Demand Response Electricity Markets Dallon Kay Diamond Energy Group 20111101

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Presentation on Demand Response in Electricity Markets, Singapore Electricity Roundtable 2011, 1st November 2011, Singapore International Energy Week 2011 "Securing Our Energy Future"

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Demand Response Electricity Markets Dallon Kay Diamond Energy Group 20111101

  1. 1. Demand Response in Electricity Markets Singapore Electricity Roundtable 2011Suntec Singapore International Convention & Exhibition Centre 1st November 2011 © Diamond Energy Group 2011 1 All Rights Reserved
  2. 2. Presentation Outline What is Demand Response? Types of Demand Response Programs Demand Response in the National Electricity Market of Singapore Outlook for Demand Response and Forward Plan © Diamond Energy Group 2011 2 All Rights Reserved
  3. 3. National Electricity Market of Singapore (“NEMS”) Merchant market for electricity established in 2003 Gross energy only pool with co-optimization of energy and reserve Value of products traded in 2010 was ~ S$ 7.99 billion Market Annual Turnover Annual Turnover (%) (S$ Million) Energy 98.5 7,870 Reserve 0.8 64 Regulation 0.7 56 Total 100 7,990Source: Derived from Energy Market Company, Market Report 2010 © Diamond Energy Group 2011 3 All Rights Reserved
  4. 4. What is Demand Response? Action taken by a consumer of electricity to adjust their demand in response to conditions in the physical power system and/or price signals to realize economic benefit Consumers that are able to adjust their electricity consumption at short notice are ideal candidates for Demand Response Effective Demand Response requires not only having a mechanism to control demand but also there being an appropriate incentive for the Consumer to participate © Diamond Energy Group 2011 4 All Rights Reserved
  5. 5. Types of Demand Response Programs Price Response Programs Ancillary Service Programs © Diamond Energy Group 2011 5 All Rights Reserved
  6. 6. Price Response Programs Respond to price signals in the spot market End-users reduce their consumption and receive the spot market price for the avoided electricity they provide through their demand reduction In these type of programs Demand Response is scheduled and centrally dispatched as part of the merit order for Energy in the same way as a power plant The Demand Response resource sets their offer price at the level it is willing to curtain their demand Responding to price signals requires forward visibility into the market which requires real time information flow and the availability of data © Diamond Energy Group 2011 6 All Rights Reserved
  7. 7. Ancillary Service Programs Respond to the frequency condition of the power system End users are paid the option premium associated with being able to reduce their consumption regardless of being called upon to do so In these types of programs Demand Response is scheduled and centrally dispatched as part of the merit order for Reserve the same way as a power plant The Demand Response resource typically acts as a price taker Responding to the needs of the power system requires forward visibility into the market which requires real time information flow and the availability of data © Diamond Energy Group 2011 7 All Rights Reserved
  8. 8. Why participate in Demand Response? Demand Response is deployed to realize a new source of revenue Revenue Creation Make Money! Demand Response is deployed to reduce or mitigate costs that would otherwise be incurred Cost Avoidance Save Money! © Diamond Energy Group 2011 8 All Rights Reserved
  9. 9. Current Demand Response Landscape in NEMS Interruptible Load was introduced in the Reserve Spot Market in 2004 Reserve 2 Active Market Participants Market Ancillary Service Program No Demand Side Bidding in the Energy Spot market 2011/2012 Rules Change Panel Work Plan includes a Energy Demand Side Bidding in the Energy Market initiative Market This initiative is being led by the EMC’s Market Administration Team in consultation with the Energy Market Authority and work has already commenced Price Response Program © Diamond Energy Group 2011 9 All Rights Reserved
  10. 10. Demand Response in the NEMS ReserveMarket © Diamond Energy Group 2011 10 All Rights Reserved
  11. 11. Reserve Market The power system requires reserves to cater for contingency events Reserves can be provided in two ways Surplus capacity from an operational generator “spinning reserve” Deactivation of an electrical load Payment is made when the provider is scheduled even without being activated or called upon to provide reserve © Diamond Energy Group 2011 11 All Rights Reserved
  12. 12. Reserve ClassesClass Response TimePrimary 8 SecondsSecondary 30 SecondsContingency 10 Minutes © Diamond Energy Group 2011 12 All Rights Reserved
