource adequacy. The assignment of DR as a
capacity resource by an LSE in this construct could be done
with as a little as a day's notice for the next day, as capacity
obligations could possibly change for competitive LSEs as
load switched suppliers with in states in PJM that allowed
retail competition.
However, prior to the implementation of the RPM Capacity
Market, the incentive for LSEs to submit DR for participation
in the Capacity Credit Market was relatively small. Table
17.1 shows the annual weighted average prices of capacity
from 2002 to 2007 along with the amount of committed DR
as ALM as of June 1 of each year from 2002 to 2006.
Table 17.1
DR Participation and Capacity Prices Under the Capacity Credit Market and ALM
Construct*
2002 2003 2004 2005 2006
Capacity Price ($/MW-day) $33.40 $17.51 $17.74 $6.12 $5.73
ALM Quantity (MW) 1,342 1,265 1,412 2,035 1,655
*
2007 State of the Market Report, Table 2-97, p. 107 and Table 5-10, p. 246.
820