integration of the market response 2017 -...

1

Integration of the Market Response 2017 WSIV presentation

Brussels, March 28th 2017

Workshop agenda

Reminder of the objective, planning and scope of the study

2

~15 min

Presentation of the final proposal of methodologies

Discussion on the implementation

Next steps

~75 min

~30 min

~60 min

Context

Market Response is a crucial market dynamic during difficult situations on the electricity

grid, especially in tough conditions, when adequacy problems arise

European (2009/72/CE and 2012/27/CE) and national policy makers as well as

regulators are pushing for an increased development of demand side response (DSR)

and Market Response. This effort is mirrored by market stakeholders’ demands (FRP,

BRP, producers, suppliers, third party aggregators and customers) to fine-tune the

methodology used to grasp the potential of Market Response in Belgium

In 2015, Elia has launched a questionnaire to the BRPs, Elia grid users and/or

aggregators to estimate the Market Response in moments of systems stress. In 2016

the results showed a decrease in volumes

Key stakeholders on the market have expressed their willingness to be associated with

the definition of a new methodology to define Market Response in Belgium

3

Agenda

4

2 Final methodology proposal

1 Goal, scope and planning

3 Implementation proposal and discussion

4 Next steps

The workshops aim at involving the stakeholders to obtain and validate a

methodology by the end of March 2017

5

Jan Feb Mar Apr

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Activity 2: Back office

analysis

SUBGROUP

17/03

Workshop 3:

Methodology

selection

Final report Activity 1: Task Force

animation

07/02

Task force

24/01

Workshop 1:

Brainstorm

23/02

Workshop 2:

Methodologies

review

28/03

Workshop 4: final

Final proposal &

Implementation

20/04

Task force

presentation

Subgroup interviews

WS

summary

Benchmark,

Subgroup interviews

WS 3 preparation Final

CCL

WS

summary WS

summary

E-CUBE

Criteria

definition

Elia interviews

Impl.

Project scope: Market Response encompasses all DR/DSR not subject to

a contract with the TSO, above normal conditions (>150€/MWh)

6

Voluntary demand

response

DR type Associated product

R1, SDR, R3DP, ICH1)

SMS, notification…

Perimeter of the market response

Demand response

contracts from BRPs

With TSO

With BRP

Contract based

DR valued within a

portfolio

DR valued in the

market

DSR not explicitly sold on any energy/flexibility or capacity market. TSO do not have any trigger on this DSR. Implicit DSR is driven by

prices signals. Suppliers optimise their portfolio according to prices or tariffs level. (Time Of Use Tariffs)

DSR which can be valued through markets mechanisms : Strategic Reserve (SDR), R3-DP, R3 ICH, in the future, potentially : DA/ID

In a market

DR valuation

Within in a

portfolio

Within a

portfolio

This category is contracted

between the customer and the

BRP who reacts to prices

Voluntary DR responds to signals

without any incentive. Signals can

be sent by the TSO or the BRP

Description

This type of DSR is directly

activated by the TSO in periods of

scarcity

Source: E-CUBE Strategy Consultants

1) These products were excluded of the perimeter of the study as they are directly contracted with Elia

2) The price of 150€/MWh is used by Elia and the Creg in the design of SDR as a reference for high prices

Focus: above normal conditions (>150€/MWh2))

Price based demand

response

BidLadder, DA/ID DR

Time of Use tariffs

In a market

Within a

portfolio

This type of DR is directly sold in

the energy markets by the

customer

This type of DR is not directly sold

but it is indexed on the market

price

Specific focus in the following pages

Project scope: under a certain threshold, market response is already taken

into account in the load forecast by Elia – the methodology aims at

assessing market response above this threshold, above normal conditions

7 Source: E-CUBE Strategy Consultants

Input load profile calculation

Time

Price (€/MWh)

Flag

limit:

150€/

MWh1)

The price is above the flag

limit

the period is removed

from the input of the

adequacy model

Since the input of the model is

based on historical load, market

response is already integrated in

the calculation under “normal”

price conditions

1. When the price is inferior to the flag limit: market response is already taken in the calculation

2. When the price is superior to the flag limit: market response is not taken into account since the hours are flagged

this volume is to be assessed by the methodology

What is the market response

during these times?

