Henry Yoshimura
Panel Discussion: Policy and Planning
Henry Yoshimura Director, Demand Resource Strategy ISO New England
JUNE 21, 2013
| BOSTON, MA
The Past, Present, and Future of Demand Resources in New England EBC Renewable Energy Program The promise of Smart Grid—what does it mean for renewables? Policy and Planning Panel
Henry Yoshimura DIRECTOR, DEMAND RESOURCE STRATEGY
Energy Efficiency a Priority for New England Capacity market coupled with state policies have produced robust EE investment
• Ranking of state EE efforts by the American Council for an Energy-Efficient Economy : – Massachusetts
1
– Vermont
5
– Connecticut
6
– Rhode Island
7
– New Hampshire
18
– Maine
25
• Billions spent over the past few years; more on the horizon – Approximately $1 billion invested from 2008 to 2010 – ISO estimates $5.7 billion to be invested in EE from 2015 to 2021
3
Impact on New England Demand: Energy Demand Flat, Peak Demand Still Growing (but at a Lower Rate) New England: Annual Energy (GWh)
New England: Summer 90/10 Peak (MW) 35000
155000
34000 150000 33000
145000
32000
31000
140000
30000 135000 29000
130000 2012
2014
RSP12
2016
RSP12-FCM
2018
2020
2022
RSP12-FCM-EEF
28000 2012
2014
RSP12
2016
RSP12-FCM
2018
2020
2022
RSP12-FCM-EEF
4
PRD Can Further Improve Market Performance • What is Price Responsive Demand (PRD)?
– Consumers change consumption in real time, in response to changes in wholesale power prices – Use more energy when prices are low and less when prices are high
• What are the benefits?
– Increase in system productivity (capacity utilization) by reducing peak and increasing off-peak use
• Demand Response, Distributed Generation, Storage, Electric Vehicles,
– Reduce customer electricity bills • • • •
Reduces risk premiums in rates Uses actionable information to help customers manage energy costs Reduces peak- period wholesale prices Eliminates cross-subsidies in rates
– Treat customers as customers
• Avoids treating customers as suppliers with obligations • Avoids estimating customer baselines • Supports retail choice—services customized to each customer 5
Progress Has Been Made … But Additional Things Can be Done • While enormous progress has been made … • … Retail pricing, with very few exceptions, has retained its non-dynamic, average cost reflective characteristics
6
Barriers to Customer Response to Prices • Most New England states lack advanced metering infrastructure and associated tools to assist customers to respond to prices – Results in basic/default service being based on a uniform rate • Consumers cannot benefit from changing their consumption levels in response to changing real-time wholesale energy prices • Smart grid technology makes little sense under uniform retail rates
– Limits ability of retail suppliers to offer other retail products – Limits the ability of consumers to evaluate other retail products (e.g., dynamic retail offers) or the costeffectiveness of smart grid investment opportunities 7
Challenges to Investment in a Smarter Grid • Utility distribution companies risk disallowance of cost recovery associated with improved infrastructure investments – Use of historic test year
• Incremental benefits of improved infrastructure accrue mostly to customers and society, not to the utility – Savings in utility operating costs may have already been captured through infrastructure upgrades with limited functionality made at the time of industry restructuring – Customers benefit from service improvement and bill reductions – Society benefits from an improved environment
8
What Can be Done to Breakdown the Barriers? • Revise the ratemaking process so as to encourage broader, more forward thinking concerning the future electric grid • Conduct comprehensive analysis of the benefits and costs of advanced metering and other infrastructure improvements
• Comprehensive stakeholder discussions and participation needed 9
In Conclusion… Past 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
New England Demand Resource Growth in MW
Present • ISO implements “smartgrid” system • Monitor and dispatch demand response in realtime by location • Dispatch similar to generation: when and where needed
• Advanced metering and communications
• Automated load control
60
40 30 20
Savings from reduced LMPs
