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Smart Grid: Wholesale Market Realities

Granular customer data will revolutionize megawatt markets.

Fortnightly Magazine - September 2009

able to view only the aggregate results, and this granularity of data simply hasn’t been accurate or timely enough to allow these demand resources to be considered in wholesale power markets.

The deployment of AMI and the capability to monitor load and consumption of individual customers at more frequent intervals will change this old reality. It will provide utilities and power providers the ability to measure the success of EE programs on a dwelling-by-dwelling basis. By monitoring program performance on an individual basis, utilities and power providers will be able to make more rapid corrections if forecasted results aren’t being achieved. Ultimately, it will give them the ability to understand individual load shapes and better segment the customer base in a much more granular and meaningful way than the traditional residential, commercial and industrial segments.

The potential for new segmentation, by load shape and not by customer class, will allow utilities and power providers to gain powerful insights into the resources necessary to serve a specific segment. Likewise, it also will let them customize EE programs to the unique needs of each customer segment so that the programs will have higher penetration rates, be more accurate, and consequently be more successful. EE programs will be used to further reshape the load curve much like a negative generation asset. Overall, smart technologies will allow EE programs to be considered reliable demand-side resources that can be instantly monitored and quickly deployed in a matter of months, rather than years. In the short-term, these insights will change how utilities and power providers choose to serve their customers. New patterns of capacity and energy bidding will emerge, generating the need for new products, which will incorporate EE as one of the resources. In the long-term, it will impact generation-resource planning and compliance with new and stricter environmental regulations.

Similar to EE programs where utilities encourage customers to undertake such activities as installing high-efficiency equipment or weatherizing their premises, conservation programs are those that depend on customers changing their behavior to reduce the overall magnitude of their energy consumption. Anecdotally, these efforts include customers who increase the temperature on their thermostats by one degree during the summer months or those who always wash their clothes with cold instead of hot water. While the maximum potential of these programs is up for debate, the main challenge for system planners and the wholesale markets is the unpredictability of these demand-side resources. Along with EE, smart technologies will allow for a better and more granular monitoring of conservation efforts.

While regional markets in New England and PJM recently allowed for the bidding of conservation programs into capacity and energy markets, challenges could arise in the years to come when these programs reach critical mass. In order to manage these disparate residential conservation resources, they will have to be more visible to system operators. Also, new tools will have to be developed to process massive amounts of data for the purposes of forecasting and billing.

They key to success for utilities and power providers leveraging EE and conservation programs to serve