Emergency Demand Response Concept Overview and Examples

Presented to:ERCOT

December 3, 2004

Presented by:Neenan Associates

2Confidential 30-Nov-04

ISO Demand Response Programs

Spot EnergyMarket

Price Price

Real Time

Day Ahead

Price Following

Scheduled Curtailments

PJM

PJM

NY

NE

NY

NE

PJM 1020

108

377

Resources 2004

• Very low activity in NYISO day-ahead (low prices)• More real-time activity, but questions about value

3Confidential 30-Nov-04

ISO Demand Response Programs

Capacity

ReliabilityReliability

PJM

PJM

Sp

otForward

Emergency Op Reserves

ICAP Resource

Dispatched Operating Reserves

NY

NY

NE

NY

NE

PJM 1783

249

1562

Resources 2004

• Emergency program heavily marketed in NY, ICAP• ICAP increasing in importance• Ancillary services market participation is a new initiative

4Confidential 30-Nov-04

Need for Emergency DR

Operating reserves ensure that the loss of a major transmission line or large generator(s) does not imperil the entire system

If a deficiency is extreme enough, load shedding is undertaken to protect the overall system integrity

Well orchestrated load curtailments help mitigate, or avoid operating reserve deficiencies and their consequences…

Without disrupting spot market price formation Only the ISO can effectively dispatch such

resources – reliability is a social good

5Confidential 30-Nov-04

ISO Emergency DR Programs Emergency DR Programs provide system operators with

unique reserves Resources indigenous to the market Fully synchronized to the system, Short notice (2 hours) High availability rate, diverse and reliable No capacity payment required – pay for performance only

NYISO

PJM

ISO-NE

Start Date 2001

May 2001

May 2001

June 2001

292 / 425

17 / 62

12 / 6

2002

1,711 / 668

61 / 629

79 / 113

2003

1,231 / 879

99 / 629

106 / 249

Reg. Sites / Subscr. MW

Source : NERA Dec. 2003

About the same

2004

About the same

Slightly higher

6Confidential 30-Nov-04

NYISO EDRP Registration Requirements

To participate, customers must: Register at least 100 kW of load curtailment and/or

output from on-site generator

Have an interval meter

Small-customer aggregations HVAC controls, pool pumps, etc. can employ statistical method for determining performance

Program registration options Load Serving Entity (LSE)

Curtailment Service Provider (CSP)

As a Direct or Limited Customer of the NYISO

Currently, almost all

participants register through a default service

utility

7Confidential 30-Nov-04

NYISO EDRP Dispatch Rules

NYISO can dispatch EDRP resources at the zonal level, on an as-needed basis

EDRP invoked when In-Day Peak Hour Forecast indicates an 30-Min operating reserve shortage and/or Major Emergency state is declared

Sometimes a non-binding advisory notice is provided a day-ahead

Once operating reserve shortage is verified in-day, curtailment event is declared with at least two (2) hour’s notice of event

Four (4) hour minimum event durationConcession to

customers

8Confidential 30-Nov-04

NYISO EDRP Customer Baseline Load (CBL) Methodology

Uses most recent ten (10) days hourly interval-metered usage values1. Calculate each day’s total usage during event hours

2. Choose the resulting five (5) highest days

3. Average the interval usage data by hour over those five days to get an hourly CBL value

Optional adjustment for weather can be applied CBL is adjusted(up & down) relative to

conditions 2 hours prior to the start of the event

9Confidential 30-Nov-04

NYISO EDRP Payment

Participation in any event is voluntary No requirement to notify the NYISO of their intent

to participate in an EDRP event in order to be paid

Payment is for any measured level of curtailment

Payment is the higher of $500/MWh or LBMP NYISO pays the registration agent, not

participants Unregulated Agents’ contract terms are

proprietary

NYPSC requires regulated LSEs pass along at least 90% of payment

Price has generally

lower

10Confidential 30-Nov-04

Emergency DR Program Benefits

Reliability Benefits – curtailments reduce the probability of an outage due to operating reserve shortfalls

Value is defined as product of: Expected Unserved Energy VOLL

Program is operated to avoid any unintended consequences on on real-time spot market prices If the DR reserves turn out to be needed, then they can

set real-time LBMP, but only if price otherwise is below $500

Adopted because initially the dispatch of large DR resources appeared to cause RT price to crash

11Confidential 30-Nov-04

NYISO EDRP Historical Program Benefits

2001

2002

2003

8,159

6,632

7,734

EDRP Curtailed

MWHs

20.1

4.8

32.3

Reliability Benefits

($M)

4.2

3.3

3.9

Program

Payments ($M)

~ 5

~ 1.5

~ 9.5

B/C

Ratio

12Confidential 30-Nov-04

EDRP Reliability Benefits during Northeast Blackout of 2003

Recovering System State (August 15) Change in LOLP=1.0, High VOLL=$5,000/MW, Load At

Risk=DR Recovered System State (August 16)

Change in LOLP=0.2, Low VOLL=$2,500/MW, Load At Risk=Only DR Needed to meet 30-Minute Reserve Margin

Date System State Benefit Payment Ratio

Aug. 15 Recovering $31.6M $3.2M 9.5

Aug. 16 Recovered $0.7M $0.7M 1.0

Total $32.3M $3.9M 8.3

13Confidential 30-Nov-04

Some Observations

• Participation in NYISO grew to over 800 MW in three years

• Only about 10% of registered resources are DG• Diverse participation contributes to availability• Constant and reliable curtailment performance

• Level stable over 5-6 hour events• On average, curtailment is about 1/3 of CBL

• Vital early role for Curtailment Service Providers• Vital agency role

• PSC tariffs and jawboning• NYSERDA outreach and technology support