The document discusses Task XIII of the International Energy Agency's Demand Side Management Programme, which aims to integrate demand response resources (DRR) into electricity markets. It provides an overview of Task XIII's objectives: 1) Identify existing DRR potential in participating countries. 2) Assess how DRR can contribute to electricity sector goals given market structures. 3) Mobilize resources to complete the project. Task XIII will work with country experts to analyze DRR potential and value, identify barriers, and develop recommendations. It will establish best practices and tools to estimate DRR. The project delivers analyses, reports, and recommendations to integrate DRR and maximize its benefits across

1. INTERNATIONAL ENERGY AGENCY
DEMAND SIDE PROGRAMME
TASK XIII: DEMAND RESPONSE RESOURCES
POSITION PAPER
Ross Malme
Chair of PLMA, CEO & President RETX
Introduction
It’s July 10 in London, Rome, New York, Seoul, or Toronto. The weather is scheduled to be unusually hot
and all power generators are on notice to be available. As the clock ticks towards 1 PM, a congestion
problem begins to develop in Zone 1. But the power gird control room operators do not seem overly
panicked. They know that their demand response program is sending out price signals to consumers and
they can see the consumers responding to those messages. The demand response program is beginning
to do its job. Consumers in Zone 1 have been receiving proper price signals throughout the day and the
congestion problem highlighted the need to reduce consumption. These consumers started offering their
demand response resources (DRR) to the market as the price signals started to show a need for their
services. The targeted DRR in Zone 1 has helped mitigate the congestion problem by relieving the
demand on the grid in the constrained region.
Demand Response Resources (DRR) has been defined as load response called for by others and price
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response managed by end-use customers . Inclusion of DRR in energy markets can take the form of
reduced energy costs, direct payments for energy “not consumed”, and/or a reservation payment for
being available to reduce consumption upon request. This view of DRR as a resource can be taken within
any structure, ranging from a totally liberalized electricity market for all customers to a still-regulated
regime where one provider is charged with meeting customer needs and providing customers with
choices in ways that are the lowest cost and most reliable. DRR is a tool needed by any electricity
system to adequately, economically and reliably carry out its planning and operation responsibilities.
Several market trials have been implemented in various parts of the world. These trials have
demonstrated the benefits that DRR can have on major issues such as price volatility, emergency
reserves/grid reliability, and congestion management. For example, the New York Independent System
Operator (NYISO) calculated that its demand response program provided substantial benefits to the
market by helping the power grid recover from the August 2003 Blackout. Specifically, they estimated that
on August 15, 2003, the participating DRR of 593.9 MW provided $50.8 M (US) worth of economic
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benefits at a cost of $5.9 M (US). This equates to a benefit / cost ratio of 8.7 .
It is unlikely that the NY market would have received similar benefits had NYISO not had the foresight to
implement a DRR initiative in 2001. The benefits of DRR are directly tied to their availability during
infrequent emergency or peak pricing conditions. By its nature, DRR provides available capacity for a few
high cost hours throughout the year. This is an ideal resource to meet the needs of low probability, high
consequence events. However, to ensure that DRR is available when it is needed, there must be prudent
strategic planning, proper market signals, and coordinated efforts amongst all participants. Markets must
have business rules, infrastructure and educated participants so people know what they are supposed to
do and how they are supposed to do it. This requires DRR to be viewed as a strategic resource that is
developed and nurtured throughout the year so that the resources can be dependable on days like July
10.
1
Peak Load Management Alliance, “Demand Response: Principles for Regulatory Guidance”, February
2002
2
New York Independent System Operator, Inc., “Semi-Annual Compliance Report on Demand Response
Programs and the Addition of New Generation”, FERC Docket ER-3001-00
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2. Task XIII has been charged with reviewing DRR practices in various markets around the world and
developing recommendations on best practices for integrating DRR into regular market activities. The
primary objectives of Task XIII are:
Objectives
1. Identify and develop the country-specific information needed to establish the existing stock of and
potential for demand response.
2. Perform the market and institutional assessment needed to set realistic goals for the contribution
of DRR to sector objectives.
3. Mobilize technical and analytic resources needed to complete the project.
The Operating Agent will facilitate this by completing the following tasks for each market:
Tasks
1. Finalize Global and Country-Specific Objectives
2. Define DR Resource Base and Market Characterization
3. Market Potential of DRR
4. Demand Response Valuation
5. Role and Value of Enabling Technologies
6. Characterize Priorities and Barriers, and Develop Solutions and Recommendations
7. Develop DRR Network of Methods, Tools and Applications
8. Deliver Products and IP to IEA DSM Programme and Project Participants
This paper will provide information on Task XIII and its initial steps. The paper is organized into the
following parts:
PART I: Project Overview and Background
PART II: Project Objectives
PART III: Project Deliverables
PART IV: Proposed Process for Country Specific Objectives
PART I: Project Overview and Background
A. The International Energy Agency (IEA)
Headquartered in Paris, the 26 Member countries of the International Energy Agency (IEA) seek to create
the conditions in which the energy sectors of their economies can make the fullest possible contribution to
sustainable economic development and the well being of their people and of the environment. In
formulating energy policies, the establishment of free and open markets is a fundamental point of
departure, though energy security and environmental protection need to be given particular emphasis by
governments. IEA countries recognize the significance of increasing global interdependence in energy.
