Status of Demand Response in Europe. Jessica Stromback, Smart Energy Demand Coalition EPFL Lausanne Switzerland Sept 10 th, 2015

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Status of Demand Response in Europe Jessica Stromback, Smart Energy Demand Coalition EPFL Lausanne Switzerland Sept 10 th, 2015

The Smart Energy Demand Coalition (SEDC) is an European Industry Association with approximately 45 members

In order to change the future you must challenge the present The SEDC Moto DR is the only none-subsidized resource in the energy markets today

Demand Response The People Power Resource Why Care? USA - As of 2014, over 3.5* billion Euros earned by the local economy annually through Demand Response 7 years after market opening 29 GW under Demand Response programs USA Multi Billion $ Business Direct Revenue + avoided investments in generation Demand Response took off in 2005 with Demand Side access to capacity markets Average estimate peak clipping 8-11% US (FERC) Average estimate possible peak clipping 6-13% Europe (SEDC) Developed & developing nations looking at DR for peak clipping purposes: Canada, Australia, South-Korea, Singapore, Japan, India, Brazil, China etc. *Joule Assets AESO CASIO ERCOT IESO ISO-NE MISO NBSO NYISO PJM SPP Mean 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% A total of 66 GW were under some form of control, making up 9% of total US national capacity (source FERC)

Aggregation Seviced KEY for successful DR Aggregator can be third party, utility, or retail supplier Aggregated Demand Response: a reliable source of flexible capacity The aggregator collects multiple customers with multiple loads electric heating, freezers, refrigeration, fans, lighting, pumps, grinders, smelters,... PJM 2011 Final Emergency Load Management (ILR/DR) and Economic Demand Response summary.

Demand Response Economic Energy Dispatch 8/17/2009: Via phased DR, 75MW of expensive generation avoided

State of the Art Integrated, Automated Demand Response for Control Centers Increasing Interactions with Grid (OpenADR & Smart Grid) Resources Sold Back to Grid Daily Energy Efficiency Daily Time-Of- Use Energy (TOU Rates) Dynamic Peak Load Management (Dynamic Rates) Scheduled Demand Response Real-Time Demand Response (Ancillary Reserves) Regulation (Ancillary Services) Covered by the Network Codes Explicit DR Service Levels Optimized Time of Use Optimized Service Levels Temporarily Reduced Increasing Levels of Granularity of Control Increasing Speed of Telemetry Demand can participate: - 2 second, 30 second, 2 min 1 hour, intra-day... Time Scale of DR Source: LBNL

SURVICE IS KEY Demand Response Back Office Identify Notify Curtail Monitor Restore Operators see need for event Event calls are made to customers Customers change their consumption Operators monitor response, then releases customers Customer load returns to normal Normal Operations Demand Response Event Recovery Normal Operations Source: Comverge

Aggregation Service Role Handle communication, registration requirements Real-time metering takes place at the level of the aggregator If necessary the then passes on the individual measurements of the consumers actions Handle measurement and verification requirements Secure standardization of communication interfaces Calculate and report baseline and saving change Use an already existing methodology that has been proven to be sufficiently accurate to allow for fair payment and adequate reliability Handle penalty and payment structures (for example reserves)

Aggregation enables reliability Figure 1: PJM, Load Management Performance Report 2014/2015. Load Management commitments, compliance, and test performance (ICAP) for Limited Summer product, DY2014/15,

Business models

DR Success is a Process May need different requirements from different resources to deliver the same product Demand Response Business Regulation Market Design Market development is a process gain one level of uptake then adjust Pay attention to product details and requirements

Market Structure Developed TSO Panasonic Client Industrial consumer TSO Tariffs/sole service Potential Strategy Risk: Types of Response - Low Potential if this is the only market - Technology Provider: Bundle software Use as a differentiator First entrant advantage - Low risk - Money spent developing software National Markets Poland Italy Spain Slovenia Aggregators Cyber Grid (sole service) Flexitricity (Tariff) Kiwi

Function of Aggregation Consumer Government Generation ISO/Market Retailer Direct revenue Do-good Use of back-up Generation Control Security of Supply Energy Management Justification Smart System Grid Bidding potential into Value to voters new markets, Avoided investment Lower cycling costs, Green Increase efficiency Increased wind and New communication solar requirements fulfilled Policy affordable, sustainable, reliable Best mix for assets Enlarge market for existing power plants Virtual power plant product Service to customers Control of purchasing risk Green Revenues

Other: Example: Issues Lack of standardised baseline Complex contracts No pooled pre-qualification No realistic duration and minimum load requirements Penalties through network tariffs No appropriate settlement processes No access to historical data Can find all or a selection of these an other barriers throughout the EU

