Demand Response Electricity Markets Dallon Kay Diamond Energy Group 20111101

Demand Response in
Electricity Markets
Singapore Electricity Roundtable 2011
Suntec Singapore International Convention & Exhibition Centre
1st November 2011

© Diamond Energy Group 2011 1
All Rights Reserved

Presentation Outline

What is Demand Response?

Types of Demand Response Programs

Demand Response in the National Electricity Market of Singapore

Outlook for Demand Response and Forward Plan

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National Electricity Market of Singapore (“NEMS”)
Merchant market for electricity established in 2003
Gross energy only pool with co-optimization of energy and reserve
Value of products traded in 2010 was ~ S$ 7.99 billion

Market Annual Turnover Annual Turnover
(%) (S$ Million)
Energy 98.5 7,870

Reserve 0.8 64

Regulation 0.7 56

Total 100 7,990

Source: Derived from Energy Market Company, Market Report 2010

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What is Demand Response?

Action taken by a consumer of electricity to adjust their demand in
response to conditions in the physical power system and/or price
signals to realize economic benefit

Consumers that are able to adjust their electricity consumption at
short notice are ideal candidates for Demand Response

Effective Demand Response requires not only having a mechanism
to control demand but also there being an appropriate incentive for
the Consumer to participate

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Types of Demand Response Programs

Price Response Programs

Ancillary Service Programs

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Price Response Programs

Respond to price signals in the spot market

End-users reduce their consumption and receive the spot market price for the
avoided electricity they provide through their demand reduction

In these type of programs Demand Response is scheduled and centrally
dispatched as part of the merit order for Energy in the same way as a power plant

The Demand Response resource sets their offer price at the level it is willing to
curtain their demand

Responding to price signals requires forward visibility into the market which
requires real time information flow and the availability of data

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Ancillary Service Programs
Respond to the frequency condition of the power system

End users are paid the option premium associated with being able to reduce their
consumption regardless of being called upon to do so

In these types of programs Demand Response is scheduled and centrally
dispatched as part of the merit order for Reserve the same way as a power
plant

The Demand Response resource typically acts as a price taker

Responding to the needs of the power system requires forward visibility into
the market which requires real time information flow and the availability of
data

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Why participate in Demand Response?

Demand Response is deployed to realize a new
source of revenue
Revenue
Creation
Make Money!

Demand Response is deployed to reduce or mitigate
costs that would otherwise be incurred
Cost
Avoidance
Save Money!

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Current Demand Response Landscape in NEMS

Interruptible Load was introduced in the Reserve
Spot Market in 2004
Reserve 2 Active Market Participants
Market
Ancillary Service Program

No Demand Side Bidding in the Energy Spot market
2011/2012 Rules Change Panel Work Plan includes a
Energy Demand Side Bidding in the Energy Market initiative
Market This initiative is being led by the EMC’s Market
Administration Team in consultation with the Energy Market
Authority and work has already commenced
Price Response Program
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Demand Response in the NEMS Reserve
Market

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Reserve Market

The power system requires reserves to cater for contingency events

Reserves can be provided in two ways
Surplus capacity from an operational generator “spinning reserve”
Deactivation of an electrical load

Payment is made when the provider is scheduled even without being
activated or called upon to provide reserve

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Reserve Classes

Class Response Time

Primary 8 Seconds

Secondary 30 Seconds

Contingency 10 Minutes

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Participation

Requires a license from the Energy Market Authority

Requires registration as a market participant with the EMC

Minimum 0.1 MW load is required

Flexibility to participate in all three reserve classes simultaneously or
an individual reserve class if desired

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Technical Requirements

Class Mode of Activation Trigger System Limit on
Activation Interruptible Load

Primary Under System frequency < 49.4 Hz 20% of Reserve
Frequency Requirement1
Relay

Secondary Under System frequency ≤ 49.7 Hz 20% of Reserve
Frequency for 30 sequential seconds Requirement
Relay
Contingency Manual Within 10 minutes of 30% of Reserve
receiving Activation Requirement
Instruction
Source: System Operation Manual
1 10% when the power system is isolated

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Market & System Requirements
Continuous near real time pre-activation reporting

Trading systems to enable offer submission

Software and electrical systems to enable the Interruptible Load

Compliance with obligations contained within the Market Rules,
System Operation Manual, etc.

