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How Distributed Resources Will Impact Wholesale Power Markets
- 1. Trusted Power and Renewables Intelligence woodmac.com How Distributed Resources Will Impact Wholesale Power Markets Elta Kolo, Ph.D | Research Manager, Grid Edge Fei Wang | Senior Analyst, Grid Edge
- 2. Wholesale markets and flexibility today1.
- 3. 2 US Power & Renewables Summit 2018 woodmac.com Source: Wood Mackenzie Power and Renewables US RTO/ISO territories
- 4. 3 US Power & Renewables Summit 2018 woodmac.com 9% 3% 14% 5% 6% 15% 48% 40% 31% 3% 20% 2%4% 54% 0%3% 27% 16% 24% 48% 16% 8% 2 2% 45% 3%14% 5% 23% 10% 51% 22% 6% 21% 36% 34% 19% 6% 5% Installed generation capacity varies by fuel type in each ISO/RTO territory Source: CAISO, ERCOT, ISO NE, MISO, NYISO, PJM, SPP Natural gas Coal Nuclear Renewables Oil Hydro Other Dual Fuel
- 5. 4 US Power & Renewables Summit 2018 woodmac.com Distributed Energy Resources (DERs) Opportunities for distributed energy resources in wholesale markets Flexible Loads Combined Heat & Power Generator Sets Solar PV Fuel Cells Wind Energy Storage Electric Vehicles Volt/VAR Equipment Microgrids CAPACITY REAL-TIME SYNC RESERVES REGULATION DAY-AHEAD Wholesale value streams Market access: • front-of-the-meter • behind-the-meter • individual resources • aggregations
- 6. 5 US Power & Renewables Summit 2018 woodmac.com Source: CAISO, ERCOT, ISO NE, MISO, NYISO, PJM, SPP ISO/RTO demand response market size overview $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 2013 2014 2015 2016 2017 USD($mil) Capacity(MW) PJM MISO CAISO ERCOT SPP ISO NE NYISO $ (mil)
- 7. 6 US Power & Renewables Summit 2018 woodmac.com Source PJM Installed capacity in PJM Natural Gas 36% Coal 34% Nuclear 19% Renewables 6% Oil 5% Demand response cleared in the capacity auction makes up 6.6% CAPACITY REAL-TIME SYNC RESERVES REGULATION DAY-AHEAD 9 GW 0.7 GW 0.12 GW Available capacity by market Q3 2018 maximum availability 2.5 GW *Unique MW: represents total estimated demand reduction assuming full Load management and Economic reductions Wholesale value streams Available market capacity
- 8. 7 US Power & Renewables Summit 2018 woodmac.com Manufacturing, 4,112 Manufacturing, 499 HVAC, 2,684 HVAC, 26 Generator, 1,162 Generator, 4 Generator, 79 Lighting, 625 Water Heaters, 93 Water Heaters, 33 Batteries, 30 0% 20% 40% 60% 80% 100% Capacity/Energy Regulation Synch Reserve Manufacturing HVAC Generator Lighting Refrigeration Water Heaters Plug Load Batteries Manufacturing 47% Residential 16% Schools 8% 7% 6% 5% 4% 3% 3% 1% How?Where? 9 GW Source: PJM, WoodMac report “U.S. Wholesale DER Aggregation” 8, 945 MW 129 MW 654 MW
- 9. 8 US Power & Renewables Summit 2018 woodmac.com Economic demand response opportunities are shifting closer to real-time CAPACITY REAL-TIME SYNC RESERVES Wholesale Value Streams REGULATION $435 Million (Through Q3 2018) DAY-AHEAD $426 $1.5 $4.2 $2.3 $0.8 0% 20% 40% 60% 80% 100% 2013 2014 2015 2016 2017 2018 % Sync reserves & Regulation PJM Economic Demand Response Markets 2013 to Q3 2018 $12.4 $24.1 $14.1 $8.1 $7.3 $8.9 Year-over-year percent share of revenue by market 30% 26% 43% 56% 66% 74% $0 $10 $20 $30 2013 2014 2015 2016 2017 2018 Source: PJM, WoodMac report “U.S. Wholesale DER Aggregation”
- 10. 9 US Power & Renewables Summit 2018 woodmac.com Source: PJM, WoodMac report “U.S. Wholesale DER Aggregation” PJM demand response regulation settled MWh trend for DER • Behind-the-meter battery storage settled 74% of the 2017 volume (MWh) • Registrations from stationary installations of lithium-ion batteries • In 2015, behind-the-meter generators provided 15% of regulation; in 2017 this dropped to 1%$0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 $2.0 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 2013 2014 2015 2016 2017 CSPCredits(millionUSD) MWh Battery Electric water heaters Generator CSP Credits (million USD)
- 11. 10 US Power & Renewables Summit 2018 woodmac.com Changing dynamics in demand response 1. The current 32 GW of available capacity is not utilized to its full potential 2. Availability of the type of flexible capacity is sensitive market design changes 3. Third party business models for aggregation and market access are evolving
- 12. 11 US Power & Renewables Summit 2018 woodmac.com Source: CPUC, CAISO Third party market is flourishing in California as CPUC registered demand response providers triple since 2016 E R R R R E R R E R E E D D D D D D D D D D D D D D D D D D D Vendor registration DRAM 2018/19 participationD Vendors dealing with residential or small commercial customersR E Battery energy storage vendors
