Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
AMI/Demand Response: Getting It Right the First Time
Each DR portfolio will have a different set of AMI needs, based on overall technology infrastructure.
Advanced metering infrastructure (AMI) evaluations will benefit greatly from creating an appropriate DR portfolio as part of the overall solution.
In the Energy Policy Act of 2005 (EPACT), Congress sent a strong message to electric utilities, consumers, and industry regulators that they need to get serious about advanced metering, time-based rates, and demand response (DR).
To underline this point, EPACT states:
“It is the policy of the United States that time-based pricing and other forms of DR, whereby electricity customers are provided with electricity price signals and the ability to benefit by responding to them, shall be encouraged, the deployment of such technology and devices that enable electricity customers to participate in such pricing and DR systems shall be facilitated, and unnecessary barriers to DR participation in energy, capacity and ancillary service markets shall be eliminated.”
However, a number of state public utility commissions (PUCs) and electric utilities were evaluating the implementation of advanced metering infrastructure (AMI) even before EPACT was signed into law. In many cases, a significant portion of the economic justification for installing AMI systems is attributed to potential benefits derived from DR applications. AMI can be an enabling technology for DR efforts, and including DR benefits in the AMI business case is both reasonable and prudent.
Unfortunately, precious little time has been spent identifying and determining the degree to which DR will benefit the market, nor to the types of DR applications that will provide those benefits. Absent this understanding, it is difficult to scope the functional requirements of the AMI. Doing so will limit the overall benefits of the total AMI business case severely.
Table 1 shows the level of AMI functionality needed with various type DR applications.
For example, an AMI system should be designed with real-time, two-way data communication if the DR product is intended to support spinning reserves. An AMI system might have only daily data communication if DR is intended to provide a capacity backstop alone. Either of these situations is reasonable, but they would have different designs and, most certainly, different costs and benefits.
It is difficult to conclude the required functionality from an AMI absent an analysis of the benefits various DR efforts can provide. This may be analogous to putting the cart before the horse. In light of goals stated in EPACT, the industry is likely to