4 Steps to successful Demand Response 16

Step 1- Involve the Consumer Critical issue, difficult in majority of Member States 1. Consumers require a clearly defined offer, which is both simple to use and contains clear benefits. 2. They require a provider this offer an independent aggregator or a retailer. Requirements for success: 1) Legality: Demand must be accepted as a resource in the markets 2) Access_ Consumer s should have access to service providers without interference from potential competition 3) Standardized process: A standardized process is required for the BRP-Aggregator as described in EG3 4) Bi-directional payment BRP-Aggregator: The BRP requires payment for sourcing costs. 17

Step 2 Baseline & Measurement Requirements This issue tends to be resolved as market matures Measurement and verification protocols measurement ensures fair payment. Requirements for success Baseline and measurement standardization (A single consumer may be face contradictory requirements from his/her retailer, TSO and DSO). Measurement technology though this is supplied during the program OR access to standardized data 18

Step 2 Baseline & Measurement Requirements This issue tends to be resolved as market matures ensures fair payment. Baseline depend on the duration of the activation and the lead-time prior to activation. 1) They range from extrapolating (flat) the last value for limited duration event with no lead time (this is the case for tertiary reserve in Belgium f.ex.) to more elaborate extrapolation based on the curve of the last 8 from 10 days rescaled to the actual consumption just prior to the notification for longer events with longer lead times (such as strategic reserves in Belgium or capacity market in the UK). 2) The current baseline solutions used in balancing markets have proven to be up to the task and mature. 3) There is significant literature available on baselines. 19

Step 2 Balancing BRP Critical to refine roles and responsibilities DR is designed to be activated only a few hundred hours a year (adequacy, tertiary reserves, exceptional market conditions on intraday market ) therefore the split responsibility on the access point is only applicable for these exceptional situation and not the remaining more then 8000 hours of the year. & Com TSO & Com BRP Customer AG & Com This process is described within the Electricity Balancing Network Code by ENTSO-E. Is currently under review by the Commission 20

Step 3 Create viable products Progress made in several Member States Products/programs that fit Consumer capabilities Requirements for success: Historic regulation: Participation requirements in markets historically directed toward the needs of the national generators. Now must be adjusted to maximize the use of a range of resources included demand and renewables Allowing consumer participation Product Design: It is critical that participation requirements for a market allows a range of resources to participate, including demand side resources. 21

Step 4 Ensure fair payment Pay equality has seen little progress and is an issue in a majority of Member States Transparency and Equal Pay! All resources, including demand side resources, should be paid the full value of services provided! Requirement for success: Equality: Today Demand Side Resource are not always paid the MW to MW as generation for the same resource Transparency: Prices are often set through bilateral agreements, are not published, and are not transparent. Value for Flexibility: The value of flexibility is not currently reflected in current market structures Standardized bi-directional BRP-aggregator payment methodology: to ensure transparent smooth are required for development 22

2013 Industrial DR business activity 2015 IS PT IE ES GB FR NL BE NO DK DE CH SE CZ AT IT SI HR BB PL SK HU RS ME AL M K GR FI EE LV LT BY RO BG MD UA Key: 23

Key: Residential DR business activity in Europe EE and DR. 2015 Dynamic pricing mandated In the Nordics Dynamic pricing will be possible Is not now IS Retailers testing with mixed results PT IE ES GB FR NL BE CH NO DK DE SE IT Prices are largely regulated split between DSO and Retailer addressed CZ AT SI HR BB PL SK FI EE LV LT BY MD UA HU RO TOU RS not need ME reflective BG and too low AL M K for consumer value GR 24

Questions?

Thank You Jessica Stromback SEDC +358 44 90 66 821 Jessica.stromback@smartenergydemand.eu

Commercial Contract Standardised process Step 1- Involve the Consumer Contractual Relationships Without standardised process BRP Customer TSO Data exchange agreement and confirmation document for prequalification Agreement on financial adjustment 1 Service contract Aggregator Prequalification, nomination and delivery of balancing services Confirmation for prequalification, Ensure handling of DSO curtailment events Retailer DSO 1 An alternative way is an agreement between customer and retailer

Contractual Relationships Switzerland, Belgium, France Aggregated Data exchange balancing adjustment Standardised financial adjustment 1 BRP TSO Retailer Customer Prequalification, nomination and delivery of balancing services Commercial Contract Service contract Aggregator Confirmation for prequalification, Ensure handling of DSO curtailment events Standardised process DSO

Demand Response Measurement against baseline 8/17/2009: Via phased DR, 75MW of expensive generation avoided

Step 4 Ensure fair payment Lost sales for retailer Payment of sourcing costs Bought electricity Part of balancing responsibility And retailer function Purchased electricity which cannot bill A few Retailers look for payment of full costs, which they calculate, generation, retailer, profits

Issue BRP- Aggregator The SEDC promotes: 1) Standardized Payment/Settlement: Payment methodologies should be standardised but should follow market development 1) A mix of forward and day ahead prices 2) An average price which follows the market 3) A price all BRPs agree upon as a fair methodology Energy is transferred between market parties 2) Aggregated Information: No direct communication of any consumer related data should be provided directly between the BRP and aggregator but rather aggregated data for all DR participating in a given area should be transferred through a third party to the BRP 31