- 14. 13 US Power & Renewables Summit 2018 woodmac.com 6% 16% 9% 10% 15% 44% Source: U.S. Energy Information Administration (EIA) Annual Energy Outlook (AEO), 2000, 2009 and 2018 Breakdown by electricity consumption by end use in U.S. residential households changes little for conventional categories 10% 13% 10% 14% 8% 45% 2000 2009 8% 14% 9% 9% 9% 51% Space Heating Space Cooling Water Heating Refrigeration Lighting Other Appliances 2018 Electricity consumption by end use in U.S. residential households in 2000, 2009 and 2018
- 15. 14 US Power & Renewables Summit 2018 woodmac.com Residential customers continue to deploy technologies that fit their lifestyle and in turn introduce more variability to the load shape and the electric grid 8% 14% 9% 9% 9% 51% Space Heating Space Cooling Water Heating Refrigeration Lighting Other Appliances 2018 Electricity consumption by end use in U.S. residential households in 2018 Additional technologies contributing to residential flexibility Rooftop Solar Battery Storage Electric Vehicle Charging
- 16. 15 US Power & Renewables Summit 2018 woodmac.com By 2023, 65 million U.S. households will own at least one voice assistant devices and use voice assistants as smart home control platforms 0 50 100 150 0 50 100 150 2016 2017 2018 2019 2020 2021 2022 2023 #ofHouseholdsUsingDevicesas SmartHomePlatforms(Millions) Deployment(Millions) Cumulative Deployment Smart Home Platform Penetration Cumulative voice assistant device deployment in the U.S., 2016 - 2023 Wood Mackenzie Power & Renewables, Energy Management in the Connected Home, June 2018
- 17. 16 US Power & Renewables Summit 2018 woodmac.com Wood Mackenzie Power & Renewables, Residential Flexibility Potential in the U.S.: Solar, Battery Energy Storage, EV Charging and Smart Thermostats, September 2018 The 23 Million Residential DER and Connected Devices in the U.S. Require a Holistic Approach to Orchestrate Flexibility 72 Approximately 1.8 million residential solar PV systems have been installed. There are more than 11,000 residential energy storage units. Nearly 900,000 residential EV chargers are in use. More than 20 million smart thermostats operate in residential households. Residential deployments by 2018
- 18. 17 US Power & Renewables Summit 2018 woodmac.com Behind-the-meter flexibility: The orchestrated impact of distributed generation and energy management tools on customer load shapes Cumulative stacked potential for behind-the-meter residential flexibility, 2017-2023E 29 37 47 57 66 77 88 0 20 40 60 80 100 2017 2018E 2019E 2020E 2021E 2022E 2023E GW Smart Thermostats Residential Solar EV Charging Residential Energy Storage Wood Mackenzie Power & Renewables, Residential Flexibility Potential in the U.S.: Solar, Battery Energy Storage, EV Charging and Smart Thermostats, September 2018
- 19. 18 US Power & Renewables Summit 2018 woodmac.com Advanced inverter functions help increase visibility into residential solar operations, but advanced inverter still run into technology and regulatory issues 4,399 4,399 4,399 4,399 4,399 4,399 4,399 232 1,121 2,081 3,189 4,445 5,743 7,183 10,557 12,785 15,230 18,066 21,360 24,744 28,487 0 5,000 10,000 15,000 20,000 25,000 30,000 2017 2018E 2019E 2020E 2021E 2022E 2023E MWdc Other States California - Before Rule 21 California - After Rule 21 Illinois Hawaii U.S cumulative residential solar deployment by state, 2017-2023E Source: Wood Mackenzie Power & Renewables, U.S. Market Insight Q3 2018
- 20. 19 US Power & Renewables Summit 2018 woodmac.com Grid-interactive water heaters can be the new frontier if the CTA-2045 compliant port reaches commercialization Wood Mackenzie Power & Renewables, Energy Management in the Connected Home, June 2018 Utility Vendor Start Year Water Heater Pilot Scale 2017 499 units in Kapolei Lofts on the island of Oahu 2017 Pilot with 150 customers 2017 81 new homes in Minneapolis-St. Paul N/A 2017 Pilot with 7 controlled systems 2018 Pilot with 600 multi-family customers 2018 Pilot with 20 units in Duke Florida service territory Select programs featuring grid-interactive water heaters
- 21. 20 US Power & Renewables Summit 2018 woodmac.com Utilities and market operators are presented with an opportunity to adapt programs and procedures to leverage flexibility to address distribution and wholesale issues Only when technology developments, regulatory improvements and the need for flexibility come together can utilities move toward holistically orchestrating flexibility. 35 42 51 59 68 78 88 0 20 40 60 80 100 2017 2018E 2019E 2020E 2021E 2022E 2023E Billions$ Residential Solar Smart Thermostats Residential Energy Storage EV Charging Cumulative market size of equipment to enable residential flexibility since 2013, 2017-2023E Wood Mackenzie Power & Renewables, Residential Flexibility Potential in the U.S.: Solar, Battery Energy Storage, EV Charging and Smart Thermostats, September 2018
- 22. Thank you!
