Demand Response: Keeping the
Power Flowing in Southwest
Connecticut
Presented by:
Henry Yoshimura
Manager, Demand Response
ISO New England
September 30, 2005
Background (the Problem)
• ISO New England is responsible for maintaining
reliability of the entire New England electricity grid
– Can not allow a serious threat to the region’s
reliability to go unresolved
• Prefer the market to address resource scarcities
• Wholesale markets not yet sending the right
locational price signals to encourage new investment
• Load growth in SWCT has exceeded the capacity of
local generation and transmission to serve load
reliably
• New local resources and transmission lines are badly
needed, but delayed, creating a “reliability gap”
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
NEW YORK
Southwest Connecticut
LONG ISLAND SOUND
TOWNS
SOUTHWESTERN CONNECTICUT AREA
NORWALK-STAMFORD AREA
CONNECTICUT
SUBJECT
AREA
16 Preferred Towns
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Solving the Problem
• Preferred Method:
– ISO New England defines the problem
(opportunity), gives the right price signals,
gets out of the way and lets the market solve
the problem
• Last Resort:
– ISO New England intervenes in the market,
issues a RFP and contracts for new resources
to solve the problem
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Emergency RFP
• RFP issued in December 2003 for up to 300
MW of new emergency resources in
Southwest Connecticut for 4 years
• Eligible resources included:
– Quick Start Generation
– Demand Response
– On-Peak Energy Conservation (CLM)
• 34 Proposals (1,084 MW) Received on
January 21, 2004
– Many offered multiple projects and options
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Selection of Projects
• 8 Suppliers Selected by March 2004
– Selection criteria: cost, project viability, reliability benefit
– Project viability:
• Demand response and CLM: the quality of customer acquisition
plan, certainty of savings per customer, acceptability of the plan
for reporting savings, persistence of savings over the period
• Generation projects: stage of site acquisition and approval,
permitting status, interconnection status, technology risk, and
experience of the bidder
– Reliability benefits determined by testing project performance
under different scenarios and contingencies
– The final choice of resources was made integrating the
results of the cost rankings with project viability and reliability
benefits
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Contract Terms
• All Selected Resources are either Demand
Response or On-Peak Conservation (CLM)
• Performance Based Contracts with 6 Suppliers
– 260 MW by Summer of 2007
• Performance Based Payments
– $/kW per Month and $/kWh
• Penalties for Failing to Deliver and Perform
• 4 Year Term with 5th Year Option
• Monitoring and Verification Plan
• Cost: Approximately $128 Million over 4 years
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Selected Suppliers and Technologies
Supplier
Technologies
Comverge
Load Reduction by Residential and Small Commercial Air
Conditioner Direct Load Control
Pinpoint Power
Emergency Generation and Load Reduction
Conservation Services Group
(CSG)
On-Peak Conservation (CLM)
CMEEC
Emergency Generation and Load Reduction
United Illuminating
Emergency Generation and Load Reduction
EnerNOC
Emergency Generation and Load Reduction
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Summary of Selected Resources
Emergency
On-Peak
Generation & Load
Conservation
Reduction
2%
10%
Load Reduction
29%
Emergency
Generation
59%
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Why did Demand Response do so well?
• Location, Location, and Location
– Resources located in the load pockets
– No interconnection issues
• Price
– Mostly incremental investments in metering,
communications and controls
• Permitting
– Not an issue for Load Reduction
– DEP Regulations in Connecticut made it easier for
emergency generators to participate
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Comparing Different Resource Types
• Resources designed to be dispatched for only a few
hours over the course of the year are typically the
most economic resources to provide reserves
– Combustion turbines
– Dynamic demand response
• Resources designed to provide energy for many
hours are typically too expensive to compete as a
contingency reserve resource
– Combined-cycle
– Energy efficiency
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Issues to Address in Order to Allow
Energy Efficiency to Compete
• While a potentially valuable resource, energy
efficiency does not perform in the same manner as
other quick-start capability (i.e., generators or
dynamic demand response)
– Not dispatchable in real time when needed
– Resource performance is typically not measured in real-time
– Performance and payment is usually in the form of $/kWh
saved
• Such differences in performance makes apples-toapples comparisons among differing resources
challenging
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Placing Energy Efficiency of a Level
Playing Field with Quick-Start
Capability
• The efficiency projects that reduce load across the
entire SWCT peak period should compete
– If loads are permanently reduced across the entire peak
period, the need for dispatchable resources to cover
operational reserve requirements that are driven by peak
load is reduced
– Reducing loads in off-peak periods will not help avoid the
need for additional capability
– Since energy efficiency is not dispatchable, loads must be
reduced across the entire peak period in order to avoid the
need for additional resources to cover the “holes”
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Placing Energy Efficiency of a Level
Playing Field with Quick-Start
Capability (cont)
• Bids by project proponents must be on a
$/kW-month basis
– Submission of bids from energy efficiency projects
must be comparable to the bids made by other
resource types
– No explicit payment for energy savings (i.e.,
$/kWh saved) as these savings are “paid” through
bill reductions
– Payment for verified savings is made on a $/kWmonth basis, which is comparable with other
resources
Integrating Demand Response into the
Wholesale and Retail Markets
© 2005 ISO New England Inc.
Henry Yoshimura
ISO New England
Office: 413-540-4460
hyoshimura@iso-ne.com