Estimated Cost Savings: Demand Response Millions $
10
• ~$650 M (Jan ‘07 – May ’13)
• Full integration of demand response into capacity, energy, and ancillary service markets
• Dynamic retail rates
• Facilitates aggregation 50
• Capacity market payments helped stimulate Demand Resource growth
Future
0
Payment Oct 2010 - Sept 2011
• Distributed generation • Energy storage (and EVs)
• All customers enabled to provide demand response
APPENDIX Additional Information
About ISO New England • Private not-for-profit • Regulated by the federal government • Independent of companies doing business in market • Administer competitive wholesale electricity markets
• Operate transmission system • Plan for long-term system needs 12
New England’s Electric Power Grid at a Glance • 6-state region • 14 million residents; 6.5 million meters • 350+ generators • 37,000 MW of resources with capacity supply obligations – 32,000 MW generation – 2,900 MW demand resources – 1,900 MW imports
• 8,400 miles of transmission • 28,130 MW all-time peak demand 13
Targets for Renewable Resources Increase Significantly over Next Decade Renewable Targets as % of Energy in New England (2020) 18%
• Renewable targets projected to increase from 10% in 2010 to 18% in 2020 – Adding Energy Efficiency increases target to 30%
• 18% of total New England energy in 2020 is equivalent to: 82% Energy from state renewable targets
– 9,400 MW of wind capacity, or – 3,300 MW of biomass capacity
Energy from other sources
14
New Opportunities for Regional Consumers to Benefit from Demand Response and Smart Grid • On June 1, 2010, ISO implemented the Forward Capacity Market (FCM) – Demand resources now represent approximately 10% of capacity supply obligation – Demand resources include demand response, distributed generation, energy efficiency
• New infrastructure developed to securely communicate dispatch instructions, and receive near realtime telemetry and revenue-quality meter data from active demand response capacity resources
Demand Resources (MW) 4,000 3,500
FCM
3,000 2,500 2,000 1,500 1,000 500 0
15
Payments to Demand Response 2011 and 2012 $ Million
• Through the regional wholesale electricity markets, demand response has been paid approximately $200 million over the past two years
DALRP & RTPR, $8
Capacity Payments, $187
Regional price response programs
TPRD, $2
16
Expanding Demand Resource Opportunities in Region Moving toward greater integration into regional electricity markets
Currently
Long-Term Goal
• Demand resources can sell demand reduction capability in the FCM and receive payments comparable to generation resources
• Fully integrate demand response into energy, capacity, and ancillary markets
• Opportunities for customers to purchase electricity from the wholesale energy market at wholesale energy prices
• Support state efforts to encourage demand response through the implementation of advanced metering, monitoring/control infrastructure, dynamic retail rates 17
Smarter Grid Allows Customers to Use Energy More Wisely While Saving Money
G3 Basic Service: $38,133.81 Real-Time Price: $24,367.70 One-Month Savings: 36%
18
Customer Savings Under Real-Time Prices Exceed Full-LMP Payment For Demand Response Comparison of Typical Customer Bills Under National Grid Basic Service and Real-Time Price (NEMA Load Zone) -- January 1, 2005 to December 31, 2009
Rate Class R1 G1 G2 G3
Basic Service $ 4,043 $ 8,190 $ 124,378 $ 1,370,674
Real-Time RTP with Price Price ("RTP") Savings Response Savings $ 3,533 13% $ 3,284 19% $ 7,247 12% $ 6,742 18% $ 106,217 15% $ 98,871 21% $ 1,140,709 17% $ 1,064,680 22%
Basic Service With Full LMP Payment for Price Response Savings $ 3,678 9% $ 7,455 9% $ 113,330 9% $ 1,255,703 8%
Note: This comparison includes generation commodity only – state-regulated wires charges (i.e., T&D costs) are not included
19
Region Lacks Advanced Metering Infrastructure Advanced Meter Penetration (2012)* AMI Meters (000)
Total Meters (000)
% AMI
ME
671
1,373
49
9
NH
77
743
10
9
CT
101
2,045
5
25
MA
71
3,385
2
46
RI
0
477
0
6
VT
0
398
0
5
Region
920
8,421
11
100
State
% Regional KWh Sales ME VT NH
MA CT
RI
Comparison of AMI Penetration
California 70%
USA 23%
New England 11%
*Source: FERC 2012 Assessment of Demand Response and Advanced Metering. (December 2012) , Table 2-3. 20