Submission of post-activation reports within 24 hours of an activation

24 x 7 operational capability

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Interruptible Load Illustration

Contingency
Event

49.7

Secondary reserve activation

49.4 Primary reserve activation

Source: Based on Energy Market Company, RCP Concept Paper, 4th September 2007

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Demand Response Participation in Reserve Market
Current Situation
Interruptible Load There are currently two
active Demand Response
participants in the Reserve
Revenue Market
Creation

Diamond Energy is a
Demand Response
e Aggregator providing
Demand a bl services to third parties
Response p lic
Model
t Ap
No

Cost
Avoidance

No Yes

NEMS Market Participation

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Demand Response Participation in Reserve Market
Possible Future Scenario
Generators ≥ 10 MW are
allocated a portion of the
Interruptible Load
total reserve cost according
to their position in the runway
Revenue
Creation
Embedded Generators ≥ 10
MW due to technical and
operational considerations
bl
e typically do not participate in
a the reserve market as a
Demand
Response p lic provider of reserve
Model
t Ap Interruptible Load
No Related loads of these
Embedded Generators that
Cost are capable of providing
Interruptible Load may elect
Avoidance Related Loads of

to do so as an option to
Large Embedded

hedge the reserve cost
Generators

exposure of their Embedded
Generator

No Yes


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NEMS Example

Ancillary Service Program
“Interruptible Load”

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Reserve Prices (All Classes)
The chart below represents the reserve price duration curve for all three classes of reserve combined from 1st
January 2011 to 30th September 2011
The maximum price occurred on 15th August 2011 (period 28) at S$ 4,661.98 per MWh
The average price over the selected time period was S$ 22.36 per MWh

Average Price S$ 22.36 per MWh

Source: www.nemsview.com.sg

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Annual Revenue Potential

Description Price Participation Gross Revenue
(S$ per MWh)1 (MW) (S$)2
1 195,874
Flat Average Reserve Price
22.36 5 979,368
(All Classes)
10 1,958,736
Source: Estimate (rounded to nearest S$)
st th
1 1 January through 30 September 2011
2 Prior to Adjustment for Reserve Effectiveness Factor

Demand Response participation in the existing Interruptible Load scheme
represents significant revenue potential for qualifying loads that meet the technical
requirements

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Effective Energy Spot Price
The effective energy spot price can be defined as (USEP x (1 – VHP)) + (VPRP x VHP)
The chart below represents the effective energy spot price duration curve from 1st January 2011 to 30th September 2011
The average effective energy spot price over the selected time period was S$ 208.30 per MWh

Average Price S$ 208.30 per MWh


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Annual Energy Spend

Description Price Demand Energy Spend
(S$ per MWh)1 (MW) (S$)2
1 1,824,798
Flat Average Effective
Energy Spot Price 208.30 5 9,123,540
10 18,247,080
st th
1 1 January through 30 September 2011
2 Excludes expenditure on non “Energy” charges such as Grid Use of System, Grid Contracted Capacity, etc.

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Revenue Potential in Perspective
Description Demand Energy Spend
(MW) (S$)1
1 1,824,798
Annual Energy Spend
5 9,123,540
10 18,247,080
1 Excludes expenditure on non “Energy” charges such as Grid Use of System, Grid Contracted Capacity, etc.

Description Participation Gross Revenue Energy Savings
(MW) (S$)1 Equivalent (%)
1 195,874
Annual Interruptible 10.7%
Load Revenue 5 979,368
10 1,958,736
1 Prior to Adjustment for Reserve Effectiveness Factor

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Demand Response in the NEMS Energy
Market

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Demand Response Participation in Energy Market
Current Situation
A direct Demand Response
participation scheme does
not currently exist in the
energy market
Revenue According to EMA data for
Creation
June 2011 there were 2,195
contestable customers being
supplied by SP Services at
the spot price (effective
bl
e energy spot price)
This segment represents
Demand a
lic
approx. 7% of total
Response p
Model Managed Curtailment &
t Ap contestable demand
Load Shifting
No While the majority of these
customers do not proactively
monitor the spot price and
Cost
respond when prices are
high, Singapore District
Avoidance

Cooling is an example of a
company that has
implemented a proactive load
shifting program to mitigate
exposure to high spot market
No Yes prices


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Contestable Customer Breakdown

According to EMA data for June 2011 there were 7,839 contestable
accounts
2,195 contestable consumers were buying from MSSL
5,644 contestable consumers were buying from Retailers

An MSSL Consumer is a contestable customer that purchases
electricity from SP Services at the spot price
Under this arrangement the customer pays the Effective Energy
Spot Price for their power

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Demand Response Participation in Energy Market
Possible Future Scenario
Intelligent Energy Demand Side Bidding With enhanced information
System Phase 2 In Energy Market flow and greater Demand
Demand Response Pilot Response awareness the
Small MSSL Consumers may
introduce managed load
Revenue

shifting programs
Creation
Large Retail Consumers
Consumers of Various
on Fixed Price
A Demand Side Bidding
Sizes
scheme in the Energy Market
Demand represents the greatest
Response potential for large consumers
Model Managed Curtailment & to gain through active
participation
Demand Side Bidding
Load Shifting In Energy Market

Phase 2 of the EMA’s
Cost Intelligent Energy System
Avoidance
Pilot Project is an opportunity
for electricity consumers of
Small MSSL Consumers Large MSSL Consumers

various sizes to participate in
Demand Response without
participating directly or
indirectly in the NEMS
No Yes


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NEMS Example

“Demand Side Bidding in Energy Market
Targeting High Demand Periods”

