standby generators & demand response what is demand response why demand response works pjm‘s...
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Standby Generators & Demand Response
•What is Demand Response•Why Demand Response Works•PJM‘s DR Programs •Financial Benefits•Participation Requirements•Emissions Regulations
Demand ResponseFERC & Electric Utility Support
• “Demand Response creates a more efficient grid and allows consumers to lower their bills. When you combine those two things together you’ve got a powerful engine that can start and maintain the smart grid”. – FERC Chairman, Jon Wellinghoff, 2010 SmartGrid Today.
• “Demand response and energy efficiency really have the highest potential to transform the way we consume electricity”.– Quote from Brett Perlman, former member of the Texas Public
Utilities Commission, at the 2012 National Electricity Conference in Washington, DC.
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Demand ResponseDefinitions
• Demand Response is the voluntary and temporary reduction of electricity usage in response to electrical power system stress or economic signals from retail rates.
• Reductions in electricity usage can be achieved by turning off building loads (lights, air conditioning, fans…) or by transferring building load to standby generators.
• Financial incentives exist across the US to encourage Demand Response participation which is needed to help lower peak demands.
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NYISO 2011 Demand PeakUtilizing DR for Peak Management
Demand ResponseDemand Side Management
• DR provides electrical utilities and grid operators a tool to more efficiently balance electrical supply and demand.
– Quickly reduces critical peak load demands. – Minimizes transmission congestion / constraints.
• Electricity demand continues to grow while supply side solutions are becoming increasingly limited due to:
– High construction costs,– Environmental concerns,– Transmission capacity constraints.
• Traditional pricing structure also presents a challenge.– Most consumers pay a fixed price, while producers are paid based on a
variable clearing price creating inelastic demand.
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The Electricity MarketplacePrice Determined by Load
• All resources are paid the clearing price.
0
50
100
150
200
250
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180
$/MWh
GWs
Supply Resources
Hydro, NuclearCoal
GasCC Peakers
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The Electricity MarketplaceInelastic Demand Curve
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PJM Demand Response Programs Operational Time Requirements
Time of Day Response Time Duration FrequencyTotal Hours /
Year
Capacity (DR) ~ 2 - 6pm ½ - 3 Hours 2 – 6 Hours1 – 10 Times /
Year2 – 40 Hours
Ancillary / Synch
Reserves
Anytime24 / 7
10 Minutes10 Minutes –
1 Hour2 – 3 Times /
Month12 – 20 Hours
Economic / Price
VoluntaryDay-Ahead or
Day-OfVoluntary Voluntary 10 to 40 Hours
Peak ~ 2 – 6pm 1 – 2 Hours 1 – 2 Hours10 – 15 Times /
Year10 – 20 Hours
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CAISO$48,000 - $62,000
PJM$6,000 - $62,000
Ontario$70,000 - $160,000
ISONE$60,000
NYISO ROS$24,000
NYC (Zone J)$60,000 - $150,000
2012 ISO Payments: $ per MW-yr (Typical DR Aggregator Take ~25%) .
ERCOTEILS - $60,000LaaR - $90,000
Demand Response ProgramsCapacity Revenue Opportunity
Duke/PE & SCG&E $30,000 - $42,000
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Demand Response ProgramsPJM Synch Reserve Revenue
Synch payments in Eastern PJM ~$50,000 / MWyr.
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• Economic demand response – load reduction performed when energy market price is higher than cost of generation.
• Simple run analysis based on the spread between local energy prices and operational (fuel) costs.– When energy price > fuel cost, run and keep the spread.– When energy price < fuel cost, don’t run.
• FERC Order 745 requires RTOs to pay demand resources the full LMP for load reductions.– Order 745 lowers run costs by up to 50%
• Economic DR revenue potential with Order 745 ranges between $5,000 and $25,000 / MW-year.
Demand Response ProgramsEconomic
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Demand Response ProgramsEconomic Opportunity: Avg cents/kWh
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• Understand your air permit.• If you don’t have an air permit, you’ll need to get one.• Standby generator air permits vary considerably by state
and by application. Commonly categorized as:– Emergency – only operated during loss of utility power and during
system operational testing events. – Non-emergency – Anything other than emergency, typically limited
by annual allowable operating hours.• Air permitting requirements:
– Federal: RICE NESHAP, NSPS, Tier 4, Tier 2…– State Requirements – always trump Fed, most often more stringent• Customer’s can only market their curtailable load.
Demand Response ParticipationUsing Standby Generators
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DEMAND RESPONSE PARTICIPATION REQUIREMENTS
Definition of Emergency:
• Emergency – when power is unavailable due to failure/loss of utility power beyond reasonable control of facility; not including storm avoidance. • Federal Definitions – vary by regulation.
• Subpart IIII – strictly emergency operation. • Subpart JJJJ & ZZZZ – allows for 50 hours per year for non-emergency
operations (testing), but no peak shaving; allows for 15 hours per year for emergency DR participation.
• Definitions vary by state.• DC, PA, NJ and DE – strictly for emergency, maintenance and testing; after-
treatment required for emergency demand response and any other DR.• MD and VA – Allow operation in emergency demand response; anything else
requires after-treatment.
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• EPA Statement regarding emergency generators: “Engine cannot be used for peak shaving or as part of financial arrangement with another entity, except 15 of the 50 non-emergency hours / year can be used for demand response in emergency situations (e.g., imminent blackout)”
• EPA / DR aggregator case pending which may increase emergency exception hours to 60 per year.
• States still have jurisdiction over whether or not they allow emergency generator to participate in any Demand Response program.• New Jersey – does not allow customers with emergency
generators to participate in any PJM Demand Response program.
Demand Response ParticipationEmergency Permitted Generators
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• Proven emissions after-treatment technology to meet state specific emissions requirements.
• Complete system monitoring.• Closed transition load transfer capabilities allow for easier
and safer DR participation with automated record keeping. • Multi-year maintenance and warranty contracts minimize
owning and operating risk.• Emissions compliance testing and air permitting assistance
provided when needed.• Financing packages and lease to own options.
New Generator Set Purchase ConsiderationsDR Ready Packages
Standby GenerationMore Than Just Emergency Power
• A valuable revenue stream from otherwise dormant standby power generation equipment.
• Simple system requirements necessary for participation.• Improved data analytics with remote monitoring, smart
metering and web-based reporting.• Proactive emergency preparation with advanced notice of
grid stress.• Corporate social responsibility and public recognition; helps
“keep the lights on” and the grid more efficient and operational for everyone.
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• Electrical utility and Federal programs demonstrate the need for increased demand side management.
• Distributed generation will continue to be an integral part of lowering peak demands.
• A good energy management strategy can improve the bottom line of a company and the broader community.
MTU Onsite EnergyEnergy Management Initiative
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Demand Response:
Maximizing value from standby generation.
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