1 New England Demand Response Resources: Present Observations and Future Challenges Henry Yoshimura Demand Resources Department ISO New England, Inc. Holyoke, Massachusetts February 17, 2008

© 2008 ISO New England Inc mi. 400 mi. New England’s Electric Power System Six-state region: CT, ME, MA, NH, RI, and VT 14 million people; 6.5 million households and businesses All-time actual peak demand: 28,127 megawatts on 8/02/06 Over 33,000 megawatts of existing resources –~350 generators/power plants –~8,000 miles of transmission lines –12 interconnections to neighboring systems –~2,600 Demand Resource assets ~ 1,700 MW of capacity

© 2008 ISO New England Inc. 3 Demand Response Program Types Reliability (Demand) Programs: –Customers respond to System Reliability Conditions as determined by the ISO New England System Operators Price Programs: –Customers respond to Real-Time Prices as determined by the Market. –Customers can submit “offers” to reduce their load next day based on Day-Ahead Wholesale Market Prices The recently implemented Forward Capacity Market (subject of next panel) enables Other Demand Resources (“ODRs”) to participate in the wholesale capacity markets. –Energy efficiency, load management, baseload distributed generation.

© 2008 ISO New England Inc. 4 Demand Resources Enrolled MWs: 1/2004 – 1/2008

© 2008 ISO New England Inc. 5 Today’s Real-Time Demand Response Program Who?Individual or Groups (Minimum 100 kW Reduction) When?Respond to ISO System Operator dispatch instructions to address real-time capacity deficiency (OP4) How fast?Within 30-Minutes or 2-Hours of ISO request How much?Energy Payment: Greater of Real-Time Wholesale Price or Guaranteed Minimum $0.50/kWh for 30-Minute Response and $0.35/kWh for 2-Hour Response Capacity Payment: Monthly payment ($/kW) based on Forward Capacity Market Settlement Agreement How long?Minimum 2-Hour guaranteed interruption Metering?5-Minute Usage data sent to ISO NE via the Internet- Based Communication System or Customized Measurement and Verification plan

© 2008 ISO New England Inc. 6 Demand Response Events August 2006 Demand Response resources were activated on August 1 st and 2 nd in response to OP4 Actions. August 1, 2006 –Some Reliability Programs Activated. –Activations started at 3:45 P.M. and ended at 7:00 P.M. August 2, 2006 –All Reliability Programs Activated. –Activations started at 12:15 P.M. and ended at 6:00 P.M. Maximum Load Reduction from Reliability Programs of MW achieved at 4:10 P.M. on August 2, 2006 (based on 5-minute data). –Actual system peak demand of 28,127 MW would have been higher without demand response.

© 2008 ISO New England Inc. 7 Breakdown of MW by Region and Resource Type Based on preliminary 5-minute data from Demand Response resources with Internet Based Communication Systems reporting to ISO-NE at the time this report prepared

© 2008 ISO New England Inc. 8 August 2, 2006 Performance 30-Minute Real-Time Demand Response without Emergency Generation Note: Graph does not include a 10 MW resource that had data reporting problems

© 2008 ISO New England Inc. 9 August 2, 2006 Performance 30-Minute Real-Time Demand Response with Emergency Generation Note: Dip at 15:40 caused by one large resource that tripped off line and recovered

© 2008 ISO New England Inc. 10 ISO-NE – Total Load Impacts on 8/2/06

© 2008 ISO New England Inc. 11 Present Observations and Future Challenges Demand response resources have performed well to date and have enhanced system reliability. Demand response event hours have been limited to date. Enabling demand response resources to participate in wholesale markets enhances competition and market efficiency and reduces market power concerns. The increased volume of Demand Resources participating in the wholesale electricity markets presents operational and planning challenges. –Over 2,500 MW of Demand Resource capacity cleared in Forward Capacity Auction #1 (subject of next panel). –As Demand Resources grow in proportion to total resources, they will be relied upon to maintain system reliability.

© 2008 ISO New England Inc. 12 ISO Operations and Planning Issues The number of demand response event hours and the amount of demand response clearing in capacity markets are not independent. –As demand response resources replace generation, there will be fewer generators available to satisfy the load and reserve requirements. –Load reductions from demand response resources will be called upon more frequently to maintain the reserve requirements for a given expected load level. –In other words, as demand response replaces generation, the more frequently it will be used. As event hours expand, how well will demand response resources perform? –Permanent load reductions are not as susceptible to these performance issues.