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Load as a Resource

Integrating controllable demand into real-time, security constrained economic dispatch.

Fortnightly Magazine - August 2012

benefit from the ability to use existing generation to gain revenues in the wholesale market. They also benefit from reductions in losses and other charges associated with the reduced need to meet the customer’s dynamic consumption.

The advantage to this approach is that it’s simple to administer and doesn’t require any real settlements between the utility and CD customers. It also provides the greatest incentive for customers to invest in the control systems and resources that allow them to provide CD. A potential criticism of this approach is that it gives CD customers the benefit of system average costs on the supply side and wholesale pricing on the sell side, and thereby creates a form of subsidy by the utility’s other customers.

Wholesale Revenue Sharing: A variation on direct market access, wholesale revenue sharing allows the utility and CD customers share a portion of the wholesale revenues based upon a tariff or other pre-negotiated mechanism. This approach provides the wholesale market signal to CD customers but shares the benefit among the utility and its other customers. The revenue share would reflect the administrative costs the utility incurs for the program and to cover other costs associated with backing up the CD customer’s resources in the case of non-performance. This revenue sharing could be in lieu of any imbalance charges if the customer misses its forecast demand reduction, and addresses the subsidy concerns in the first variation.

Cost-Based Dispatch: An alternative mechanism is for the utility to pay the customer its system average dispatch costs. Under this mechanism the utility would be required to publish its system average costs so customers could determine whether it’s more economic to sell or buy energy. Alternatively the utility could have a tariffed price to beat based upon its system average costs, which could include any operational expenses and losses that are avoided when a customer uses its internal resources, as well as the reliability benefits associated with the ability to use load as a dispatchable resource.

Reliability and Third-Party Aggregators

The role of the aggregator is to work with the utility and customers to identify the controllable demand potential, and to provide scheduling and any settlement services. The aggregator can function as a common platform that the utility offers to customers interested in participating, and the costs of implementation can be treated as an expense to be recovered in a fuel clause or under an approved demand response program. Working with such a common platform and knowledge, the utility increases the value of controllable demand. Essentially the participating customers create a pool of load-based energy assets within the utility’s distribution grid. On an aggregate form these assets can be dispatched to provide maximum economic and reliability value, because the aggregator has more transparency into both the utility’s needs and individual customer capabilities, and can coordinate a unified dispatch with the utility. The costs of administering this program can also be charged back to the participating customers and thereby avoid any imposition of costs on non-participating customers.

Making this approach work requires a distributed energy