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Targeted Demand Response During 2% of Highest
Demand Periods for August 2011
The maximum forecast demand of 6,234 MW was observed on 2nd August during trading period 28 (1/2 hour trading
period commencing 1330 hrs)
A “Look Back” for the month of August determined there were 58 instances (approximately 4% of the time) when the
prevailing ½ hour forecast demand exceeded 98% of the maximum forecast demand
With 125 MW of Demand Response the effective demand could be reduced to 98% level


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Profile of Highest Demand Week in August
Without Demand Response
The weekly demand profile for the 1st week of August 2011 is represented below with the scale amplified
The red shaded area represents the trading periods where the forecast demand exceeded 98%


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Targeted Demand Response During Highest
Equivalent GT Generation Periods for August 2011
During the month of August there were 48 trading periods when GT capacity was scheduled (approximately 3% of the
time)
The maximum scheduled GT capacity of 285 MW was observed on 15th August during trading periods 23 through 28
(1/2 hour trading period commencing 1100 through 1400 hrs)
With 125 MW of Demand Response 40 of these periods could be avoided (approximately 83%)


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Quantifying the Benefits of Demand Response in
the Energy Spot Market
Offsetting High Price Periods (August 2011 Example)

Without Demand Response
GTs Scheduled > 125 MW: USEP Average 3,092.97 S$/MWh
GTs Scheduled ≤ 125 MW: USEP Average 598.37 S$/MWh (Min 481.91 S$/MWh)
GTs Not Scheduled: USEP Average 228.20 S$/MWh
Generation from GTs: 1,773 MWh
Cost: S$ 1,021 Million

With Demand Response
Demand Response Capability: 125 MW
Trading Periods when GTs Scheduled ≤ 125 MW Demand Response offsets required GT Capacity
and the prevailing USEP is replaced with 481.91 S$/MWh
Trading Periods when GTs Scheduled > 125 MW No Change to price
Trading Periods when GTs Not Scheduled No Change to price
GTs Generate: 1,268 MWh
Cost: S$ 1,008 Million

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Summary of Benefits (August 2011 Example)

Description Benefit

Reduced System Cost 13.099 S$ Million

Reduction in Generation from GTs 506 MWh
Translates to Lower Carbon Emissions

Demand Response is a compliment to existing
GT capacity and when annualized represents
significant benefit to the market

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Outlook for Demand Response
Demand Response represents significant benefits to the market and to consumers who
participate

Phase 2 of the Energy Market Authority’s Intelligent Energy System Pilot Project has an
extensive Demand Response program envisaged
The Energy Market Authority is planning to initiate a Request for Proposal (“RFP”) for a Demand
Response Aggregator

The Electric Vehicle Test Bedding Project by the Energy Market Authority and the Land
Transport Authority presents Grid to Vehicle and Vehicle to Grid opportunities

Other existing merchant power markets and soon to be implemented merchant power
markets in the region such the Philippines and Vietnam respectively intend to implement
Demand Response programs

Demand Response also provides an opportunity for Retailers affiliated with non-portfolio
Generators an avenue to mitigate outage risk

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Conclusions
Demand Response programs, when appropriately designed and implemented, can
yield significant benefits to the market

Demand Response is not intended to replace existing generation capacity already
in operation but rather complement this infrastructure

Demand Response can diversify the supply mix

Unlike conventional generation capacity, Demand Response does not require
additional land resources and can be implemented with short lead times provided
the commercial incentives are sufficient to entice participation

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Forward Plan
A strategic target for Demand Response should be established for Singapore
125 MW could be considered initially

Proactive efforts to increase the awareness of Demand Response are needed

A thriving Demand Response industry will require enhanced information flow and
availability of data

Crafting a comprehensive Demand Response
Master Plan is the next step for Singapore

All Rights Reserved

Disclaimer

Diamond Energy is pleased to present to you the proposed transaction or transactions described herein.
Although the information contained herein is believed to be reliable, we make no representation as to the
accuracy or completeness of any information contained herein or otherwise provided, and accept no
responsibility or liability, in contract or in tort, in negligence or otherwise, should such information be found to
be inaccurate or incomplete in any respect. The ultimate decision to proceed with any transaction rests
solely with the recipient of this information. Diamond Energy is not acting as the advisor to the recipient of
this information. Therefore, prior to entering into any proposed transaction, the recipient of this information
should determine, without reliance upon Diamond Energy, the economic risks and merits, as well as the legal
consequences, of the transaction and that it is able to assume these risks. The concepts described herein
are intended for discussion purposes only. This presentation is neither an offer to sell nor the solicitation of
an offer to enter into a transaction. This document and its contents are proprietary information and is the
work product of Diamond Energy and may not be reproduced or otherwise disseminated in whole or in part
without Diamond Energy’s prior written consent. The views contained in this document do not represent the
views of Diamond Energy Pte Ltd a Wholesaler Licensee of the Energy Market Authority of Singapore.

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Demand Response Electricity Markets Dallon Kay Diamond Energy Group 20111101

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