Henry Yoshimura Director, Demand Resource Strategy ISO New England
JUNE 21, 2013
| BOSTON, MA
The Past, Present, and Future of Demand Resources in New England EBC Renewable Energy Program The promise of Smart Grid—what does it mean for renewables? Policy and Planning Panel
Henry Yoshimura DIRECTOR, DEMAND RESOURCE STRATEGY
Energy Efficiency a Priority for New England Capacity market coupled with state policies have produced robust EE investment
• Ranking of state EE efforts by the American Council for an Energy-Efficient Economy : – Massachusetts
1
– Vermont
5
– Connecticut
6
– Rhode Island
7
– New Hampshire
18
– Maine
25
• Billions spent over the past few years; more on the horizon – Approximately $1 billion invested from 2008 to 2010 – ISO estimates $5.7 billion to be invested in EE from 2015 to 2021
3
Impact on New England Demand: Energy Demand Flat, Peak Demand Still Growing (but at a Lower Rate) New England: Annual Energy (GWh)
New England: Summer 90/10 Peak (MW) 35000
155000
34000 150000 33000
145000
32000
31000
140000
30000 135000 29000
130000 2012
2014
RSP12
2016
RSP12-FCM
2018
2020
2022
RSP12-FCM-EEF
28000 2012
2014
RSP12
2016
RSP12-FCM
2018
2020
2022
RSP12-FCM-EEF
4
PRD Can Further Improve Market Performance • What is Price Responsive Demand (PRD)?
– Consumers change consumption in real time, in response to changes in wholesale power prices – Use more energy when prices are low and less when prices are high
• What are the benefits?
– Increase in system productivity (capacity utilization) by reducing peak and increasing off-peak use
• Demand Response, Distributed Generation, Storage, Electric Vehicles,
– Reduce customer electricity bills • • • •
Reduces risk premiums in rates Uses actionable information to help customers manage energy costs Reduces peak- period wholesale prices Eliminates cross-subsidies in rates
– Treat customers as customers
• Avoids treating customers as suppliers with obligations • Avoids estimating customer baselines • Supports retail choice—services customized to each customer 5
Progress Has Been Made … But Additional Things Can be Done • While enormous progress has been made … • … Retail pricing, with very few exceptions, has retained its non-dynamic, average cost reflective characteristics
6
Barriers to Customer Response to Prices • Most New England states lack advanced metering infrastructure and associated tools to assist customers to respond to prices – Results in basic/default service being based on a uniform rate • Consumers cannot benefit from changing their consumption levels in response to changing real-time wholesale energy prices • Smart grid technology makes little sense under uniform retail rates
– Limits ability of retail suppliers to offer other retail products – Limits the ability of consumers to evaluate other retail products (e.g., dynamic retail offers) or the costeffectiveness of smart grid investment opportunities 7
Challenges to Investment in a Smarter Grid • Utility distribution companies risk disallowance of cost recovery associated with improved infrastructure investments – Use of historic test year
• Incremental benefits of improved infrastructure accrue mostly to customers and society, not to the utility – Savings in utility operating costs may have already been captured through infrastructure upgrades with limited functionality made at the time of industry restructuring – Customers benefit from service improvement and bill reductions – Society benefits from an improved environment
8
What Can be Done to Breakdown the Barriers? • Revise the ratemaking process so as to encourage broader, more forward thinking concerning the future electric grid • Conduct comprehensive analysis of the benefits and costs of advanced metering and other infrastructure improvements
• Comprehensive stakeholder discussions and participation needed 9
In Conclusion… Past 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
New England Demand Resource Growth in MW
Present • ISO implements “smartgrid” system • Monitor and dispatch demand response in realtime by location • Dispatch similar to generation: when and where needed
• Advanced metering and communications
• Automated load control
60
40 30 20
Savings from reduced LMPs
Estimated Cost Savings: Demand Response Millions $
