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Market Development and Understanding - 2014 Demand Management Innovation Forum
- 1. TransGrid’s 2014 Demand Management Innovation Forum Market development and understanding Mal Coble, TransGrid 24 September 2014 1 | The role of networks in a changing market dynamic September 2014
- 2. Overview 1. State of the market 2. Increasing market depth and liquidity 3. Table discussions on key challenges 2 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014
- 3. Introduction TransGrid’s 2014 Demand Management Innovation Forum was held on 24 September in Sydney. This is an annual event that TransGrid hold to discuss demand management activities both in our network and across the NEM. More than 60 people joined the conversation, ranging from large energy users, consumer advocates, researchers, technology providers and other networks. 3 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014
- 4. Demand management at TransGrid > Benefits of increasing demand management > economic efficiency > lower transmission costs (and other supply chain costs) > adaptive network planning > Historical difficulty procuring demand response > Uncertainty about potential participants Historical network support procurement 9 4 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014 2 Request for proposal issued Network support procured
- 5. Demand management overseas > Policy settings typically encourage demand response and energy efficiency > Different regulatory environment 5 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014
- 6. Information sharing > Data sourcing issues for networks assessing a non-network option (TransGrid’s ‘triage database’) > A need for public mapping of network constraints against demand management opportunities 6 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014
- 7. Understanding peak demand potential reduction Contribution of the various factors to reduced demand for electricity in the NEM since 2006 Estimate of DSR potential > Difficulties understanding peak demand persist > Hugh Saddler’s ‘Power Down’ provides insight into total consumption decrease > Early studies indicate untapped potential for demand response at peak 7 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014
- 8. Removing barriers RMIT study into residential energy demand showed improved engagement by networks required Small and medium businesses still remain an untapped resource 8 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014 Market development could boost uptake in commercial, industrial and agricultural sectors
- 9. Table discussions 9 | TransGrid’s 2014 Demand Management Innovation Forum 24 September 2014
Editor's Notes
- Discuss TransGrid’s experience in attempting to procure DM – 2 out of 10 RfPs resulted in network support being procured. Forecasting peak demand used to have a clear positive relationship to economic growth – but not recently. The drivers are becoming more clear such as energy efficiency, but future demand is increasingly difficult to forecast. There is a lack of variety or competition in the demand management marketplace. Why grow the DM market? DM gives some consumers an option to respond to marginal transmission costs promoting: economic efficiency Lower transmission costs, and reduced investment requirements throughout the electricity supply chain adaptive network planning (DM is incremental, granular and has a relatively short lead time) Result: Lower prices and costs for consumers’ energy use. Notes for chart covers period from 2000 to 2014 three projects where a request for proposals was issued were subsequently deferred or cancelled Since 2000, TransGrid has issued a number of RFPs for network support to avoid or defer network investment, with the following results: Sydney Inner Metropolitan Area in 2009 – successful network support agreements with demand response aggregator EnerNOC and distribution business Ausgrid, totalling 40 MW for summer 2012/13 (RfP 105/09) Newcastle-Sydney-Wollongong area in 2006 – successful network support agreements with three service providers totalling 350 MW for summer 2008/09 (RFP 104/06) Western Area of NSW in 2000 – no responses NSW Central Coast in the early 2000s – no responses South West of NSW in mid 2000 – no responses Mid-North Coast of NSW in 2009 – offers made for 4 MW, but project subsequently deferred (RFP 130/10) Far North Coast in 2010 – one response that did not ultimately meet requirements for network support (RFP 51/10) South Coast (Nowra) in 2011 – two responses for small capacity, later withdrawn (RFP 62/11) Northwest NSW in 2011 – one proposal, but project later suspended (RFP 63/11)
- Australian DM market is not like the US. Greater availability in US. For example, in September 2013, PJM dispatched 6000 MW during a peak event or more than 4% of the system peak load in Sept 2013 Independent system operator and planning are typically integrated Policy settings: California has a cross-agency strategy for DR and EE Greater uptake of advanced metering (FERC estimated 13.4% penetration of advanced metering as of June 2011) NZ is also different. Transpower is targeting 10% of peak load for new DR capability. Nodal pricing, which also acts to some extent as a DR mechanism in the wholesale market (although ineffective for small to medium consumers not exposed to spot prices). UK xx Chart is from file:///Y:/Corporate_Development/Network%20Support%20and%20Consultations/1.%20Innovation%20DM/2014%20to%202019/Forum/References/pjm-hot-days-reports-for-20130910-20130911.pdf
- Data sourcing issues for networks assessing a non-network option (TransGrid’s ‘triage database’) Data sourcing issues privacy concerns inhibiting data collection Difficulty keeping information up to date Alternatives to achieve the database’s original purpose? estimate/extrapolate DR potential based on local factors pay consumers to understand availability (but possibly expensive and not directly connected to a constraint) with improvements the triage database could provide a reliable way of estimating DR availability as a “pre-feasibility” study but so far it has not been able to meet the original vision. A need for public information about network constraints and demand management opportunities Note the ARENA pending funding for the Institute for Sustainable Futures’ DANCE model (DANCE = Dynamic Avoidable Network Cost Evaluation) Words from ISF’s draft paper about this project – for speakers’ notes only, must be kept confidential ‘the measure will develop freely available, annually updated, online maps of network constraints, planned investment and the potential value of distributed energy resources in electricity networks across the Australian National Electricity Market (NEM). It fills a fundamental information gap by the provision of clear, consistent and timely information on network opportunities and constraints to renewable energy and demand management (DM) project proponents’ Note TransGrid’s inclusion of spatiotemporal mapping of network constraints against dm opportunities in its DMIA proposal for 2014-2019 Note TransGrid’s efforts to continually improve provision of information about demand management opportunities, eg TAPR 2014 changes, new early consultation on projects eg PSF Screen caps are from the Oakley Greenwood user guide for TransGrid’s Demand Management Triage Database
