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Reliable Power
Reliable Markets
Reliable People
Demand Response in Alberta’s Wholesale Electricity Market Demand Response Working Group
Kick Off Meeting- September 3, 2008
Laura LetourneauDirector; Market Services
2
Agenda
• Meeting Objectives– Introductions (interests & experience)– Terms of Reference - structure, transparency, scope, rules for
engagement– Industry/Business Model for Demand Response in Alberta
• Presentation– Background and Context– Demand Response Overview– Alberta Facts– Challenges & Opportunities
• Next Steps– Finalize Terms of Reference – Evaluate Alberta Demand Response programs and results– Assess other market’s programs and results– Assess Demand Response challenges/limitations/barriers to
success– Industry/Business Model – current, options, proposed
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Background & Context
Laura LetourneauDirector; Market Services
4
Electric Industry Evolution
AESO formed
ElectricUtilitiesActpassed
May 1995
June 1995
Jan.1996
May1998
June1998
Aug.2000
Jan. 2001
PowerPoolCouncilformed
EUAtakeseffectPower Poolbegins operation
IndependentPPC & Market Surveillance Administrator appointed
IndependentTransmissionAdministrator appointed
Gov’t auctions rights to generator output
Retailcompetition
Nov.2000
BalancingPoolPhase I supplyauction
June2003
5
Industry Model Post-Restructuring
competitiveforces
competitiveforces
naturalmonopoly
FunctionalSeparation
Vertically Integrated Utility
naturalmonopoly
6
Electric Utilities Act
Minister of EnergyAppoints AESO Board members , MSA & AUC Chair
MarketSurveillance Administrator
(MSA)
BalancingPool
Wholesale Energy Market
Transmission
Alberta Electric System Operator
Real-timeAlberta Electric
System Operator
Alberta UtilitiesCommission (AUC)
Regulates AESOLoad
Settlement
Industry Structure
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Alberta Electric System Operator
• Independent – Not-for-profit with a public interest mandate
– Holds no commercial interests – independent of the market
– Impartial: no affiliation with industry
– Governed by independent board
• Regulated by Alberta Utilities Commission– Transmission Tariff
– ISO Rules & OPPs
• Revenue – energy trading charge
– transmission tariff (load settlement)
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Key Agencies Roles
• Alberta Utilities Commission (AUC)– Independent, quasi-judicial agency of Alberta Government
– Approves ISO Rules & Operating Policies and Procedures
– Regulates transmission reinforcements/upgrades and tariffs
– Approves environmental and siting for generation projects
– Approves the distribution and regulated rate option tariffs
• Market Surveillance Administrator (MSA)– Performs on-going monitoring of Alberta’s electricity markets to ensure fair,
efficient and openly-competitive operation of the markets
– Monitors compliance with all rules, laws and regulations and manages non-compliance and penalties (resolves issues before complaints)
• Balancing Pool– Markets unsold Power Purchase Arrangement (PPA) capacity
– Manages the unsold PPAs and ultimately returns profits to Alberta consumers
9
AESO Mandate
• Reliability of the Electric System – coordinated operation of the power grid and make sure that the
supply and demand are in constant balance
• Open, non-discriminatory access to the Transmission system
• Plans Transmission System - ensure important infrastructure keeps pace with growing demand and supply
– supports reliability
– enable fair, efficient and open competition
– facilitates investment in both load and generation
• Fair, efficient and openly competitive (FEOC)– operate the market ensuring a fair, efficient and openly competitive
wholesale market for all participants
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AESO Roles & Responsibilities
• Ensure safe, reliable and economic operation of the power system by dispatching merit order (generators & price-responsive bids)
• Connects customers (supply & load) – designs and administers tariff for system access
• Contracts with TFOs for service & provide direction to transmission facility owners to coordinate operation of the transmission system
• Schedules generation and loads to provide system services (AS) - procured through service contracts or tariff
• Dispatches merit order for reserves (reg/spin/supplemental)
– procured from independent third party market or
– over-the-counter arrangements and used to maintain required reserves
• Calculates and communicates the pool price
• Settlement – load, energy market and transmission
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Hourly Real-Time Market
Customers
Hourly AESOPool Price
Retailers
AESOTransmission
Exports
Other generation
Power Purchase Arrangements
Imports
SelfRetailers
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Demand Response Overview
Laura LetourneauDirector; Market Services
13
Demand Response Drivers
• Aging industry infrastructure and the pace of Generation, Transmission or Distribution investment may contribute to
– shrinking reserve margins and
– increasing congestion and reliability events
• Increasing prices and price volatility – super peaks
– associated with congestion,
– load characteristics and
– concentration of supply resources
• Increasing overall demand coupled with reduction of incentives for efficiency
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Benefits
• More Resource Options
– reliable and efficient operation of the system and market,
– increases liquidity and mitigates potential market power
• Shift and Reduce
– Flattens load & dampens price spikes
– Shifting peak use to off-peak use flattens load profile and reduces price spikes during scarcity/high prices
• Conservation and efficiency
– Reduced use/demand
– Shifting resources to lower cost resources increases market efficiency
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DR Program Categories
Incentive Programs: • Induce customers to reduce during periods of system need or stress with payments
rather than direct price signals– Direct load control– Interruptible/curtailable rates– Demand bidding/buyback programs– Emergency demand response programs– Capacity market programs– Ancillary services market programs
Time/Price Programs: • Promote DR based on price - move away from flat or average pricing and promote
more efficient markets that reflect underlying costs– Time-of-use prices (day, week, season)=> differentiate by peak/off-peak or shoulders
– Critical peak/scarcity pricing=> use real-time prices during extreme peaks
– Real-time pricing => links hourly prices to cost of power
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Demand Response Continuum
Multi-year Year Month Day-Ahead Real-Time
Energy Efficiency
Conservation Load Shifting
Load Shed
Distributed Generation
Timeframe
Varied demand response products/services suited to varied needs
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Alberta Facts
Laura LetourneauDirector; Market Services
18
Alberta at a Glance
Alberta
WesternSystem
DC
BC Sask.