10
• ~$650 M (Jan ‘07 – May ’13)
• Full integration of demand response into capacity, energy, and ancillary service markets
• Dynamic retail rates
• Facilitates aggregation 50
• Capacity market payments helped stimulate Demand Resource growth
Future
0
Payment Oct 2010 - Sept 2011
• Distributed generation • Energy storage (and EVs)
• All customers enabled to provide demand response
APPENDIX Additional Information
About ISO New England • Private not-for-profit • Regulated by the federal government • Independent of companies doing business in market • Administer competitive wholesale electricity markets
• Operate transmission system • Plan for long-term system needs 12
New England’s Electric Power Grid at a Glance • 6-state region • 14 million residents; 6.5 million meters • 350+ generators • 37,000 MW of resources with capacity supply obligations – 32,000 MW generation – 2,900 MW demand resources – 1,900 MW imports
• 8,400 miles of transmission • 28,130 MW all-time peak demand 13
Targets for Renewable Resources Increase Significantly over Next Decade Renewable Targets as % of Energy in New England (2020) 18%
• Renewable targets projected to increase from 10% in 2010 to 18% in 2020 – Adding Energy Efficiency increases target to 30%
• 18% of total New England energy in 2020 is equivalent to: 82% Energy from state renewable targets
– 9,400 MW of wind capacity, or – 3,300 MW of biomass capacity
Energy from other sources
14
New Opportunities for Regional Consumers to Benefit from Demand Response and Smart Grid • On June 1, 2010, ISO implemented the Forward Capacity Market (FCM) – Demand resources now represent approximately 10% of capacity supply obligation – Demand resources include demand response, distributed generation, energy efficiency
• New infrastructure developed to securely communicate dispatch instructions, and receive near realtime telemetry and revenue-quality meter data from active demand response capacity resources
Demand Resources (MW) 4,000 3,500
FCM
3,000 2,500 2,000 1,500 1,000 500 0
15
Payments to Demand Response 2011 and 2012 $ Million
• Through the regional wholesale electricity markets, demand response has been paid approximately $200 million over the past two years
DALRP & RTPR, $8
Capacity Payments, $187
Regional price response programs
TPRD, $2
16
Expanding Demand Resource Opportunities in Region Moving toward greater integration into regional electricity markets
Currently
Long-Term Goal
• Demand resources can sell demand reduction capability in the FCM and receive payments comparable to generation resources
• Fully integrate demand response into energy, capacity, and ancillary markets
• Opportunities for customers to purchase electricity from the wholesale energy market at wholesale energy prices
• Support state efforts to encourage demand response through the implementation of advanced metering, monitoring/control infrastructure, dynamic retail rates 17
Smarter Grid Allows Customers to Use Energy More Wisely While Saving Money
G3 Basic Service: $38,133.81 Real-Time Price: $24,367.70 One-Month Savings: 36%
18
Customer Savings Under Real-Time Prices Exceed Full-LMP Payment For Demand Response Comparison of Typical Customer Bills Under National Grid Basic Service and Real-Time Price (NEMA Load Zone) -- January 1, 2005 to December 31, 2009
Rate Class R1 G1 G2 G3
Basic Service $ 4,043 $ 8,190 $ 124,378 $ 1,370,674
Real-Time RTP with Price Price ("RTP") Savings Response Savings $ 3,533 13% $ 3,284 19% $ 7,247 12% $ 6,742 18% $ 106,217 15% $ 98,871 21% $ 1,140,709 17% $ 1,064,680 22%
Basic Service With Full LMP Payment for Price Response Savings $ 3,678 9% $ 7,455 9% $ 113,330 9% $ 1,255,703 8%
Note: This comparison includes generation commodity only – state-regulated wires charges (i.e., T&D costs) are not included
19
Region Lacks Advanced Metering Infrastructure Advanced Meter Penetration (2012)* AMI Meters (000)
Total Meters (000)
% AMI
ME
671
1,373
49
9
NH
77
743
10
9
CT
101
2,045
5
25
MA
71
3,385
2
46
RI
0
477
0
6
VT
0
398
0
5
Region
920
8,421
11
100
State
% Regional KWh Sales ME VT NH
MA CT
RI
Comparison of AMI Penetration
California 70%
USA 23%
New England 11%
*Source: FERC 2012 Assessment of Demand Response and Advanced Metering. (December 2012) , Table 2-3. 20
