presented at Smart Grids Task Force Steering Committee meeting of DG Energy of the European Commission, 9 July 2013, Brussels

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Shift, Not Drift: Towards Active Demand
Response and Beyond
Smart Grids Task Force Steering Committee meeting
9 July 2013, Brussels
http://think.eui.eu
Project leader Leigh Hancher
Research team leader Xian He
Research team Isabel Azevedo, Nico Keyaerts, Leonardo Meeus, Jean-Michel Glachant
Project advisors Władysław Mielczarski, François Lévêque

2. http://think.eui.eu
Why active demand response?
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GENERATION
- Centralized
- Predictable
- Dispatchable
DEMAND
- Inelastic
Before
GENERATION
- Decentralized
- Less predictable
- Less dispatchable
DEMAND
- Flexible
Now with more RES
ACTIVE DEMAND
RESPONSE
FLEXIBILITY
FLEXIBILITY
FLEXIBILITY
To keep the balance
…The flexibility challenge

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That’s why we find demand response in…
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Energy Roadmap 2050
“energy saving and
managing demand: a
responsibility for all”
Smart Grid Task Force
“smart grids can be a useful tool in
enabling consumers to take action
to more effectively manage their
energy consumption”
Energy Efficiency Directive
“demand response is an important
instrument for improving energy
efficiency ”
Internal Market Communication
“stronger demand response in
distribution networks”
Smart Appliances
Smart box
Smart Meters
DR benefits
DR potential
Sustainability first
Dynamic tariff
Regulatory barriers

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But significant skepticism in reality
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No future for demand
response!!

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We challenge this view by adopting
a consumer-centred approach
1. How to assess consumers’ potential and willingness
to participate in active demand response?
2. How to realise active demand response?
TOPIC #11
Shift, not drift: Towards active demand response and beyond

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How to assess consumers’ potential and
willingness to participate in active
demand response?
Part 1

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How consumers will be engaged?
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……?
Potential to participate
Willingness to participate
Consumer engagement Contract
€
kW
DR contract
• Consumer-centred
Analytical approach
• Focus on contract

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Consumers’ potential to participate in active
demand response
• Not only about the smart appliances
• But also about the way we use the ‘smart’ and ‘dumb’
appliances
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More flexible
Load
Non-storable Storable
E.g. heating and
cooling, electric
vehicles
Non-shiftable Shiftable
E.g. laundry and
dish washer
Non-curtailable Curtailable
E.g. lighting and
TV
E.g. Alarm,
automation, TV,
Base

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Consumers’ potential expressed by load mix
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Load mix
Base
20%
Curtailable
15%
Shiftable
25%
Storable
40%
Shiftable mix
Curtailable mix
Storable mix

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How consumers will be engaged?
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……?
Consumer engagement
Contract
€
kW
Willingness to participate
Potential to participate

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Interaction between load mix and demand response
contracts
Shiftable mix
Curtailable mix
Storable mix
Fixed capping
contract
TOU contract
Direct load
control
Dynamic pricing
contract
Dynamic capping
contract
5 contract types
Price-based, fixed tariffs for fixed
intervals, determined annually
Volume-based, fixed load cap and
intervals, determined annually
Price-based, dynamic tariff
with day-/ hour-ahead notice
Volume-based, dynamic load cap
with day-/ hour-ahead notice
Control-based, automatic
operation by a 3rd party

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How consumers will be engaged?
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……?
Consumer engagement
Contract
€
kW
Willingness to participate
Potential to participate

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Consumers’ willingness to participate in active
demand response
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Preferences
Financial
compensation
Social
motivation
Price risk
Volume risk
Autonomy/
privacy
Complexity

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Interaction between consumer preferences and
demand response contracts
Contract
Preferences
Price Risk Volume risk Complexity
Autonomy/
Privacy loss
Financial
compensation
TOU Low None Low None Limited
Dynamic
pricing
High None High None High potential
Fixed
capping
contract
None Low High Limited Limited
Dynamic
capping
contract
None High High Limited High potential
Direct load
control
None None None High High potential
Lots of trade-offs

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Can consumers be engaged to participate
in active demand response?
Yes,
if we provide them enough options and
tools to choose the right contract.

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How to realise active demand response?
Part 2

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……?
Potential to participate (load
mix)
Willingness to participate
(preferences)
Consumer engagement Contract terms
€
kW
Intermediaries
How to have an adequate range of contracts?

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Pros and cons of different intermediaries
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Intermediaries
Electricity Suppliers
3rd parties
Consumer cooperatives
Pros Cons
Expertise in energy sector
Possible conflict with core
business
Limited competition
pressure
No conflict with core business Lack of expertise
Full incentive of profit sharing Lack of expertise

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How to have an adequate range of contracts?
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A single intermediary may not have the incentive/competence
to provide an adequate range of contracts.
But
We do not need to correct their business motivation, as
long as an adequate range of intermediaries exists.
How to have an adequate range of intermediaries?

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Recommendations to ensure an adequate
range of intermediaries
1) Demand response license  provides a ‘quality label’ to build trust.
2) Disaggregated billing  allows better comparison of offers from
intermediaries who offer bundled services (e.g. supply and demand
response) and those who do not.
3) Non-discriminatory access to electricity markets and to data.
4) Output-based regulation for regulated services (congestion
management and ancillary services)
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How to make choice out of this range?
• Need for consumer empowerment and protection measures
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4 Steps in contract selection
Qualifying their load mix
Recognizing their preferences
Selecting an appropriate contract type
Finding the right contract
implementation
Challenges
Lack of knowledge of appliances; lack of
skills to use them
Not aware of the risks and rewards
implied by the contract; lack of skills to
evaluate them
Difficulty in aligning load mix and
preferences
Lack of comparability in contract design

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Recommendation on a toolkit of consumer
empowerment and protection
1) Mandatory consumer profiling  reveal consumer’s load mix and preferences
2) Independent contract comparison tool  facilitate consumers in choosing the
appropriate contract
3) Monitoring and optimisation of the range of contracts  limit the complexity of
contract terms
4) Adequate data protection  raise consumers’ trust to reveal personal
information before and after signing a contract.
5) Effective dispute resolution mechanism fall-back option to enable efficient
switching of contracts or intermediaries by consumers.
6) Special scheme for vulnerable consumers  prevent them from being penalised
for their inability to provide active demand response.
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Conclusion
1. How to assess consumers’ potential and willingness
to participate in active demand response?
2. How to realise active demand response?
Consumers can be engaged if they have options that reflect their
diversity and are adequately empowered to make choices.
Toolkit of consumer empowerment
Measures to facilitate market entry

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Thank you very much for your attention
xian.he@eui.eu;
http://think.eui.eu
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THINK reports (published 2011 - 2013)
1) Public Support of RD&D
2) Smart Cities
3) Energy Roadmap for 2050
4) Public Budget of EU Member States
5) Offshore Grids
6) Transmission Grid Tariffication
7) Building refurbishment
8) Electricity Storage
9) EU technology policy for 2050
10) CBA for infrastructure package
11) Active demand response
12) DSO Regulation