PJM market: peak demand grows, demand response declines
While peak demand grew, the use of demand response declined by 10% last year in the U.S., writes Fereidoon Sioshansi, publisher of newsletter EEnergy Informer and editor of Innovation & Disruption at the Gridâs Edge. The decline is no incident, notes Sioshansi: regulators are failing to take an active role. Millions of advanced meters are performing dumb tasks.
The Energy Policy Act of 2005 requires the Federal Energy Regulatory Commission (FERC) to conduct an annual survey of the demand response (DR) and advance metering in the US. The 12th edition of the report was released in December 2017 and anyone looking for major revelations is likely to be disappointed.
The report makes it abundantly clear that just as the industry needs more DR to balance the grid due to the rapid rise of variable renewable generation, DR resources are playing a diminished role in the wholesale markets
Not much happens from year to year in the slow moving utility sector â and worse â sometimes things move in the wrong direction. FERC says DR in wholesale power markets actually fell 10% in 2016 â mostly attributed to changes in market rules in PJM, the biggest wholesale US market and the one with the largest DR program.
Ever so slowly
The report â citing data from the Energy Information Administration (EIA) â says there were 64.7 million electronic meters in operation in the US in 2015, roughly 42.9% of a total of 150.8 million currently in use. The numbers are rising, ever so slowly with a few states or regions far in advance of others. Nearly 82% of customers in Texas, for example, have electronic meters in contrast to 6% in Hawaii.
Ironically, however, few are used to deliver time-of-use (TOU) or real-time prices (RTP). Moreover, FERCâs latest survey concludes that in the US organized wholesale markets, DR was called on to meet 5.7% of peak demand in 2016 â roughly a 10% decline from the 6.6% achieved in 2015.
According to the report, âSince 2009, demand resource participation in wholesale markets has increased by approximately 6%, but has been outpaced by an approximately 16% increase in peak demandâ. It does not sound like commendable progress to this editor.
State-level regulators, ever so conservative and lethargic, are concerned about customer reaction as their bills change when time-of-use rates are introduced
The latest report found that DR market participation fell across all ISO/RTO regions to 28,673 MW, a 10%Â decrease from 2015:Â a level roughly equal to the one experienced in 2013 and 2014. But peak demand, which DR is expected to meet, move or mitigate, actually grew by 3% from 2015 to 2016. One step forward, two steps back?
“This decrease in demand resource participation across the RTO/ISO regions was primarily due to an approximately 24% (3,030 MW) drop in demand resource enrollment in PJM Interconnection,” according to FERC’s latest report.
Diminished role
The report makes it abundantly clear that just as the industry needs more DR to balance the grid due to the rapid rise of variable renewable generation, DR resources are playing a diminished role in the wholesale markets.
In the case of California ISO (CAISO), with its famous âDuck Curve,â DR participation fell by 8% due to decreased enrollment in price-responsive demand programs. “Participation in utility-sponsored programs has been gradually declining over the last several yearsâ, notes the report, âwhile participation in CAISOâs wholesale demand response products has been growing,” adding, “In 2016, demand resource enrollment in CAISOâs two wholesale products totaled 1,480 MW.”
DR resources in the ISO New England and New York ISO markets also decreased by approximately 4%, while it reportedly rose in the Midcontinent ISO due to an increase in capacity registered as emergency DR. Not a rosy picture overall.
Time-varying rates
There is even less progress when it comes to time-varying rates â which were expected to follow the installation of advanced metering infrastructure or AMI.
While some progress is expected â for example Californiaâs 3 large investor-owned utilities (IOUs) will transition to residential default time-of-use rates (TOU) by 2019 â FERC notes that “barriers remain to the wide-spread uptake of time-based rates.”
State-level regulators, ever so conservative and lethargic, are concerned about customer reaction as their bills change when TOU rates are introduced. “In addition, a gradual transition to the new tariffsâwith an opt-out for certain populationsâand appropriately designed pilots to test customer response, may ease the transition,” the FERC report says. Not reassuring.