They therefore seek to promote the effective operation of international energy markets and encourage
dialogue with all participants. The IEA secretariat has recently published a review of the issues related to
Demand Response;
“The Power to choose” and has hosted several conferences on the matter (see www.iea.org). The
Secretariat will follow the work here proposed closely.
B. IEA Demand Side Management Programme
Operating as an Implementing Agreement to the Office of the Secretariat to the central IEA Organization,
the IEA Demand-Side Management Programme (IEA DSM) is an international collaboration with
seventeen IEA Member countries and the European Commission, working to clarify and promote
opportunities for demand-side management (DSM). For the purposes of this Programme, DSM is defined
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3. to include a variety of purposes such as load management, energy efficiency, strategic conservation and
related activities. DSM is thus forming a "tool-box" for utilities and governments in their work to make
energy systems more suited to their purpose. Furthermore, the Programme is developed to cover such
needs under different regulatory regimes and market structures since the basic need to ensure an optimal
function of the energy
system is common throughout the world. Additional information about the IEA DSM
Programme can be found on its website at http://dsm.iea.org/.
C. Task XIII – Demand Response Resources (DRR) History
During the IEA DSM’s Executive Committee (ExCo) spring meeting in 2003, it was requested that a
project should be initiated to investigate how demand response could be rapidly integrated into emerging
and developing competitive electricity markets. This was in response to the growing recognition by IEA
DSM Member countries and the importance of demand response in creating and sustaining efficient and
effective electricity markets by the IEA DSM ExCo. The U.S. Department of Energy, who is the U.S.
contracting party and representative to the IEA DSM Executive Committee, offered to take the lead in the
task development and the definition.
The ExCo appointed Ross Malme (Chairman of the Peak Load Management Alliance (PLMA),
http://www.peaklma.com/, a trade association of the demand response industry of North America) as the
task “Interim Operating Agent.” The ExCo requested the U.S. DOE and Interim Operating Agent to hold
an International Symposium on Demand Response to identify specific issues of interest in demand
response in the global electricity community. Furthermore, the ExCo also wanted to conduct an “Experts
Workshop” with representatives from IEA DSM Member countries interested in defining and participating
in such a demand response project. The objective of the Experts Workshop was to contribute to the
development of the task proposal and enable the Interim Operating Agent and to submit a project
proposal, workplan, and budget for consideration at the October 2003 ExCo meeting.
The International Demand Response Symposium was conducted on September 9th and 10th in New
York City in conjunction with the PLMA Fall Meeting. An Experts Workshop was conducted immediately
following in Albany, New York, on September 11th and 12th at the offices of the New York Independent
System Operator (NYISO) and the New York State Energy Research and Development Authority
(NYSERDA).
The DRR project proposal was submitted to the ExCo on September 26th, was approved by the ExCo on
October 15th, and is designated as Task XIII. Through the U.S. DOE, the U.S. has agreed to lead the
project with 12 other member countries agreeing to participate, subject to final funding approval. These
countries are the UK, France, Netherlands, Denmark, Finland, Sweden, Norway, Italy, Spain, Australia,
Japan, and Korea. In addition, the ExCo appointed Ross Malme as the permanent Operating Agent for
the DRR Project.
PART II: Project Objectives
The ExCo approved the following objectives for Task XIII at its October 15, 2003 meeting:
1. Identify and develop the country-specific information needed to establish the existing stock of and
potential for demand response.
2. Perform the market and institutional assessment needed to set realistic goals for the contribution
of DRR to sector objectives.
3. Mobilize technical and analytic resources needed to complete the project.
These objectives establish the boundary conditions for the project and will be used to guide the Operating
Agent (OA) as specific tasks are created.
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4. Objective 1: Identify and develop the country-specific information needed to establish the existing
stock of and potential for demand response.
The Operating Agent will coordinate with the designated Country Expert(s) (CE) to assess the potential
and existing DRR in the nation. The OA & CE will gather applicable market data and complete an
analysis designed to estimate the available DRR in that market. The analysis will be based on national
demographics, best practices identified from around the world, and local market constraints.
The OA and the CE will work closely together to complete this objective. The CE will have primary
responsibilities for gathering the applicable data points and the OA will provide various tools (e.g. data
templates, Internet based project portal, Expert Workshops, best practice recommendations, others) to
assist with the process. Once the appropriate information is gathered, the OA and CE will collaboratively
analyze the data and apply statistical analysis to estimate the DRR potential for the market.