  13. 13. Participation Requires a license from the Energy Market Authority Requires registration as a market participant with the EMC Minimum 0.1 MW load is required Flexibility to participate in all three reserve classes simultaneously or an individual reserve class if desired © Diamond Energy Group 2011 13 All Rights Reserved
  14. 14. Technical Requirements Class Mode of Activation Trigger System Limit on Activation Interruptible Load Primary Under System frequency < 49.4 Hz 20% of Reserve Frequency Requirement1 Relay Secondary Under System frequency ≤ 49.7 Hz 20% of Reserve Frequency for 30 sequential seconds Requirement Relay Contingency Manual Within 10 minutes of 30% of Reserve receiving Activation Requirement InstructionSource: System Operation Manual1 10% when the power system is isolated © Diamond Energy Group 2011 14 All Rights Reserved
  15. 15. Market & System Requirements Continuous near real time pre-activation reporting Trading systems to enable offer submission Software and electrical systems to enable the Interruptible Load Compliance with obligations contained within the Market Rules, System Operation Manual, etc. Submission of post-activation reports within 24 hours of an activation 24 x 7 operational capability © Diamond Energy Group 2011 15 All Rights Reserved
  16. 16. Interruptible Load Illustration Contingency Event 49.7 Secondary reserve activation 49.4 Primary reserve activation Source: Based on Energy Market Company, RCP Concept Paper, 4th September 2007 © Diamond Energy Group 2011 16 All Rights Reserved
  17. 17. Demand Response Participation in Reserve Market Current Situation Interruptible Load There are currently two active Demand Response participants in the Reserve Revenue Market Creation Diamond Energy is a Demand Response e Aggregator providing Demand a bl services to third partiesResponse p lic Model t Ap No Cost Avoidance No Yes NEMS Market Participation © Diamond Energy Group 2011 17 All Rights Reserved
  18. 18. Demand Response Participation in Reserve Market Possible Future Scenario Generators ≥ 10 MW are allocated a portion of the Interruptible Load total reserve cost according to their position in the runway Revenue Creation Embedded Generators ≥ 10 MW due to technical and operational considerations bl e typically do not participate in a the reserve market as a DemandResponse p lic provider of reserve Model t Ap Interruptible Load No Related loads of these Embedded Generators that Cost are capable of providing Interruptible Load may elect Avoidance Related Loads of to do so as an option to Large Embedded hedge the reserve cost Generators exposure of their Embedded Generator No Yes NEMS Market Participation © Diamond Energy Group 2011 18 All Rights Reserved
  19. 19. NEMS Example Ancillary Service Program “Interruptible Load” © Diamond Energy Group 2011 19 All Rights Reserved
  20. 20. Reserve Prices (All Classes) The chart below represents the reserve price duration curve for all three classes of reserve combined from 1st January 2011 to 30th September 2011 The maximum price occurred on 15th August 2011 (period 28) at S$ 4,661.98 per MWh The average price over the selected time period was S$ 22.36 per MWh Average Price S$ 22.36 per MWhSource: www.nemsview.com.sg © Diamond Energy Group 2011 20 All Rights Reserved
  21. 21. Annual Revenue Potential Description Price Participation Gross Revenue (S$ per MWh)1 (MW) (S$)2 1 195,874 Flat Average Reserve Price 22.36 5 979,368 (All Classes) 10 1,958,736Source: Estimate (rounded to nearest S$) st th1 1 January through 30 September 20112 Prior to Adjustment for Reserve Effectiveness Factor Demand Response participation in the existing Interruptible Load scheme represents significant revenue potential for qualifying loads that meet the technical requirements © Diamond Energy Group 2011 21 All Rights Reserved
  22. 22. Effective Energy Spot Price The effective energy spot price can be defined as (USEP x (1 – VHP)) + (VPRP x VHP) The chart below represents the effective energy spot price duration curve from 1st January 2011 to 30th September 2011 The average effective energy spot price over the selected time period was S$ 208.30 per MWh Average Price S$ 208.30 per MWhSource: www.nemsview.com.sg © Diamond Energy Group 2011 22 All Rights Reserved
  23. 23. Annual Energy Spend Description Price Demand Energy Spend (S$ per MWh)1 (MW) (S$)2 1 1,824,798 Flat Average Effective Energy Spot Price 208.30 5 9,123,540 10 18,247,080Source: Estimate (rounded to nearest S$) st th1 1 January through 30 September 20112 Excludes expenditure on non “Energy” charges such as Grid Use of System, Grid Contracted Capacity, etc. © Diamond Energy Group 2011 23 All Rights Reserved
