Integration of Demand Response into the Electricity Chain

Challenges, Opportunities, and Smart Grid Solutions

Arturo Losi, Pierluigi Mancarella, Antonio Vicino

• Publisher: Wiley-ISTE
• Year: 2015
• Print ISBN: 9781848218543
• eBook ISBN: 9781119245582
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Energy

The concept of Demand Response (DR) generally concerns methodologies, technologies and commercial arrangements that could allow active participation of consumers in the power system operation. The primary aim of DR is thus to overcome the "traditional" inflexibility of electrical demand and, amongst others, create a new powerful tool to maximize deployment of renewable energy sources as well as provide active network management solutions to help reducing the impact of limited grid capabilities.

DR allows consumers to actively participate in power system operation, thus bringing new opportunities in emerging energy markets as well as tangible system benefits. In this sense, DR is considered one of the key enablers of the Smart Grid concept. However, DR also poses a number of challenges, particularly when "active demand" is connected to the Low Voltage network, thus affecting all the actors involved in the electricity chain.

This book presents for the first time a comprehensive view on technical methodologies and architectures, commercial arrangements, and socio-economic and regulatory factors that could facilitate the uptake of DR. The work is developed in a systematic way so as to create a comprehensive picture of challenges, benefits and opportunities involved with DR. The reader will thus be provided with a clear understanding of the complexity deriving from a demand becoming active, as well as with a quantitative assessment of the techno-economic value of the proposed solutions in a Smart Grid context.

Many research contributions have appeared in recent years in the field of DR, both in journals and conference proceedings. However, most publications focus on individual aspects of the problem. A systematic treatment of the issues to be tackled to introduce DR in existing electricity grids, involving the extended value chain in terms of technical and commercial aspects, is still missing. Also, several books have recently been published about Smart Grid, in which there is some mention to DR. However, again while DR is seen as a key pillar for the Smart Grid, there is no dedicated, comprehensive and systematic contribution in this respect.

1
Demand Response in Smart Grids

1.1. Introduction

Traditional electric power utility regulation favors investments in supply-side resources over demand-side flexibility and energy efficiency resources. Accordingly, utilities have preferred capital intensive investments like building power plants, transmission and distribution networks since their profits have been, and are still, linked to their capital expenditures and energy production and sales. This trend is slowly shifting in modern power systems. The movement being observed is toward ensuring energy security and reducing industry’s carbon footprint by integrating renewable and distributed energy resources, and through the implementation of energy efficiency programs [BEE 12, CAP 09].

The proliferation of renewable energy resources, with energy security and environmental betterment objectives, poses significant challenges to the secure operation and planning of power systems. This is particularly due to the need for higher levels of flexibility and controllability to accommodate the intermittency and non-dispatchablility of renewable energy resources [ETO 10, UND 10, MAR 10, ILL 10, ELA 12]. In this environment, the demand side is expected to play an increasingly active role in maintaining the supply–demand balance by providing the required flexibility to follow non-dispatchable renewable energy resources [IVG 10]. This is in distinct contrast with the traditional power systems operation and planning paradigm in which generators are controlled to follow the demand as it varies over hours, days, seasons and years. Moreover, demand-side management (DSM) programs in the emerging low-carbon grids have had further expectations to leverage their potential over more traditional roles in decreasing the peak demand, reducing the operation of quick-start and peaking units (which are the major contributors to green-house gas emissions), and assisting with transmission and distribution investment deferrals.

According to the US Department of Energy, demand response (DR) can be defined as “changes in electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized” [USD 06]. There are other definitions which are more representative of the emerging applications for demand-side flexibility where demand is seen as a dispatchable resource responding to signals from transmission and distribution system operators, flexibility aggregators and utilities in the wider sense. For instance, the California Energy Commission defines DR as “a reduction in customers’ electricity consumption over a given time interval relative to what would otherwise occur in response to a price signal, other financial incentives, or a reliability signal” [CEC 11].

