DR Measurement & Verification Common sense, practicality, and lessons from experience

When and why do we need baselines? Baselines are necessary when customer is being incentivized by a means different than paying for metered load. Time-based pricing does not require a baseline Uptake is slow; volumes often don’t warrant the accounting costs Requires painfully high prices to induce behavior Difficult to reliably plan the system around voluntary behavior – leads to inefficient overbuilds. Supply-side DR requires calculation of a baseline. DR programs are more popular than dynamic pricing with customers Requires proving a negative: the counterfactual proposition of what the customer did not consume. Baselines are important because operators rely upon the resource and resources are paid for performance.

Attributes of a quality baseline from a practitioner’s perspective Attributes of a quality baseline from a practitioner’s perspective . . . ACCURACY Accuracy Baseline should not overestimate or underestimate “but for” consumption. May need different baselines for variable loads RRMSE Test for customer load variability Need a different baseline for weekends and holidays Baseline should be seeded with recent consumption data with similar days of consumption Discard outliers – dispatch days and days that deviate from normal consumption excluded Differences between “10 of 10”, “High 4 of 5”, “Middle 6 of 10” Weather adjustments – addresses inherent bias of most baselines

Attributes of a quality baseline from a practitioner’s perspective Attributes of a quality baseline from a practitioner’s perspective . . . INTEGRITY Baseline “gaming” must be avoided Rules that permit customer to inflate performance artificially is cheating DR is vulnerable to accusations of gaming because performance is based upon the counter-factual Gaming is sort of unnatural for customers, which makes it generally rare Most forms of gaming have been identified and there are best practices to avoid them Locking in a stale baseline Overconsuming prior to event start Inflating peak load contribution Rules should be adopted with an eye toward limiting gaming potential Vigilance and enforcement and serious consequences for abuse is better than trying to stamp out all possible forms of gaming.

Attributes of a quality baseline from a practitioner’s perspective Attributes of a quality baseline from a practitioner’s perspective . . . SIMPLICITY Baseline is the basis for customer payment. Customers do care about baselines. Must be simple enough to explain to the customer how performance is measured. Must be simple enough for customer to calculate to verify performance/settlements. Should be determinable in advance of event so that real time performance can be managed. Must be administrable Needs to be based upon enough data to calculate an accurate baseline, but not so much data that baselines become burdensome to calculate or susceptible to errors. Compliance is a paramount concern. Data is more complex, noisier and contains more errors than most realize. Data set used to calculate baselines for settlement must be validated carefully. There is major overhead and compliance risk associated with verification of complex baselines that increase program costs.

Attributes of a quality baseline from a practitioner’s perspective Attributes of a quality baseline from a practitioner’s perspective . . . ALIGNMENT Different types of baselines should be considered depending upon goals of the DR program.

Two basic types of baselines

Attributes of a quality baseline from a practitioner’s perspective Attributes of a quality baseline from a practitioner’s perspective . . . ALIGNMENT Different types of baselines should be considered depending upon goals of the DR program. Guaranteed Load Drop is often utilized in economic and/or reliability DR programs where it is important to know how much energy the demand response is intended to replace. Firm Service Level may be fine for programs built a reliability program around resource planning needs where it is important to know the level of customer consumption rather than the amount of reduction May need both types in a program due to variable patterns of customer consumption

GLD vs. FSL from a nomination and performance perspective. Guaranteed Load Drop Firm Service Level

Attributes of a quality baseline from a practitioner’s perspective Attributes of a quality baseline from a practitioner’s perspective . . . ALIGNMENT Different types of baselines should be considered depending upon goals of the DR program. Guaranteed Load Drop is often utilized in economic and/or reliability DR programs where it is important to know how much energy the demand response is intended to replace. Firm Service Level may be fine for programs built a reliability program around resource planning needs where it is important to know the level of customer consumption rather than the amount of reduction May need both types in a program due to variable patterns of customer consumption Ancillary Service programs with short duration dispatches may be better served by a Meter Before/Meter After type of measure. Meter Before/Meter After doesn’t work with long duration dispatches. More lead time leads to broader participation – Meter Before/Meter After generally requires short lead time.

Final Thought Baseline design is local utility or regulatory decision, but serious consideration should be given to standardization in order to attract innovation to serve customers and utilities on a regional basis.

Kenneth D. Schisler Vice President of Regulatory Affairs 410-725-1462 kschisler@enernoc.com