  24. 24. Revenue Potential in Perspective Description Demand Energy Spend (MW) (S$)1 1 1,824,798 Annual Energy Spend 5 9,123,540 10 18,247,080 Source: Estimate (rounded to nearest S$) 1 Excludes expenditure on non “Energy” charges such as Grid Use of System, Grid Contracted Capacity, etc.Description Participation Gross Revenue Energy Savings (MW) (S$)1 Equivalent (%) 1 195,874Annual Interruptible 10.7%Load Revenue 5 979,368 10 1,958,736Source: Estimate (rounded to nearest S$)1 Prior to Adjustment for Reserve Effectiveness Factor © Diamond Energy Group 2011 24 All Rights Reserved
  25. 25. Demand Response in the NEMS EnergyMarket © Diamond Energy Group 2011 25 All Rights Reserved
  26. 26. Demand Response Participation in Energy Market Current Situation A direct Demand Response participation scheme does not currently exist in the energy market Revenue According to EMA data for Creation June 2011 there were 2,195 contestable customers being supplied by SP Services at the spot price (effective bl e energy spot price) This segment represents Demand a lic approx. 7% of totalResponse p Model Managed Curtailment & t Ap contestable demand Load Shifting No While the majority of these customers do not proactively monitor the spot price and Cost respond when prices are high, Singapore District Avoidance Cooling is an example of a company that has implemented a proactive load shifting program to mitigate exposure to high spot market No Yes prices NEMS Market Participation © Diamond Energy Group 2011 26 All Rights Reserved
  27. 27. Contestable Customer Breakdown According to EMA data for June 2011 there were 7,839 contestable accounts 2,195 contestable consumers were buying from MSSL 5,644 contestable consumers were buying from Retailers An MSSL Consumer is a contestable customer that purchases electricity from SP Services at the spot price Under this arrangement the customer pays the Effective Energy Spot Price for their power © Diamond Energy Group 2011 27 All Rights Reserved
  28. 28. Demand Response Participation in Energy Market Possible Future Scenario Intelligent Energy Demand Side Bidding With enhanced information System Phase 2 In Energy Market flow and greater Demand Demand Response Pilot Response awareness the Small MSSL Consumers may introduce managed load Revenue shifting programs Creation Large Retail Consumers Consumers of Various on Fixed Price A Demand Side Bidding Sizes scheme in the Energy Market Demand represents the greatestResponse potential for large consumers Model Managed Curtailment & to gain through active participation Demand Side Bidding Load Shifting In Energy Market Phase 2 of the EMA’s Cost Intelligent Energy System Avoidance Pilot Project is an opportunity for electricity consumers of Small MSSL Consumers Large MSSL Consumers various sizes to participate in Demand Response without participating directly or indirectly in the NEMS No Yes NEMS Market Participation © Diamond Energy Group 2011 28 All Rights Reserved
  29. 29. NEMS Example Price Response Program“Demand Side Bidding in Energy Market Targeting High Demand Periods” © Diamond Energy Group 2011 29 All Rights Reserved
  30. 30. Targeted Demand Response During 2% of Highest Demand Periods for August 2011 The maximum forecast demand of 6,234 MW was observed on 2nd August during trading period 28 (1/2 hour trading period commencing 1330 hrs) A “Look Back” for the month of August determined there were 58 instances (approximately 4% of the time) when the prevailing ½ hour forecast demand exceeded 98% of the maximum forecast demand With 125 MW of Demand Response the effective demand could be reduced to 98% levelSource: www.nemsview.com.sg © Diamond Energy Group 2011 30 All Rights Reserved
  31. 31. Profile of Highest Demand Week in August Without Demand Response The weekly demand profile for the 1st week of August 2011 is represented below with the scale amplified The red shaded area represents the trading periods where the forecast demand exceeded 98%Source: www.nemsview.com.sg © Diamond Energy Group 2011 31 All Rights Reserved
  32. 32. Profile of Highest Demand Week in August With Demand Response With Demand Response the trading periods in the previous chart which exceeded 98% can be avoidedSource: www.nemsview.com.sg © Diamond Energy Group 2011 32 All Rights Reserved
  33. 33. NEMS Example Price Response Program“Demand Side Bidding in Energy Market Targeting High Price Periods” © Diamond Energy Group 2011 33 All Rights Reserved
  34. 34. Targeted Demand Response During Highest Equivalent GT Generation Periods for August 2011 During the month of August there were 48 trading periods when GT capacity was scheduled (approximately 3% of the time) The maximum scheduled GT capacity of 285 MW was observed on 15th August during trading periods 23 through 28 (1/2 hour trading period commencing 1100 through 1400 hrs) With 125 MW of Demand Response 40 of these periods could be avoided (approximately 83%)Source: www.nemsview.com.sg © Diamond Energy Group 2011 34 All Rights Reserved
