2016 Conference

Presentation

Slides

Content

1.

2.

3.

Demand-side markets; now and in the future Andrew Wright, Ofgem – p. 3 - 12

Realising the value from Flexibility Jeff Whittingham, Dong Energy – p. 13 - 20

Demand Response; Aggregators Yoav Zingher, KiWi Power – p. 21 - 32

Demand-side markets; now and in the future

Andrew Wright 16th June

The Demand Side : the opportunity will knock

2

> Climate Change

> Technological Change

> Changes in the system mix

> Smart systems

>Increased value of flexibility

>Easier and lower cost access to DSR

Increased opportunity

for DSR

Barriers to realising the demand- side opportunity

• Regulatory/ market arrangements designed for the “old world” • Various barriers for flexibility in general • A fragmented and complex market…. • …which is not designed for DSR participation • Commercial challenges • Cultural / informational/ behavioural barriers

3

SYSTEM INCENTIVES

Low carbon support Fuel incentives and taxes

Electricity cash out

Payments for balancing actions

Connection charges

Capacity auctions

Payments for system services

BSUoS CM penalties

Transmission and Distribution Use of System

Recovery of capacity payments and environmental levies

System operator disconnection and curtailment

Environmental Incentives

5

High Level Principles

Incentives reflect costs / value to

the whole system

As much as possible in the

market

A level playing field

Non-distortive recovery of fixed and sunk costs

Consistent with European

integration

POTENTIAL FUTURE ARRANGEMENTS

6

As much as possible in the market? A more granular wholesale market

• Location • Time •Connection level

A market in capacity and constraints

• Firm vs. non firm grid access • Capacity rights and obligations • Secondary markets

Flexibility markets

• Rationalise flexibility products • “Marketise” SO activities

•DSO/ SO integration

Local markets

• Managing local congestion • Enabling local solutions

• Supply and demand side constraints

POTENTIAL FUTURE ARRANGEMENTS

7

A level playing-field between ….

Supply side vs demand

side

Technologies

Network vs Generation

Grid connected vs Embedded vs

On site

Imported vs Domestic

POTENTIAL FUTURE ARRANGEMENTS

Relevant Ofgem/DECC work • Imminent joint “call for evidence” with DECC

– DSR and aggregators

– Network charging

– DSOs and local markets

• Enhanced SO

• Review of “Whole system” costs

• Embedded benefits review

8

Joint Call for Evidence with DECC

1. Removing policy and regulatory barriers

2. Providing price signals for flexibility

3. A system for the consumer

4. The role of different parties in system and network operation

5. Innovation

9

For I&C DSR: • Many of the enablers in place • Large users have commercial incentive to participate • Traditional provision from largest users, typically using

on-site generation • Many do not participate (as much as they could) as

unaware of the opportunities or wary of the risks • Some existing initiatives to address this However, we need to: • Consider ways to engage with harder-to-reach groups • Increase awareness of the full range of DSR

opportunities available (beyond NG balancing) • Help identify the options most appropriate to each

individual consumer

DONG ENERGY RE A LIS I NG THE V A LUE F RO M F LE XIB I L I T Y

DONG ENERGY JUNE 2016

The Energy Transformation and Flexibility

2

THE CHALLENGE

Transformation to cost effective,

green, sustainable energy

Innovate to develop the energy system to support this

transformation

THE SOLUTION

Demand side flexibility

fundamental

Change the way we consume

Help UK business’s along this

journey

DONG ENERGY JUNE 2016

The customer challenges

3

Availability and volume

requirements

Access to greater value

through additional revenue

streams

Decision making,

where to begin

Not incur a penalty for

non-delivery

Accessing and

implementing on

site

DONG ENERGY JUNE 2016

The global leader in offshore wind and we have a large generation

portfolio to balance.

By using the flexibility within customer portfolios we can reduce consumption

during times of low system margin, reducing our imbalance costs. Customers

receive a share of the savings on delivery of flexible consumption.

Simple to set-up and use:

generate revenue at times that suit you

commitment free – no penalties for not delivering

no minimum volume requirements for participation

Renewable Balancing Reserve

4 DONG ENERGY JUNE 2016

Renewable Balancing Reserve – How it works

Removing the barriers

5

1 2 3 5 4

DONG ENERGY JUNE 2016

6

Identifying and understanding flexibility

Energy Vision & Site

Optimisation

DONG ENERGY JUNE 2016

Flexibility – what is holding you back?

7

Manage demand

and reduce commodity costs

Unlock your flexibility

and generate new revenue

DONG ENERGY JUNE 2016

DONG Energy Innovation

Gas

Electricity

Trading

Solutions

Flexibility

Sustainability Transparent electricity

contracts

Range of Flexibility

solutions

Renewable electricity at no premium

8 DONG ENERGY JUNE 2016

Demand Response Aggregators

Power Responsive Conference II 2016

Why do we need demand response?

25% of the UK’s

generating capacity will have shut down within

10 years as old coal and nuclear power

stations close due to Large Combustion

Plant Directive (LCPD, 2001/80/EC)

Source: Department of Energy & Climate Change, Electricity Market Reform White Paper 2011, July 12, 2011

http://www.decc.gov.uk/en/content/cms/legislation/white_papers/emr_wp_2011/emr_wp_2011.aspx

= £110bn investment

20

Over £110bn in investment

required to build the equivalent of 20 large power stations and

upgrade the grid

DEMAND

DEMAND

2050

2015

By 2050,

electricity demand is set

to double, as we switch

transport and heating onto

the electricity grid

2014

2023

Deceasing capacity Increasing demand Investment required

50%

Goal for UK balancing to be provided by Demand Response

CEO National Grid, Power Responsive Conference

June 2015

£400 million

Value of DSR to National Grid per year

Based on 50% of 2015 balancing costs

£8 billion

Annual savings to UK consumers from deployment of DSR, interconnectors

and storage

National Infrastructure Commission Report, "Smart Power"

March 2016

Routes to Market

• Market fit with assets and

flexibility

• Pricing and tendering

strategies

• Modeling and analytics

Direct Large to very large capacity

Bespoke bids

✗Market expertise – present and future

✗Asset analytics

✗Project management

✗Metering, controls and communications

technology development capability

✗Single site risk

✗Bidding risk

✗24/7 in-house DSR team

Aggregator

Small to large capacity

Access to all markets

Technology

Outsourced turnkey solution

Project management and upgrades

Earnings protection through portfolio

management

✗Fee

Qualifying your assets for participation in demand response

Response time

Duration

Events per year

Does your site have these assets?

Can your asset(s) respond in 30 seconds to 30 minutes?

Can it hold for 30 minutes to 2 hours?

Up to 5 or up to 50 times year

Chiller plant Hot water

plant

Extractor fan

Air handling unit

UPS

DRUPS

Heat pump

Lighting

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Thank you.

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