Billions of dollars have been spent â squandered may be a more accurate term â on millions of advanced meters, which by-and-large are doing more or less exactly as much as the dumb spinning disk meters they replaced
In 2015, the number of customers enrolled in incentive-based DR programs nationwide decreased by 2% to approximately 9.1 million customers.â On the other hand, âenrollment in time-based programs rose by 10% in 2015â â mostly due to progress in a few selected regions.
FERCâs report ends with a chapter titled âregulatory barriers to improved customer participation in DR, peak reduction and critical period pricing programs.â It is a sad ending to a disappointing report.
Squandered
Clearly, the Energy Policy Act of 2005, which was to usher in a new era of pricing electricity by time of use and other schemes to better manage peak demand, has not achieved even a fraction of what was expected.
Moreover, the need to manage peak demand, has become far more pressing and urgent â mostly because so much new variable renewable generation is being added to the network, which requires more price responsive demand.
In the meantime, billions of dollars have been spent â squandered may be a more accurate term â on millions of advanced meters, which by-and-large are doing more or less exactly as much as the dumb spinning disk meters they replaced: They measure kWhs consumed and produce a bill virtually indistinguishable from the ones Thomas Edison would have delivered to customers a century ago.
Editorâs Note
Fereidoon Sioshansi is president of Menlo Energy Economics, a consultancy based in San Francisco, CA and editor/publisher of EEnergy Informer, a monthly newsletter with international circulation. This article was first published in the February 2018 edition of EEnergy Informer and is republished here with permission.Â
His latest book project is Innovation and Disruption at the Gridâs Edge, published in June 2017. It contains articles by two dozen experts on âhow distributed energy resources are disrupting the traditional utility business modelâ, including contributions from:
- Audrey Zibelman, CEO of AEMO and former Chair, New York Public Service Commission
- Michael Picker, President, California Public Utilities Commission
- Paula Conboy, Chair, Australian Energy Regulator, Melbourne, Australia
- Analysts from Pöyry, CSIRO, TU Delft, University of Freiburg and many others
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Likely that many domestic consumers lead far too busy lives to be interested in shifting their home’s demand around to address problems caused, for example, by some US states incentivising too much intermittent generation.
In the UK, consumers want to do their washing, dishwashing, cooking and heat their homes at the most convenient times to suit their daily routine, not at times driven by complicated time of use tariffs which penalise consumers for using electricity at the wrong times. Also, home owners have been strongly advised on safety grounds not to run appliances when homes are unoccupied due to the risk of fires.
Homes need to be equipped with fixed storage, or use EV power storage, for demand response to be widely adopted.
Smart meters are being installed in the UK too but promises of energy savings and lower energy bills haven’t materialised to any extent. Yet Government continues to promote the roll out of smart meters costing >ÂŁ15bn that will be added to consumers bills.
demand response addresses automaic units like heating cooling etc, conuming the mayor part of electricty even in many homes. Most people are not interested if their heating is not running for a few hours if the housr remains warm, or if the hot water is made at 3o’clock at nicht instead of usually 5 o’clock at night. That’s what demand response is about.
Try this as a counterfactual – or perhaps just facts countering a set of assertions.
The last para of the article was a bit sad. Over a couple of years I have been in discussions with DG Infosoc/DG Cnect on the subject of AMI. Our views are that real time metering (smart? really?) is only of use if there is an in-home display and some method of incentivising consumers.
In the late 2000s British Gas launched a “read your own meter once a month” service. Customers signed up for free and could once a month read their elec & gas meters and send the readings in by phone (smart? really?) or Internet. They would then get a real bill with the option of paying a standing charge or just paying the bill. BG also gave away an “AlertMe” home energy monitor linked to the meters which gave real-time energy consumption readings to households.
The kicker was: the Alertme compared how “your” household was doing to other similar households – this resulted in inter-household competition to save energy. Result: households on the scheme were saving over a year up to 12% on their gas/elec bill. The scheme had circa 12,000 households taking part (it could have been more – BG were not very clear exactly how many signed up). The UK company AlertMe was eventually bought by British Gas.
