King

Demand Response Programs in New York’s Wholesale Electricity Market: 

Demand Response Programs in New York’s Wholesale Electricity Market Charles King Vice-President, Market Services New York Independent System Operator Prepared for: International Demand Response Symposium September 9-10, 2003 New York, NY

What is the NYISO?: 

What is the NYISO? An independent, not-for-profit organization Ensure safe and reliable operation of the New York bulk power transmission system Administer New York’s wholesale electricity markets Assumed some duties formerly conducted by the New York Power Pool. Established under a mandate of and regulated by the Federal Energy Regulatory Commission (FERC).

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New York State: 18.9 Million People Serving Metropolitan New York City Area 2001 load of 157,000 GWH $5.2 Billion Market Record peak load of 30,983 MW (8/9/01) 10,775 miles of High Voltage Transmission Over 335 generating units modeled Required Installed Capacity 36,132 MW NYISO Overview IMO 23,857 MW* Hydro Quebec 19,410 MW* ISO - New England 25,158 MW* PJM 54,176 MW*

Available Programs : 

Available Programs Emergency Demand Response Program ICAP Special Case Resources Program Day-Ahead Demand Response Program

Emergency Demand Response Program: 

Emergency Demand Response Program Activated in-day during Operating Reserve deficiency Greater than 100 kW, may aggregate Paid the greater of real-time marginal price or $500/MWh & guaranteed 4 hour minimum May set real-time marginal price at $500 Available to interruptible load & emergency backup generation Open to Load Serving Entities (LSEs), Direct Customers, and Aggregators

ICAP Special Case Resources (SCR) Program: 

ICAP Special Case Resources (SCR) Program Loads/Distributed Generation >= 100 kW capable of demand interruption Can supply Installed Capacity (ICAP) LSE advised in Day-Ahead market - 2 hour in-day notification Paid for energy reduction: real-time marginal price or Strike Price Maximum $500/MWh, whichever is greater - 4-hour minimum call May set real time marginal price under scarcity pricing rules Activated prior to Emergency Demand Response resources

EDRP/SCR Registration by Zone : 

EDRP/SCR Registration by Zone

EDRP Event Performance : 

EDRP Event Performance Comments: 4/17/02, 4/18/02 – no advanced notice 4/17/02 – Zones G-K 4/18/02 – Zones G-K, B 8/10/01 – Zones F-K 7/30/02, 8/14/02 – called statewide

Day-Ahead Demand Response Program: 

Day-Ahead Demand Response Program Load bids interruption in Day-Ahead Market - if chosen, can set marginal price Multi-hour strips allowed Third-party providers allowed as of July 1, 2003 Parties submitting accepted bids get: incentive credit (fixed load bid reduced by amount of curtailment provided) paid greater of marginal price or bid for actual interruption penalized for buy-through at Day-Ahead or Real-Time marginal price, whichever is greater

Lesson #1 – Opportunities for Demand Response Should Mirror Those for Suppliers: 

Lesson #1 – Opportunities for Demand Response Should Mirror Those for Suppliers Use existing markets where possible Counterbalanced by different business drivers for power suppliers and demand response: Energy reduction is not the DR’s principal business; supplier energy production is DR economics favor shift in energy consumption

Lesson #2 – Continuity and Simplicity are Critical: 

Lesson #2 – Continuity and Simplicity are Critical Annual program changes should be kept to a minimum Programs should run for at least 2-3 years (permanent is better) Coordination with environmental agencies, state regulators is needed

Lesson #3 – Participation Requires Education : 

Lesson #3 – Participation Requires Education Potential customers can develop curtailment plan – developing a bidding strategy is more difficult ISOs can teach mechanics – third party organizations should handle bid strategy training

Primary Reason for Not Participating in DADRP: 

Potential benefits don’t justify risks (30%), inability to shift usage (36%) and inadequate knowledge of program requirements (17%) given as primary reason for not participating in DADRP Primary Reason for Not Participating in DADRP

Lesson #4 – Customers Need to be Paid to Participate: 

Lesson #4 – Customers Need to be Paid to Participate …at least in the beginning Customers on flat retail tariffs have no incentive to participate Wholesale market dynamics are barrier to many organizations, even those on real-time tariffs Initial incentive payments can condition behavior, remove barriers to wholesale market bidding

Lesson #5 – Demand Side Resources Should be Capable of Setting Marginal Price: 

Lesson #5 – Demand Side Resources Should be Capable of Setting Marginal Price 2002 summer experience showed lack of scarcity pricing Marginal prices should reflect the value of resources on the margin Source: Independent Market Advisor review of NYISO summer 2002 performance

Lesson #6 – Customers Need to See and React to Real-Time Prices: 

Lesson #6 – Customers Need to See and React to Real-Time Prices Greatest benefit comes from adoption of RTP Retail demand charges complicate behavior Technology solutions needed to allow customers to see real time price and consumption Adoption level doesn’t need to be high to achieve significant marginal price impact

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Questions?