1. Demand Response: The Challenges of Integration in a Total Resource Plan Demand Response: The Challenges of Integration in a Total Resource Plan Howard Smith Manager Resource Planning and Demand Response Alabama Power Company June 2010

2. Discussion Terminology Traditional Demand Response and Energy Efficiency Smart Grid Demand Response Sustainability Integration of Supply and Demand Response Resources in Long Range Resource Planning Operational Concerns

3. Demand-Response Terminology LOAD MANAGEMENT (a.k.a. Demand Side Management & Demand Side Options)  The process of balancing the supply of electricity on the network with the electrical load by adjusting or controlling the load rather than the power station output DEMAND RESPONSE (can be “Direct” or “Indirect” per dispatchability)  Providing electricity customers in both retail and wholesale electricity markets with a choice whereby they can respond to dynamic or time-based prices or other types of incentives by reducing and/or shifting usage, particularly during peak periods, such that these demand modifications can address issues such as pricing, reliability, emergency response, and infrastructure planning, operation, and deferral. ENERGY EFFICIENCY  Using less energy to provide the same or improved level of output. CONSERVATION  Reduced energy consumption

4. Load Management Flow Chart LOAD MANAGEMENT DEMAND RESPONSE ENERGY EFFICIENCY (NON-DISPATACHABLE) DISPATCHABLE “DIRECT” NON-DISPATCHABLE “INDIRECT” CONSERVATION

5. Price Signals to Customers Controllable AC compressors Controllable Pool Pumps Controllable Hot Water Heaters Higher Insulation Levels Air Duct “Tightening” Weatherization Traditional DR and EE Resources

6. Green – An environmentally friendly grid will reduce environmental impacts through initiatives in generation, transmission, and distribution Customer Service – Provide consumers with real time pricing and other system conditions to facilitate informed energy usage decisions Efficiency – New options to reduce losses, optimize power flows and improve asset utilization Reliability – dependable power with robust power quality and the ability to self heal after a disturbance Safety – SG will sense potential safety issues and automatically provide grid condition information for reconfigurations Smart Grid

7. Real Time Control of Thermostats, Hot Water Heaters, Pool Pumps, Etc. Ability To Offer Customers’ Their Energy Usage Patterns and Support Their Energy Management Systems Ability To Support Other Demand Side Management Programs such as Sending Price Signals or load Control Signals to End Users or Processes Enhanced Benefits for Smart Grid Systems

8. 8 Distribution Demand Response Initiative (DROP/DEEP)

9. Distribution Energy Efficiency Program (DEEP) DEEP: GOAL - maximize the efficiency (minimize losses) of distribution circuits while providing a load management option Benefits: Reduce system losses Decrease demand on present Generation Fleet Lower Fuel Costs Reduce peak Lower emissions Decrease substation and feeder overloading Defer capital projects (plants, subs, etc.) Provide additional Demand Response capabilities Reduce non-compliance penalties for not meeting pending emission and renewable standards One of the more cost effective energy efficiency options

10. What is DROP? Conservation Voltage Reduction (CVR) REDUCES Voltage to LOWER Demand and REDUCE losses REDUCES system VAR requirements Voltage level at regulator adjusted by end-of-line voltage Less expensive alternative to conventional generation resources (in the $10/kW range) No carbon or emission offsets needed No Customer Impacts Distribution Regulation Option Program (DROP)

11. Demand Response Value and Sustainability Is the Demand Response Sustainable over the short and long term? Who “controls” the Demand Response Resources? What are the drivers that impact the Demand Response (price/savings, duration, economy, regulatory issues, and etc.)? Participation and Penetration – Economic theory versus actual customer behavior? The 4C’s Test – Cost, Comfort, Convenience, and Conservation Cost Comfort Convenience Conservation Understanding how customers balance these drivers will determine the sustainability of demand response resources

12. Challenges of Integrating Demand Response and Supply Resources Creating a common basis for valuing Demand Response and Supply Resources (dispatchability, hours of use, cost parameters, etc.) Sustainability over the short and long term Operational Flexibility Impacts on Customers (Reliability, Power Quality, Rates, Savings, and etc.) Environmental Impacts

13. Generation Dispatch and Commitment of Demand Response Resources Hours per year/Capacity Factor Generation in MW Baseload Capacity Peaking Capacity & DR Intermediate Capacity & DR

14. Peak to valley Load Duration Curve 5 pm5 am12 am12 pm12 am5 am

15. Typical Load Duration Load Duration with DR Load Duration Curve with Demand Response xxxxxxxxxxxxxxxxxxxxxxxx

16. Questions ?