- Understanding peak demand Difficult to forecast peak demand Usage is increasingly peaky, as energy efficiency and price response have lead to drops in total consumption TransGrid’s DMIA 2009 to 2014 procured UTS study of peak demand driivers, finding: Forecasts emphasise economic factors and less or no emphasis on behavioural characteristics of some locations or socio-economic factors. Peak demand forecasts are currently derived from total demand models, rather than a direct model of peak – this implicitly assumes drivers of electricity demand are also drivers of peak demand drivers of the recent decline in peak demand include increasing income inequality, increasing immigration, electricity prices, urbanisation. modelling shows that replacing average cost based pricing with marginal cost based pricing would have little effect on average electricity use but would reduce peak demand in 2030 by 5%. Hugh Saddler’s ‘Power Down’ report found that The three largest factors contributing to decline in total consumption are the impact (regulatory) of energy efficiency programs, structural changes in the economy away from electricity intensive industries and since 2010, the response of consumers to higher electricity prices Untapped DM potential Some available estimates for untapped demand response potential Climate works (2014) estimate up to 3.1 GW of DR potential across Australian industrial and commercial customers (assuming a commercial incentive offered of 20-30% of the annual bill) even at just a 5-15% incentive the estimated potential is still significant at 1.7 GW. EnerNOC report for TransGrid PSF area potential DR (2014) (not publicly released) Estimate between 8 and 10% of peak demand could be reduced using demand response by 2022 (5 to 8% by 2019) DSR potential diagram is from p.4 of ClimateWorks report ‘Industrial demand side potential. Technical potential and factors influencing uptake. Initial findings and discussion paper’ Feb 2014 Contribution of factors to reduced total consumption diagram from p.7 of Hugh Saddler’s ‘Power Down. Why is electricity consumption decreasing?’ report Dec 2013
- Residential RMIT ‘co-managing home energy demand’ study completed August 2013 (contributions from Ausgrid, Endeavour and TransGrid) Key findings Pricing concepts and program responses TOU tariffs have received substantial negative media attention and have not achieved their full demand response potential. The introduction of another new, more complex pricing concept such as capacity charging is unlikely to be understood by householders or achieve the desired demand response. It may aggravate customers and attract further negative attention to the electricity industry. Programs which target critical peak days and successfully communicate the issue of peak demand engage householders in demand management and have a positive impact on householders’ perception of the industry. These types of programs have made good progress but are yet to fully realise their potential. Price rises and perceptions of the electricity industry Householder motivation to work with the electricity industry to reduce or shift their energy demand is compromised by highly visible negative messages and confusion and distrust in the industry regarding electricity issues such as recent price rises. Diversity in practices and demand response Households and their practices are highly variable. However, householders share an expectation for the responsible use of energy and avoidance of ‘waste’. Programs which prescribe or assume which energy uses are discretionary at peak times may alienate some households, miss peak reduction opportunities, and/or contribute to escalating expectations of comfort and convenience (if, for example, they recommend strategies such as pre-cooling before peak events). Peak demand (mis)understandings and responses to demand management Householders need better understandings of peak demand and how household demand response can deliver longer term benefits for their own household, the electricity network, and the wider community. Communicating with households Householders are becoming increasingly disengaged from energy industry communications because these materials are viewed as too simplistic or repetitive. While householders are receptive to understanding more about the energy industry’s issues and its vision for the future, this needs to be communicated as part of a conversation with householders. Recommendations 1. Develop or revise an industry communication strategy for households that is: LOUD: Increases the frequency and intensity of communication with households UNITED: Establishes a united industry body and/or voice on peak electricity demand issues CONVERSATIONAL: Adopts a conversational communication style with households RESPECTFUL: Respects householders’ intelligence VISIONARY: Communicates the industry’s vision for the future DIFFERENTIATED: Communicates to multiple audiences through multiple media PROGRESSIVE: Learns from other campaigns that emphasise health, safety and restraint, such as those in the water, public health and bushfire prevention and response sectors 2. Provide non-financial reasons/incentives to participate in demand management programs Build programs based on communication in addition to providing financial incentives Develop novel incentives and partnerships with households, community services, local businesses and other industries Develop programs that appeal to householders’ concerns for less physically able and disadvantaged others Develop programs that cater for all householders such as young people, parents, carers and pet owners. 3. Conduct further research on changing trends in household energy demand We recommend further research to track and test changing trends in residential energy demand, its potential impact on average and peak demand, and possibilities for steering this demand in different directions. [Add in Smart Grid Smart City findings in this area] Small and medium sized businesses [Add content, including landlord/tenant problem and lack of clear messages/understanding about opportunities] Commercial, industrial and agricultural [Add content about how RfPs for DM are usually met by aggregators rather than individual large businesses. Woolworths has told TransGrid that we should be going direct to market on this rather as well as to aggregators. Tradeoff between potential participants if the cut-off MW blocks are lowed for the procurement and the difficulty of coordinating a large portfolio and managing risk of delivery]