Intertie limitations, high load factor and growing variable resources increase risk of reliability events and reduces options to manage it.
•9,710 MW peak and 80% LF•12,072 MW total generation
•9,710 MW peak and 80% LF•12,072 MW total generation
Interties Max Capability• BC (up to 780 MW) • Sask. (up to 150 MW)
Interties Max Capability• BC (up to 780 MW) • Sask. (up to 150 MW)
49%
38%
7% 4% 1%
Coal Gas Hydro Wind Other
5,893 MW
4,635 MW(Other renewables)
178 MW
(Wind)
523 MW
869 MW
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Alberta’s Demand Response
AESO has implemented a combination of market and out-of-market DR programs, some are incentive based and others are time/priced based.
Time/Price (market) Solutions include:• Operating Reserves (OR)–Supplemental • Price Responsive Loads (PRL)
Incentive programs (out-of-market/real time emergencies) include:• Voluntary Load Curtailment Program (VLCP)• Load Shed Service (LSS) (59.5 Hz freq. response) • Interruptible Load Remedial Action Scheme (ILRAS)• Demand Opportunity Service (DOS)
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Comparing Alberta’s DR
FERC’s 2007 Assessment of DR:
• estimated demand reductions in RTO/ISO regions with wholesale markets to be 1.4 - 4.1% of peak
• reductions achieved via a combination of DR programs, retail DR, & voluntary reductions
Assessment of Alberta’s DR:
• Most significant demand response comes from the approximately 175 - 300 MW of Price Responsive Load - 1.8% to 3.1% of peak (9710 MW ’07/08)
• Additionally, over 400 MW in VLCP, LSS, ILRAS,DOS and OR supplemental service provide additional options to managing reliability and ensure a fair, efficient, and openly competitive electricity market
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Price Responsive Load in Alberta
Pool Price and Existing Price Responsive Load
0
50
100
150
200
250
300
350
400
450
Lo
ad
th
at
Re
sp
on
ds
to
Pri
ce
(M
Ws)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$/M
Wh
Total Price Responsive Load Pool Price
Price Responsive Load responding to price spikes
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Alberta’s Price Responsive Load (PRL)
Average Amount of Existing Price Responsive Load when Pool Price is in Various Ranges (July 2007)
324
228
159
88
0
50
100
150
200
250
300
350
$0 to $100 $100 to $250 $250 to $500 $500 to $1000
Pool Price Range ($/MWh)
Ave
rage
Am
ount
of P
rice
Res
pons
ive
Load
(MW
s)
PRL on-line & average load reduced by Price Range
96
69
71
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Growth in Electricity Consumption
Unprecedented load growth in Alberta could potentially outpace market-driven generation additions resulting in decreased reserve margins and reduced reliability
Alberta's Average Annual Power Use
54.1 54.559.4
62.765.3 66.3
69.4 69.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2000 2001 2002 2003 2004 2005 2006 2007
meg
awat
t h
ou
rs (
in m
illi
on
s)
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Trends in Alberta System Peak
Historical Peaks
Alberta’s peak demand (AIL) and consumption grew by an average of 4% and 5% per year respectively (2001-2006)
AESO forecasts (20 years) peak demand to grow on average by 3.1% per year and consumption to grow on average by 3.2% per year
Seasonal Peak Trends
7800
8000
8200
8400
8600
8800
9000
9200
9400
9600
9800
2004/05 2005 2005/06 2006 2006/07 2007 2007/08
MW
s
Winter PeakSummer PeakWinterSummer
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Price Trends (con’t)
System and market conditions can increased frequency of price spikes
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Price Trends in Alberta
YearPrice >
$100/MWhPrice >
$250/MWhPrice >
$500/MWhPrice >
$750/MWh
2004 1.93% 0.32% 0.05% 0.01%
2005 4.21% 0.84% 0.17% 0.05%
2006 3.68% 1.42% 0.46% 0.21%
2007 2.83% 0.80% 0.34% 0.18%
Historical Pool Prices
Historical Price Frequency
Average Yearly Pool Price
$20.39
$33.03$42.74
$133.22
$71.29
$43.93
$62.99$54.59
$70.36$80.79
$66.95
0
20
40
60
80
100
120
140
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Year
$/M
Wh
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Challenges & Opportunities
Laura LetourneauDirector; Market Services
28
Challenges & Objectives
Increased risk of reliability events
– demand growth
– delays in transmission and distribution infrastructure
– potential misalignment of generation and transmission
– increasing variable resources - need for fast ancillary services
Increasing prices and frequency of scarcity pricing (price spikes)
Generally, Alberta like other markets, may experience:
To capitalize on the benefits of demand response, there is a need to explore and analyze the physical and financial structures within Alberta identifying demand response opportunities and options
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The Flow of Power
There will be a need to segment electricity transactions (physical and financial) in order to appropriately assign roles and responsibilities.
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Next Steps
• Finalize Terms of Reference
• Evaluate Alberta Demand Response programs and results
• Assess other market’s programs and results
• Assess Demand Response
• Challenges, limitations and barriers to success
• Industry/Business Model – current, options, proposed
31
Questions
For further information, questions or concerns please contact:
Laura Letourneau
Director; Market Services
Alberta Electric System Operator
2500, 330 – 5th Avenue S.W.
Calgary, Alberta T2P 0L4