  35. 35. Quantifying the Benefits of Demand Response inthe Energy Spot Market Offsetting High Price Periods (August 2011 Example)Without Demand Response GTs Scheduled > 125 MW: USEP Average 3,092.97 S$/MWh GTs Scheduled ≤ 125 MW: USEP Average 598.37 S$/MWh (Min 481.91 S$/MWh) GTs Not Scheduled: USEP Average 228.20 S$/MWh Generation from GTs: 1,773 MWh Cost: S$ 1,021 MillionWith Demand Response Demand Response Capability: 125 MW Trading Periods when GTs Scheduled ≤ 125 MW Demand Response offsets required GT Capacity and the prevailing USEP is replaced with 481.91 S$/MWh Trading Periods when GTs Scheduled > 125 MW No Change to price Trading Periods when GTs Not Scheduled No Change to price GTs Generate: 1,268 MWh Cost: S$ 1,008 Million © Diamond Energy Group 2011 35 All Rights Reserved
  36. 36. Summary of Benefits (August 2011 Example)Description BenefitReduced System Cost 13.099 S$ MillionReduction in Generation from GTs 506 MWhTranslates to Lower Carbon EmissionsDemand Response is a compliment to existing GT capacity and when annualized represents significant benefit to the market © Diamond Energy Group 2011 36 All Rights Reserved
  37. 37. Outlook for Demand Response & Forward Plan“Whenever you find yourself on the side of the majority, it is time to pause and reflect.”Mark Twain © Diamond Energy Group 2011 37 All Rights Reserved
  38. 38. Outlook for Demand Response Demand Response represents significant benefits to the market and to consumers who participate Phase 2 of the Energy Market Authority’s Intelligent Energy System Pilot Project has an extensive Demand Response program envisaged The Energy Market Authority is planning to initiate a Request for Proposal (“RFP”) for a Demand Response Aggregator The Electric Vehicle Test Bedding Project by the Energy Market Authority and the Land Transport Authority presents Grid to Vehicle and Vehicle to Grid opportunities Other existing merchant power markets and soon to be implemented merchant power markets in the region such the Philippines and Vietnam respectively intend to implement Demand Response programs Demand Response also provides an opportunity for Retailers affiliated with non-portfolio Generators an avenue to mitigate outage risk © Diamond Energy Group 2011 38 All Rights Reserved
  39. 39. Conclusions Demand Response programs, when appropriately designed and implemented, can yield significant benefits to the market Demand Response is not intended to replace existing generation capacity already in operation but rather complement this infrastructure Demand Response can diversify the supply mix Unlike conventional generation capacity, Demand Response does not require additional land resources and can be implemented with short lead times provided the commercial incentives are sufficient to entice participation © Diamond Energy Group 2011 39 All Rights Reserved
  40. 40. Forward Plan A strategic target for Demand Response should be established for Singapore 125 MW could be considered initially Proactive efforts to increase the awareness of Demand Response are needed A thriving Demand Response industry will require enhanced information flow and availability of data Crafting a comprehensive Demand Response Master Plan is the next step for Singapore © Diamond Energy Group 2011 40 All Rights Reserved
  41. 41. DisclaimerDiamond Energy is pleased to present to you the proposed transaction or transactions described herein.Although the information contained herein is believed to be reliable, we make no representation as to theaccuracy or completeness of any information contained herein or otherwise provided, and accept noresponsibility or liability, in contract or in tort, in negligence or otherwise, should such information be found tobe inaccurate or incomplete in any respect. The ultimate decision to proceed with any transaction restssolely with the recipient of this information. Diamond Energy is not acting as the advisor to the recipient ofthis information. Therefore, prior to entering into any proposed transaction, the recipient of this informationshould determine, without reliance upon Diamond Energy, the economic risks and merits, as well as the legalconsequences, of the transaction and that it is able to assume these risks. The concepts described hereinare intended for discussion purposes only. This presentation is neither an offer to sell nor the solicitation ofan offer to enter into a transaction. This document and its contents are proprietary information and is thework product of Diamond Energy and may not be reproduced or otherwise disseminated in whole or in partwithout Diamond Energy’s prior written consent. The views contained in this document do not represent theviews of Diamond Energy Pte Ltd a Wholesaler Licensee of the Energy Market Authority of Singapore. © Diamond Energy Group 2011 41 All Rights Reserved
  42. 42. Dallon KayManaging Director email: enquiries@diamond-energy.com.sgDiamond Energy Group © Diamond Energy Group 2011 42 All Rights Reserved

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