As these definitions suggest, DSM covers a broad range of activities that are planned to encourage end-users to modify their electricity usage patterns in order to assist power systems operation and planning. The terms “load management”, “demand response” and “energy efficiency” are often used interchangeably in the context of DSM. Nevertheless, there are differences between these terms which should be recognized. Load management programs usually refer to traditional applications for DSM which are mainly concerned with reducing power consumptions during peak demand and emergency conditions. Meanwhile, DR programs refer to recent and emerging applications for DSM, like improving grid reliability by providing ancillary services, or reducing wholesale energy prices and their volatility.

In contrast to load management, and DR programs that share some similarities, energy efficiency programs are primarily concerned with the permanent reduction in overall energy consumption of a specific device or system by employing high-efficiency equipment or system design [SHE 12]. Therefore, energy efficiency programs have permanent impact on reducing electricity use while load management/DR programs entail modifying electricity use temporarily, and at critical times, rather than on permanent basis.

1.2. Background on demand side management and demand response

DSM in its most basic form is not a novel concept and has been around for decades under the generic name of load management. Load management and interruptible load tariffs for large industrial and commercial customers, and direct load control (DLC) for residential customers became popular in utilities in the 1970s and 1980s in several countries [CAP 09, USF 11].

The load management practices of the 1970s were mostly implemented manually, and due to the unavailability of cheap and reliable communication equipment and slow response times, they were rarely deployed. In the 1980s, however, utilities and policy-makers became aware of the load management value as a reliability resource in integrated resource planning [CAP 09]. This was partly driven by the penetration of thermostatically-controlled loads such as air conditioners, which resulted in a load factor reduction and could create severe loading conditions particularly after blackouts. The international energy crises of the 1970s and 1980s at the same time increased awareness about the role that DSM, and especially about the role that energy efficiency programs can play in improving energy security.

In the 1990s, policy-makers and utilities started to redesign many of the vertically integrated power industries to allow for more competitive wholesale electricity markets, while gradually introducing choice for customers [HUN 99]. Policy-makers of deregulated electricity markets played a key role in the establishment of the rules to level the playing field in terms of market entry for non-traditional control resources such as DSM resources. The Energy Policy Act of 2005 [EPA 05] in the United States is a prime example where policy-makers eliminated unnecessary barriers for DR participation in the energy, capacity and ancillary service markets. The problems seen in electricity markets such as in the California market collapse of 2000–2001 [BOR 02] were also key drivers for such legislative changes, as they highlighted the role that DSM and response could play in ensuring the efficient functioning of the wholesale electricity markets and preventing generators from exerting undue market power [WEL 07]. Another example of such necessary adaptations to open up DSM in the power industry can be found at National Grid in Great Britain, where the frequency control by demand management service requires a minimum of 3 MW of capacity, which can be obtained through interruptible load aggregation [NAT 14b]. This contrasts with the technically similar firm frequency response service which has a minimum offer size of 10 MW [NAT 14a] and which is clearly targeted toward traditional generation assets. Article 15 of the European Parliament’s Energy Efficiency Directive [EUR 12] further outlines specific requirements for member states to enable and encourage DSM programs through the participation of DR providers such as aggregators. Overall, the development of open and organized wholesale markets coupled with policy support by energy regulatory commissions has facilitated the introduction of participation of demand-side resources in the power industry over the past few decades.

In recent years, the advent of smart grid (SG) technologies, which include a wide array of sensing, communication, control and decision-support tools all targeted at improving the functioning of grids, has led to many more new opportunities for DSM initiatives [MOR 09]. The ability of customers to respond to DR-related price/control signals has increased significantly as smart meters, communication, sensing and embedded control systems are becoming ubiquitous in the power industry, at home, in buildings, etc. Smart/communicating meters and telecommunication technologies enable operators, utilities and flexibility aggregators to communicate information such as time of use (ToU) prices to end-use customers in semi-real-time periods, as well as implementing various types of load control at end-use level. The potential number of applications is enormous, markets are wide open and innovation is driving major players of the information and communication technology (ICT) sectors into this brand new territory. The value of these potential applications is significantly given by the increasing role electricity plays in all economies. Electricity will be the energy carrier par excellence in the next 50 years, and therefore, the value of tools for control and management of electricity use can only increase in the near future.