1) The price of 150€/MWh is used by Elia and the Creg in the design of SDR as a reference for high prices

• The volume assessment simulates system operation, in particular the scheduling of power plants in

the energy market, taking into account that some capacity is to be ‘reserved’ for operation after

the energy market, i.e. ancillary services (AS).

• AS provided by generation units: the capacity is ‘blocked' with constraints in optimization

• AS provided by demand response: the capacity is removed from the Total DR in the optimization

Impact of Ancillary Services (1)

8

2016 2018 2020

Total DR

Market DR ASDR

Historic

Data

The objective of the study is to find the Demand

Response in the Energy Market - Market DR

Together, Ancillary Service DR and Market DR

determine the total DR capacity equipped to react

during extra-ordinary conditions – Total DR

The question how evolutions inter-yearly (yearly

dimensioning) and intra-yearly (weekly, monthly

contracts) in the share of DR providing “reserved”

ancillary services*, impact the Market DR - ASDR

Illustrative example

*Currently limited to R1 and R3 ; non-reserved R3 is considered

in the energy market following its non-reserved nature)

MW

The proposed methodology looks into the historic aggregated curves to determine Market

DR. Therefore, the curves already exclude the reserved AS in that same year!

But as the share of demand response can change over time, extrapolations of the Market

DR may require a correction with the expected evolution of DR.


9

Decreasing DR in AS will increase

Market DR

Increasing DR in AS will decrease

Market DR

Requires a consistency check with the

Total DR Capacity evolutions

2016 2018 2020

Total DR

Market DR ASDR

Historic

Data


MW


• Contracted Operating Reserves are expected to

evolve over time (following with reserve sizing

tools) over the years.

• Only part of these Contracted Operating

Reserves are procured from Demand Response,

amongst other technologies. This varies inter-

yearly and intra-yearly (consider for instance the

projected average).

A correction factor for the Market DR can be

justified and estimated based on :

1. Projections of the AS need

2. Historic DR contribution

2016 2018 2020

R1 DR

R3 DR

Total

contracted

operating

reserves

by ELIA

Historic

Data


Total ASDR

MW

Project scope: Price based DR and contract based DR are limited for the

residential segment while voluntary DR tackles the three segments


Contract based with the

BRPs

Price based demand

response

Voluntary demand

response

Residential Tertiary Industrial

Possible but rare

Future growth with smart

meter development

To be detailed in the following slides

Scope of this project

Load reduction, considered as “pre curtailment”, shouldn’t be taken into

account in the scope of the project

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Out of the scope of the project

The customers reduce their load because of a risk

for their own interests. This type of behavior is

seen when there is a real risk of curtailment and

indeed should not be integrated as a reaction of the

market.

SR aims at avoiding this type of situations

It should indeed not be taken into account for

its sizing.


P (MW)

Load reduction

Risk of curtailment

“Pre curtailment” 1

Though, voluntary DR as the reaction of individual customers in tight

situations is in the scope of the project. If existing, this volume should be

taken into account by the BRPs and reflected in their bids


Broad message to

the customers

Individual voluntary response of customers

Client 1:

Stop

ironing

Client 2:

Reduce

heating

Client 3:

Turn off

lights

Client 4:

Postpone

washing

The customers adapt their behavior following a message sent by

an impactful entity: government, TSO, DSO, their suppliers…

This message is sent before any activation of the SDR and the

response of the customer is purely voluntary as they are not

directly impacted by the risks.

Those client would have been eager to participate at 3000€/MWh if

a supplier product would have allowed them.

Also, this type of DR should be taken into account by the

BRPs: they will try to foresee it.

This demand response is in the scope of the project

Voluntary DR 2

Description

Methodology

integration

Example of voluntary DR situation

If there are some volumes on this category, the BRPs will anticipate such events. In theory, their

anticipation will be reflected in the bid curves since they will adapt their bidding behaviors

The voluntary DR is implicitly taken into account in the methodology as it is reflected in the

aggregated curves

Agenda

14




4 Next steps

The final methodology proposal was adapted from the WSIII proposal,

taking into account the remarks of the stakeholders

15

1. Perimeter of the study

Each methodology was confronted

to each segment of the project

scope to ensure the assessment

of the adapted perimeter

2. Criteria confrontation

Each methodology was confronted

to the other criteria established

during the second workshop:

• Coherence with the adequacy

• Robustness over the years

• Simplicity

• Cautiousness

• Feasibility

Methodology selection

Based on the analysis, a first

methodology proposal was

presented during the first workshop.

