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Shift, Not Drift: Towards Active Demand Response and Beyond

Smart Grids Task Force Steering Committee meeting 9 July 2013, Brussels

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Project leader Leigh Hancher

Research team leader Xian He

Research team Isabel Azevedo, Nico Keyaerts, Leonardo Meeus, Jean-Michel Glachant

Project advisors Władysław Mielczarski, François Lévêque

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Why active demand response?

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GENERATION

- Centralized - Predictable - Dispatchable

DEMAND

- Inelastic

Before

GENERATION

- Decentralized - Less predictable - Less dispatchable

DEMAND

- Flexible

Now with more RES

ACTIVE DEMAND RESPONSE FL

EXIB

ILIT

Y

FLEX

IBIL

ITY

FLEXIB

ILITY

To keep the balance

…The flexibility challenge

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That’s why we find demand response in…

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Energy Roadmap 2050 “energy saving and managing demand: a responsibility for all”

Smart Grid Task Force “smart grids can be a useful tool in enabling consumers to take action to more effectively manage their energy consumption”

Energy Efficiency Directive “demand response is an important instrument for improving energy efficiency ”

Internal Market Communication “stronger demand response in distribution networks”

Smart Appliances

Smart box

Smart Meters

DR benefits

DR potential

Sustainability first

Dynamic tariff

Regulatory barriers

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But significant skepticism in reality

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No future for demand response!!

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We challenge this view by adopting

a consumer-centred approach

1. How to assess consumers’ potential and willingness to participate in active demand response?

2. How to realise active demand response?

TOPIC #11

Shift, not drift: Towards active demand response and beyond

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How to assess consumers’ potential and willingness to participate in active demand response?

Part 1

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How consumers will be engaged?

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……? Potential to participate

Willingness to participate

Consumer engagement Contract

€

kW

DR contract • Consumer-centred

Analytical approach • Focus on contract

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Consumers’ potential to participate in active demand response

• Not only about the smart appliances

• But also about the way we use the ‘smart’ and ‘dumb’ appliances

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More flexible

Load Non-storable Storable

E.g. heating and cooling, electric vehicles

Non-shiftable Shiftable

E.g. laundry and dish washer

Non-curtailable Curtailable

E.g. lighting and TV

E.g. Alarm, automation, TV,

Base

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Consumers’ potential expressed by load mix

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Load mix

Base20%

Curtailable15%

Shiftable25%

Storable40%

Shiftable mix

Curtailable mix

Storable mix

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How consumers will be engaged?

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……?

Consumer engagement Contract

€

kW Willingness to participate

Potential to participate

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Interaction between load mix and demand response contracts

Shiftable mix

Curtailable mix

Storable mix

Fixed capping

contract

TOU contract

Direct load

control

Dynamic pricing

contract

Dynamic capping

contract

5 contract types

Price-based, fixed tariffs for fixed intervals, determined annually

Volume-based, fixed load cap and intervals, determined annually

Price-based, dynamic tariff with day-/ hour-ahead notice

Volume-based, dynamic load cap with day-/ hour-ahead notice

Control-based, automatic operation by a 3rd party

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How consumers will be engaged?

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……?

Consumer engagement Contract

€

kW Willingness to participate

Potential to participate

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Consumers’ willingness to participate in active demand response

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Preferences

Financial compensation

Social motivation

Price risk

Volume risk

Autonomy/ privacy

Complexity

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Interaction between consumer preferences and demand response contracts

Contract

Preferences

Price Risk Volume risk Complexity Autonomy/ Privacy loss

Financial compensation

TOU Low None Low None Limited

Dynamic pricing

High None High None High potential

Fixed capping contract

None Low High Limited Limited

Dynamic capping contract

None High High Limited High potential

Direct load control

None None None High High potential

Lots of trade-offs

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Can consumers be engaged to participate in active demand response?

Yes, if we provide them enough options and

tools to choose the right contract.

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How to realise active demand response?

Part 2

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……? Potential to participate (load

mix)

Willingness to participate

(preferences)

Consumer engagement Contract terms

€

kW

Intermediaries

How to have an adequate range of contracts?

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Pros and cons of different intermediaries

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Intermediaries

Electricity Suppliers

3rd parties

Consumer cooperatives

Pros Cons

Expertise in energy sector

Possible conflict with core business

Limited competition pressure

No conflict with core business Lack of expertise

Full incentive of profit sharing Lack of expertise

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How to have an adequate range of contracts?

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A single intermediary may not have the incentive/competence to provide an adequate range of contracts.

But We do not need to correct their business motivation, as

long as an adequate range of intermediaries exists.

How to have an adequate range of intermediaries?

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Recommendations to ensure an adequate range of intermediaries

1) Demand response license provides a ‘quality label’ to build trust.

2) Disaggregated billing allows better comparison of offers from intermediaries who offer bundled services (e.g. supply and demand response) and those who do not.

3) Non-discriminatory access to electricity markets and to data.

4) Output-based regulation for regulated services (congestion management and ancillary services)

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How to make choice out of this range? • Need for consumer empowerment and protection measures

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4 Steps in contract selection

Qualifying their load mix

Recognizing their preferences

Selecting an appropriate contract type

Finding the right contract implementation

Challenges

Lack of knowledge of appliances; lack of skills to use them

Not aware of the risks and rewards implied by the contract; lack of skills to evaluate them

Difficulty in aligning load mix and preferences

Lack of comparability in contract design

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Recommendation on a toolkit of consumer empowerment and protection

1) Mandatory consumer profiling reveal consumer’s load mix and preferences

2) Independent contract comparison tool facilitate consumers in choosing the appropriate contract

3) Monitoring and optimisation of the range of contracts limit the complexity of contract terms

4) Adequate data protection raise consumers’ trust to reveal personal information before and after signing a contract.

5) Effective dispute resolution mechanism fall-back option to enable efficient switching of contracts or intermediaries by consumers.

6) Special scheme for vulnerable consumers prevent them from being penalised for their inability to provide active demand response.

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Conclusion

1. How to assess consumers’ potential and willingness to participate in active demand response?

2. How to realise active demand response?

Consumers can be engaged if they have options that reflect their diversity and are adequately empowered to make choices.

Toolkit of consumer empowerment Measures to facilitate market entry

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Thank you very much for your attention xian.he@eui.eu; http://think.eui.eu

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THINK reports (published 2011 - 2013)

1) Public Support of RD&D

2) Smart Cities

3) Energy Roadmap for 2050

4) Public Budget of EU Member States

5) Offshore Grids

6) Transmission Grid Tariffication

7) Building refurbishment

8) Electricity Storage

9) EU technology policy for 2050

10) CBA for infrastructure package

11) Active demand response

12) DSO Regulation