Lab Scopes Out Demand Response
demand response requires more than just subjecting customers
to the vagaries of wholesale power prices, says a new study
by researchers at Lawrence Berkeley National Laboratory in
researchers looked closed at Niagara Mohawk s use of real-time
pricing to shift and limit loads in response to hourly wholesale
market price changes. The program was moderately successful,
the LBL team concluded, but commercial and industrial customer
behavior is considerably more complex than many would have
assumed. The work was funded by the California Energy Commission,
which is looking into various models for demand response programs.
wisdom holds that industrial customers will be the most responsive
to price signals. But the LBL study of NiMo and the New York
Independent System Operator programs found that government
and educational customers were the most responsive to market
price signals. Commercial customers were least able to respond
to real-time prices. The researchers conclude, because commercial
customers (e.g., office buildings) have similar physical characteristics
and end-use load (e.g., space conditioning and lighting) to
government and education facilities, response from this sector
is at least technically feasible. If institutional and other
barriers can be overcome, the commercial sector may provide
a rich source of price response.
study, said CEC Commissioner Arthur Rosenfeld, provides useful
insights to California policymakers about the building blocks
for a successful program. These include transparent wholesale
market prices, a broad array of options for those customers
that want to hedge and mitigate price volatility, and technical
assistance and information tools that help customer manage
their facility loads in order to respond effectively to wholesale
market price signals.
fall of 1998, NiMo offered real-time pricing as part of its
default service to customers with demand in excess of 2 MW.
Under the program, NiMo charges customers the hourly day-ahead
location-based market price established by NYISO. NiMo posts
the following day's hourly prices by 4 p.m. so customers can
plan the next day's usage.
half of the 130 customers in the study were government and
education facilities, with industrial customers representing
another third, and commercial customers the rest. The customers
had an average monthly peak demand of 3.4 MW. During 1998-2003,
about 55 percent bought commodity power from competitive suppliers.
Peak prices were fairly volatile, increasing by 15-30 percent
in various regional zones.
said Charles Goldman, the report's lead author, customers
are satisfied with real-time pricing as the default tariff,
although some said that price hedging options are not attractively
priced relative to perceived risks. Some 35 percent of survey
participants were hedged, either through fixed-rate contracts
or financial hedging products. The rest were fully exposed
to varying prices in the wholesale market. Overall price response,
the study concluded, was modest but encouraging, and individual
customer responses was extremely variable.
Mohawk experience, the report concludes, shows that large customers
are likely to provide a moderate amount of demand response when
real-time pricing is their default service tariff, even if some
customers hedge against price volatility. However, subjecting
customers to wholesale market variability is not sufficient
to realize their full demand response potential.
at Berkeley Lab"