The proposal was discussed during

the workshop

Methodology proposal

and discussion


The methodology proposal was

adapted integrating the remarks of

the stakeholders raised during the

second Workshop.

The methodology is divided into three

different steps:

A. Aggregated curves analysis

B. Objective qualitative Q&A

C. Global sanity check

Final methodology

proposal

The overall price based and contract with BRPs volumes can be estimated

globally with the aggregated curves, and complemented with a qualitative

Q&A to assess the details of the activation


Contract

based with

the BRPs

Price based

demand

response

Voluntary

demand

response


Q&A to the BRP Q&A to the BRP and

customers

Q&A to the BRP Q&A to the BRP and

customers

A Aggregated curves analysis: quantitative approach

B Objective Q&A: qualitative approach

C Global sanity check

Voluntary DR foreseen by the BRPs is taken into

account in the aggregated curves

Agenda

17


A Aggregated curves methodology

B Objective qualitative Q&A


The aggregated curve methodology can provide an estimation of the

global volume of contract based with BRPs, price based DR and voluntary

DR


Contract

based

with the

BRPs

Price

based

demand

response

Voluntary

demand

response


Aggregated curves analysis

Aggregated curves analysis: global

volume estimation

Perimeter

• This methodology enables to estimate the total

volume of the tertiary and industrial customers

for the contract based with BRPs and Price

based DR categories.

• This methodology also integrates the volumes

of voluntary DR foreseen by the BRPs

Principle

• This methodology compares the aggregated

curves of Epex Belgium in situations of high

prices. The market response is reflected in the

demand curves and also in the supply curves,

which would have to be retreated to exclude

generation.

• Since there is no lack of data for this

methodology, it will provide a systematic

first appraisal of the volumes.

This methodology provides a systematic

estimation of global volume of priced based

DR and contracts with the BRPs

A Aggregated curves analysis

Disclaimer:

• The smart orders1) are not taken into account in these curves. This reduces the total volume estimated. Though, according to EPEX, the

volumes of Demand Response smart orders are very limited, most of it being from generation assets.

• The OTC bids are implicitly taken into account in the curves. If not in the curves, it would correspond to irrational behavior of the

stakeholders, which is not to be taken into account

1) Smart orders are linked block orders (one block is executed if the other is also) or exclusive block orders

Smart orders can be exclusive or linked block orders. They mainly

concern generation

19 Source: EPEX, E-CUBE Strategy Consultants

BACKUP

Linked block orders Exclusive block orders 1 2

Two types of smart orders can be valued in the DA market:

• Linked block orders

• Exclusive block orders

According to EPEX, the volumes of DR smart orders are limited, they are mostly used for generation assets

The exclusive block order regroups various block orders, but

only one being executable.

When at least one block order is in the money, the block order

executed is the one which maximizes the total welfare within

the blocks in the money

Block 1

Low price for

baseload

Block 2

Medium price for

peak load

production

Block 3

High price for

higher peak load

production

With linked block orders, the execution of a block is linked to the

execution of another block

Two types of blocks are separated:

• The child block order can be executed only if the parent one is

executed

• The parent block order can be executed alone

The goal is once again to maximize the total welfare: the “parent”

block order can be accepted although it is out of the money, if the

child block order is executed and the global family is in the money

Parent block

order

Child block

order

Executed only if the parent

block is executed

Only the block maximizing the

welfare is activated

Market response volumes are assessed with a decrease of demand or an

increase of supply for higher prices in the aggregated curves


Market response volumes valued in the DA

market

Demand decrease Offer increase

• This part can be analyzed directly in the aggregated

demand curve, by studying the decrease of volume

when price increases

Price

(€/MWh)

Volume

(MW)

Price

increase

Volume

decrease

Demand curve for a given hour

• Instead of a demand decrease, suppliers can value

market response as new offer in the market: this part

would appear in the supply curve

• The supply curve cannot be analyzed as such since

they integrate the response of generation assets. This

part has to be divided into two steps:

1. Estimation of a price range: above 500€/MWh it is

considered that no more generation will bid. Above

150€/MWh we consider that some generation can bid.