Editor's Notes
- Putting the geographic footprint in context, this is about ¾ of the US power system
- RES penetration ranges from 5 to nearly 30% and is on a constant rise
- Just because it’s distributed does not mean its renewable Providing both front-of-the-meter and behind-the-meter flexibility access to wholesale markets as individual resources or in aggregate
- Economic demand response revenue for curtailment service providers (CSPs) has been steadily declining since 2014 largely due to day-ahead and real-time market activity. Notably, 2014 was a unique year for economic market opportunities due to the polar vortex weather constraints resulting in revenue opportunities for demand response providers. As a percent of total revenue, synchronous reserves and regulation have replaced the day-ahead and real-time markets as the chief drivers of revenue for CSPs. This is an indication of market opportunity and system changes: CSPs are making a larger portion of overall economic demand response market revenue from the provision of ancillary services, signaling increasing price arbitrage opportunities as a result of changing operational grid needs.
- The rush was strong enough to push energy storage to a record year. There were 221 MW of energy storage projects installed nationwide in 2015, a 243% increase from 2014. By mid-year 2016, PJM had about 265 MW of grid-connected storage projects, of which about 160 MW were installed in 2015, and with about 700 MW more under construction or in development. Settled regulation demand response volume (MWh) has steadily increased year-over-year since 2013. When compared to 2016, market revenue increased by 69 percent, while volume cleared increased by approximately seven percent. PJM reports that behind-the-meter battery storage settled 74 percent of the volume (MWh) in the market in 2017, a three percent increase from the previous year. Stationary installations of lithium-ion batteries make up the majority of registered regulation capacity, followed by electric vehicles. In 2015, behind-the-meter generators provided 15 percent of regulation demand response, dropping to 4 percent in 2016 and then to only 1 percent in 2017.
- Move away from generation following load and towards load following generation
- The California Public Utilities Commission (CPUC) defines a DRP/aggregator “A DRP/aggregator is a commercial entity that provides demand response services such as assisting retail customers with strategies or technology to reduce their electric consumption and then providing the electric load reductions as a ‘bid’ in wholesale energy markets. Some entities focus entirely on working with customers to reduce their electric consumption and paying incentives for their reductions. Such entities are often referred to as “aggregators” and will have commercial arrangements with other entities that specialize in interfacing with the wholesale market. The wholesale-facing entities are called Demand Response Providers (DRPs). Some entities will handle both retail and wholesale transactions. DRPs/aggregators who intend to solicit and serve utility bundled customers must register with the CPUC [these entities are summarized above]. DRPs must also register at the CAISO, sign a Service Agreement with the CAISO, and meet all CAISO’s DRP requirements.” In Q2 2016 there were only 6 entities registered CPUC DRPs/aggregators: Enernoc, EnergyHub, Ohmconnect, EnergyConnect (now Cpower), STEM, and Greencharge Networks (now Engie Storage). Note, the Demand Response Auction Mechanism (DRAM) pilot began providing demand response in Q2 of 2016. There are currently 18 DRPs/aggregators registered with the CPUC, 12 of which are registered as DRPs with the CAISO. The number of DRPs/aggregators registered with the CPUC and/or the CAISO has tripled in the past 2.5 years indicating a growth in California’s market for third party flexibility services. Not all registered entities participate in the CAISO on their own, some are represented by a scheduling coordinator that does the bidding into the market for their portfolio of demand response. Added shell and leap http://www.cpuc.ca.gov/General.aspx?id=6306