1.3. Benefits offered by demand-side management

DSM can bring a variety of benefits to the power industry, ranging from economical to environmental benefits [SHE 12].

The economic benefits of DSM can be classified into three general categories. The first economic benefit comes from reducing the peak demands. Although peak demands are infrequent in power systems, their economic impacts are significant. This is mainly because energy prices skyrocket during peak demand and supply shortages. The more frequent occurrence of such spikes is what drives traditional industry capital investment in generation, transmission and distribution. Therefore, reducing peak demands though demand-side measures can be seen as direct substitutes to those investments. Given the scale of the investments involved, choices favoring one avenue over another can have a huge economic impact [SHE 12].

The second economic benefit comes from providing ancillary services, and potentially decreasing the volatility of the demand. Generally, ancillary services are provided by generating units running in a subefficient mode of operation. Such costly situations could be substituted in part (and even maybe in whole) by employing DR capacity. The provision of ancillary services by DR can further reduce the need for running costly power plants, such as quick start and peaking units driving production costs, prices and emissions down [SHE 12].

The third economic benefit comes from reducing the transmission and distribution losses. This is because the energy usually has to travel a considerable distance from power plants to end-use customers. The transmission losses vary between 5 and 10% depending on the loading conditions of transmission and distribution lines. DSM can contribute in relieving heavily loaded lines and reducing losses [SHE 12].

DSM provides an excellent reliability resource for the most critical reliability needs [KIR 06]. Specifically, it can be used to address capacity inadequacy of power systems caused by shortage of generation and transmission resources. Moreover, DR programs can significantly increase the operational security of power systems in the short term by providing ancillary services. This is mainly because ancillary services provided by responsive demand are technically superior to their counterparts provided by generation assets as they are faster and often highly distributed – we think here, for example, of the millions of electric water heaters found in the Québec province of Canada, which can be selectively disconnected to offset morning and evening demand ramps. The only time required to activate most demand-based ancillary services is the time required for the control signal to get from an operator, aggregator or utility to the end-use load. This is much faster than generation response times, which are usually on bases of tens of minutes in practice. In specific applications such as frequency control, the DR times are almost instantaneous, as frequency is measured at the load site and there are no communication delays [KIR 06].

DSM programs increase power system reliability and lower the likelihood and consequences of generation and transmission-forced outages, which can impose significant financial costs and discomfort on customers [USD 06].

The use of DSM also results in numerous environmental benefits. The environmental benefits of DSM programs fall into two groups. The first group originates from the reduction in peak demands. Reducing the peak demands prevents the need for power plant operation and its associated emissions. In addition, those benefits may reduce the need to construct new power plants, transmission lines, substations and distribution assets. This prevents the environmental consequences that may have resulted from such construction, and enhances the social acceptability of power grids [SHE 12].

The second group originates from reducing the need for ancillary services from fast-start units. Fast-start units are mostly fueled by diesel oil or gas, which are significant contributors to green-house gas emissions. The use of DSM further leads to the operation of power plants at more efficient operating points. This results in less fuel consumption, and fewer emissions [SHE 12].

1.4. Types of demand response programs

DR programs can broadly be classified into two categories based on customer motivations for participation, i.e. price-based DR and incentive-based DR. Each of these categories has a number of variants [USD 06]....

Table of contents

• Cover
• Table of Contents
• Title
• Copyright
• Preface
• List of Acronyms
• 1: Demand Response in Smart Grids
• 2: Active Consumer Characterization and Aggregation
• 3: Distributed Intelligence at the Consumer’s Premises
• 4: Distribution Control Center: New Requirements and Functionalities
• 5: Distribution Network Representation in the Presence of Demand Response
• 6: Communication Needs and Solutions for the Deployment of Demand Response
• 7: System-level Benefits of Demand Response
• 8: Techno-economic Analysis of Demand Response
• 9: Socioeconomic Aspects of Demand Response
• 10: Looking Forward: Gaps and Enablers for Wide Scale Demand Response Deployment
• Appendix: From Requirements to Domain Interface Definition in Five Steps
• List of Authors
• Index
• End User License Agreement