The OA will release proposed data templates in advance of the Experts Workshop. These templates will
outline initial thoughts on data gathering requirements. This data will be used as “inputs” into the analytic
process. At the conclusion of the process, the project team will present a report estimating the potential
for demand response in the given market, recommendations for implementation (e.g. infrastructure &
operating guidelines), and econometric analysis on the value of DRR to the market.
Objective 2: Perform the market and institutional assessment needed to set realistic goals for the
contribution of DRR to sector objectives.
An institutional market assessment must be completed in order to assess the true market potential for
DRR and suggest ways in which the potential may be realized. There are many similarities among the
electric market structures around the world, but there are also some circumstances unique to each
marketplace. This reality means that not all best practices will be optimal for all markets. It also means
that realizing the DRR potential in any given market may be impacted directly or indirectly by specific
market challenges. These issues must be understood and considered or any potential recommendations
will likely be flawed.
In completing this objective, the OA and CE will review the local market operation and attempt to identify
potential barriers that may limit the realization of a robust DRR participation. The project team will review
how price signals are currently presented to consumers; evaluate business case potential through the
industry value chain (i.e. market, utility/ESCO, consumer); and, assess the infrastructure requirements to
establish DRR as an available capacity resource.
The project team will also endeavor to analyze the value of DRR to the market being reviewed. Various
econometric models and benefit tests will be utilized. This analysis will help establish the impact DRR has
directly on the marketplace. The econometric analysis should provide empirical evidence that regulators
and other constituencies can review as they establish market priorities. The project team will offer
recommendations for implementing DRR in the market with a focus on maximizing the econometric
benefits.
Additional considerations may be reviewed on a case-by-case basis.
Objective 3: Mobilize technical and analytic resources needed to complete the project.
The OA will work with each nation’s CE to establish work plans, technical support requirements, and the
tools needed to complete the work. As the project manager, the OA will facilitate the process and help
ensure that appropriate resources are available at the proper times. The OA will track the projects
performance with the CE and strive to ensure all milestones and deliverables are met.
In the event that the participating nation implements a pilot project during the project period, the project
team will track the pilot projects performance and compare it to the results from other marketplaces. This
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5. assessment may provide insight into modifications or adjustments to the pilot project to obtain optimal
results. On the other hand, the prospective project may also establish new best practices that will be
shared with other Task XIII participants.
PART III: Project Deliverables
Task XIII is designed to work with multiple nations on a collaborative basis. The intent is to establish a
knowledge base of DRR practices from many different markets around the world. This information will be
collected and analyzed. The analytic results should provide insights into the best DRR practices from the
markets being evaluated. All best practices may not be ideal for all markets because local circumstances
may make them difficult to implement. But all project participants can expect to learn from their colleagues
during the process. This is something that would probably be financially improbable absent the
collaborative nature of Task XIII.
In this regard, Task XIII will, as indicated in the Project Objectives above, collect market data on demand
response from the project participants and establish a library of best practices from an application and
technology standpoint. Information and analysis will be available to project participants through a project
portal or extranet, which will be used to distribute the project reports, products, industry news and to
establish a network between the project participants.
The Product Deliverables and Intellectual Property from the project will include the following:
• Standard Programme templates for analyzing DRR markets
• Resource base and markets defined by country
• Classification scheme for all DR resources
• Best practices approaches by technology and market
• Common design, products and structures across markets
• Market characterization by technology, market share, and applications
• Common methodology for evaluating DRR potential
• Common methodology for determining impact of DRR on market prices, capacity levels, and
reserve markets
• Integrated value model
• Catalogue of available systems and devices
• Catalogue of new and potential technologies
• Assessment of government policies by country
• Standard program and technology design recommendations
• Semi Annual Task Status Reports
• Project “Expert Meetings”
Information derived from Task XIII will be available to all participating members.
PART IV: Proposed Process for Country Specific Objectives
Each participating country will receive an invitation to an experts workshop in early May. At the same
time, the country will receive a survey that they will use to collect critical information on their existing
assets, market structure, existing demand response infrastructure, capacities, growth, reliability issues,
price volatility, market rules, and other critical information required to assess their current state. CE’s will
be asked to provide insight on the data templates and estimate the work required to compile the
information.
At the workshop, the countries will participate in a roundtable discussion of the challenges being faced
within each of their environments. They will also receive a complete briefing on the work to be performed
within Task XIII and gain an appreciation of what value the project could bring to their particular
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6. circumstances within their home markets. Shortly after the conclusion of the workshop, the county experts
will each collaborate with an OA analyst to develop country specific objectives for their participation in the
program within the context of their market conditions and the objectives of Task XIII. Aggregated
information on the objectives will be disseminated through the Project Portal and shared in presentations
to various organizations and entities.
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