I had the pleasure of talking to the chap that implemented the whole system (which required BG to re-jig their billing system) who came from… the mobile phone industry. The view then within BG was that the other energy providers were like dinosaurs. I mentioned the above system to various Euro energy “regulators”. Without exception there was zero interest in even considering such an approach.
I have no doubt PV + energy storage will develop strongly in the UK & other locations as elec prices rise. However, the possibilities for using psychology (households competing to save energy) should not be ignored and the BG example suggests that some/many/all households have some time to pay some attention to energy expenditure.
Same in the Netherlands. âŹ3 billion will be spent between 2015 and 2022 to install 15 million ‘smart’ power and gas meters, with so far zero benefits for end users or the market. Meter cost is added to grid fees. Delivering added value to customers is ‘left to the market’ (dixit politicians and regulator).
The supply side of this market is not interested in developing propositions for retail customers. In the Netherlands energy retailers are all financially locked-in to the traditional advance budget billing method that generates money in the bank far in excess or real customer revenue.
All supply parties (generators, traders, grid companies) that claim that demand response would help them to balance the power supply do not put their money where their mouth is: There is no incentive whatsoever for retailers to design corresponding rate propositions for their customers.
The only DR that takes place in the Netherlands is between the TSO and some DSO’s and some very large business customers. And it may very well be that this is sufficient (at least for now).
Micro-managing dishwashers for millions of households looks very expensive to do, while the net monetary benefit for the individual household will likely be close to irrelevant. Maybe charging electrical vehicles will make the difference in the future.
And finally household customers will have other priorities than modelling their life to power grid needs, certainly when the monetary benefit is negligible. Unless forced by outages of course. But in the Netherlands, as in most OESO countries, that is a highly infrequent experience.
Smart meters may start to play a role in the Netherlands as of 2020 when the current netting process for resupplied solar power will be changed for something ‘smarter’. We will see. Technology is not always used just because it is there (look at all the options in your car or on your appliances). And adoption rates in traditional industries are not comparable to your latest mobile blockbuster app.
Iâd like to offer a view from UK (and worldwide) on small scale DSR.
The need for flexibility is growing in UK as in most other countries with rising intermittent renewables. Smart meters are not a magic wand, but they are a necessary step to enable the forms of DSR that are smart enough to provide the more valuable forms of demand response. A recent report by E4tech and academics from Imperial College (and other institutions) for the UK Department for Business Energy and Industrial Strategy (BEIS) examined the lessons from small scale DSR around the world. The report found that Texas and PJM have indeed been leaders in DSR adoption thanks to a clear need (Texas is largely islanded from the US grid and carries a lot of wind power), supportive regulation and domestic loads that are well-suited to brief interruption (aircon, pool pumps, water heaters – few really consider managing peopleâs âwet goodsâ such as washing machines). Perhaps less well understood are the prospects for countries such as Finland, where an innovative grid operator has opened up the market and new DSR entrants are beginning to play.
The importance of experimentation appears not to be lost on BEIS, which is currently awarding ÂŁ7.75 million to support innovative domestic applications of DSR technologies and business models. A small step perhaps, but if it unlocks some of the value of smart meters and delivers much needed flexibility then why not? EVs and home batteries will take a while to penetrate the market; conversely smart meters, novel tariffs and programmable communicating controllers (âbring your own deviceâ in the DSR jargon) could quickly become widespread.
For more information see http://www.gov.uk/guidance/funding-for-innovative-smart-energy-systems
One question to ask is “why did RLTech fail” – given it was using fridges of various sorts to provide FR to Nat Grid (5MW I believe).
Given the scale of the problem/opportunity, ÂŁ7.75 million is something of………. a joke – but in fairness, that is the nature of the Uk these days………a joke & one would hardly expect any different from the same org that came up with capacity markets.