2. Study of market response in the offer curve with

two price threshold: market response above

150€/MWh gives a high bound and 500€/MWh a low

bound

A Aggregated curves analysis

Principle

Output

Capacity available in MW

The details on the activation cannot be estimated with the aggregated curve methodology, it is not possible to extract it

from the curves1)

1) This has been validated with EPEX

On the offer side, a specific price range would enable to avoid taking into

account the bids of the generation assets


Problematic

Solution

The supply curve cannot be analyzed as such since they integrate bids of generation assets, which can happen at

prices higher than 150€/MWh

• 150€/MWh is the physical barrier, generally considered as the limit bid for generation assets. But they can justify

higher bids in specific cases

• Above 500€/MWh it is considered very difficult to justify the price, and we can consider that only demand

response bids are valued >>

Set up of price thresholds 1

Restriction to these price levels to obtain a range 2 €/MWh

P(MW)

150

500

Low estimation of the offer side market response

This estimation doesn’t take into account the potential

value under 500€/MWh but definitely excludes generation

High estimation of the offer side market response

This estimation possibly takes into account the bids of

generation assets

A Aggregated curves analysis – Offer curve

Stress days won’t be refined ex ante: a pertinent distribution analysis will

be conducted when running the analysis


A Aggregated curves analysis – Stress days

When conducting the analysis, the distribution of the results will be studied 1

If specific patterns appear, they will be taken into account when integrating in the adequacy 2

The results of the market response volumes will be analyzed to integrate them in a pertinent manner in the adequacy

• Analysis of the statistical distribution of the results (confidence intervals…)

• Analysis of the impact of different parameters

• Day type

• Day time

• Temperature

• Season

• ….

P(MW) Example of possible pattern

Jan Feb Mar Apr Jun May Jul Aug Sep Oct Dec Nov

If such pattern appears in the analysis, they will be integrated.

For example this specific pattern could be integrated by separating the

volumes of the winter months from the volumes of the other months

Agenda

23





Additional information are required for the adequacy assessment of Elia,

so as to be coherent with the adequacy


Capacity estimation

Aggregated curves methodology Additional information required to

complement the first methodology

Required

inputs of the

adequacy

Methodology

&


Number of weekly

activation

Activation details

Maximum

activation duration

EPEX: “it is not to be found in the aggregated curves”

An “objective qualitative Q&A” can provide qualitative content to

complement the aggregated curves methodology


Contract

based

with the

BRPs

Price

based

demand

response

Voluntary

demand

response


Objective qualitative Q&A

Perimeter

• Each of the segments described in the

perimeter of the project scope can then be

assessed separately with a objective

questionnaire sent to the different players

(BRP, aggregators and customers)

Principle

• The questionnaire can provide answers for all

types of customers thanks to the answers of

the TSO connected customers, the

aggregators and the BRPs

• This methodology is required so as to

assess qualitative content from the

customers

• The Q&A will be improved so as to be

objective and simple

This methodology provides qualitative

content so as to complement the aggregated

curves methodology

Objective qualitative Q&A B


The Q&A enables to gather qualitative information on the market

response events: activation duration, number of possible activations

26

Objective of

the Q&A

Targeted

players

• The goal of the Q&A is to first obtain qualitative information so as to complement the

aggregated curves methodology. The key information to gather are:

• Number of possible activation per week

• Duration of the activation


• The Q&A will be sent to 3 types of stakeholders

• TSO connected customers

• Aggregators

• BRPs

Essential

requirements

of the Q&A

The Q&A has to be simple, intuitive and have questions anchored in the

reality

Agenda

27





A global sanity check can finally be conducted by comparing the peak

load reduction due to market response in other countries


Contract

based

with the

BRPs

Price

based

demand

response

Voluntary

demand

response


Extrapolation ratio methodology

• A global sanity check of the result can be

conducted with the extrapolation methodology:

by comparing peak load reduction in various

countries for example

• The questionnaire can provide a global

sanity check of the volumes currently

valued:

• This volumes can be asked with a

direct question, leading to an

objective answer

• This kind of questions is not concerned

by the main limit raised by the

stakeholders: the hypothetical situation

description

• This volume will then be compared to the

volumes previously established so as to

assess the global coherence


Agenda

29




4 Next steps

To be well implemented, the confidentiality aspects and the repetition

process have to be set up at best – We expect your insights on the best

implementation

30

Confidentiality

issues


• Various levels of confidentiality can be set up:

• Publicly shared responses

• Responses shared with Elia

• Confidential response via a third party

• The level of confidentiality aims at avoiding a possible bias or a reluctance

from the respondents

One solution would be to sign a confidentiality agreement between E-

CUBE and the stakeholders

Repetition of the

questionnaire

• Various solutions can be set up for the repetition of the questionnaire (once a

year, every two years etc) so as to take into account the evolution of the

activation details in the long run

• One possible limit would be the reluctance of some customers to fulfill the

same questionnaire if the answers do not change

One possible solution would be to repeat the questionnaire every two

years

Proposition Discussion

What would be the more

efficient way to tackle

confidentiality issues?

How often should be

repeated the

questionnaire?

Communication

of the Q&A

• Various means of communication can be set up: Q&A sent by mail, phone

call…

One possible solution would be to send the questionnaire by e-mail,

leaving the possibility to answer directly by phone to E-CUBE or to Elia

What is the most pertinent

communication channel for

the Q&A?

We welcome your feedback on the structure of the questionnaire (1/3)


Preliminary questions

Objective Example

Contract based DR

Price based DR

Cross check questions

Q&A sections

• The goal of this section is to obtain

information on the DR type valued by the

customer: is it through an aggregator,

through Elia…

• Do you realize DR?

• Through an aggregator

• Through a BRP

• Directly via contracts with Elia

• The goal of this section is to understand the

activation details of the contract based DR

of the customer :

• Number of activation


• What are the constraints of activation

(either technical or in your contracts):

• Weekly activation

• Maximum duration of activation?

• The objective is to gather the activation

details of the price based demand

response, valued by the customer when

optimizing its consumption

• Do you have any constraints regarding the

number of times a day you can adapt your

load to the prices?

• The objective of this section is to assess the

currently available volume of price based

and contract based DR

• What is the amount in MW in your portfolio

of DR contracted with the

BRP/aggregators?

1

2

3

4

1. Questionnaire to the customers




Objective Example

Contract based DR


Q&A sections

• For the BRPs, the objective of this section is

to assess the type of market response valued

• Do you value market response outside of

TSO contracted DR?

• The goal of this section is to have feedback

on the activation constraints in their

portfolio



• All types of specific activation details

• Among the contracted DR in your

portfolio contracts, what is the usual

maximum activation duration?


currently available volume of price based

and contract based DR


indexed on prices (DA prices or balancing

prices)?

1

2

3

2. Questionnaire to the BRPs




Objective Example

Contract based DR


Q&A sections


type of market response valued

• Do you value market response outside of

TSO contracted DR?

• The goal of this section is to have feedback

on the activation constraints in their

portfolio



• All types of specific activation details

• Among the contracted DR in your

portfolio contracts, what is the usual

maximum activation per week?


currently available volume of contract

based DR


not contracted with Elia?

1

2

3

3. Questionnaire to the aggregators

Agenda

34




4 Next steps

Conclusions and next steps

Conclusions

Subgroup interactions

Minutes of the Workshop – E-CUBE

Background analysis

Integration of the remarks raised during the workshop – E-CUBE

Implementation of the methodology, April – June 2017

2 workshops could be organized to:

– Present the first results of the methodology

– Present the final results of the methodology

Date of the next 2 workshops to be set up – Elia & subgroup participants & E-CUBE

35

The implementation of the methodologies will be conducted with the

stakeholders, for a final implementation by June

36

Mar Apr May Jun Juil.

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Activity 1: Task Force

animation

15/05 – 19/05

Workshop 5:

Intermediary

Results1)

26/06 – 30/06

Workshop 6:

Final results

10/07 – 14/07

Task force

20/04

Task force

presentation

28/03

Workshop 4:

Final proposal &

Implementation

Activity 2: Back office

analysis

E-CUBE

SUBGROUP

Final report & final

presentation

WS

summary

WS

summary

Hotline for the stakeholders

Launch of

the Q&A

Consultation on the Q&A

Interviews with key players

Finalization of the aggregated

curves analysis

Responses analysis

and integration

1) This workshop will present preliminary results for the aggregated curves methodology

End of

public

consultation

Aggregated curves

analysis

Integration of the insights of the

public consultation

Public consultation

integration of the market response 2017 -...

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