Presentation to IEAPLMA Conference, New York

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Demand Response New Zealand experience

• Presentation to IEA/PLMA Conference, New York
• Fiona Weightman
• Energy Efficiency and Conservation Authority
  (EECA)
• www.eeca.govt.nz
• 9 September 2003

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New Zealand on-top of the world
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Today's Presentation

• Introduction
• What is EECA? Electricity context in NZ.
• Demand Response actions being undertaken by EECA
  and others
• Where to from here for New Zealand Demand
  Response?

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New Zealand in context

• 2 islands, 4 million people, 1.2 million
  households
• 240,000 businesses
• 8,000 MW system with a few big energy users
  aluminium, pulp and paper, steel
• 65 hydro, 12 storage of annual inflows, 25 gas
• Small nation - international trade focus

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What or Who is EECA?

• Government lead on encouraging, promoting and
  supporting
• Energy Efficiency
• Energy Conservation and
• Renewable Energy
• Operational and policy mandate
• Implementation of the NEECS
• Overriding aim
• To change the way New Zealand thinks about, uses
  and generates energy

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NZ Electricity Supply

• One of the most deregulated markets globally
• Government preference for light-handed
  regulatory approach
• Nodal pricing, 244 nodes
• Voluntary, 30 min ex-poste wholesale market
• Multi lateral market carries bulk of volume, with
  half hourly auctions
• Some bilateral contracts exist

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New Zealand gas dominated by Maui Gas
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New Zealand Gas looking for other sources
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New Zealand Electricity what makes us unique

• Isolated electricity grid
• Over half of our electricity is from hydro
• Hydro storage capacity is relatively small
• Reliance on other generation sources
• Generation and demand - geographical locations
• Transmission during a dry year
• Sector ownership

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New Zealand Total Electricity Generation
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New Zealand Electricity Prices
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Policy Background 1

• Energy Policy Framework (October 2000)
• Overall objective
• ensure the delivery of energy services to all
  classes of consumer in an efficient, fair,
  reliable and sustainable manner
• Sustainability objectives at the core
• New Electricity Commission

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Policy Background 2

• National Energy Efficiency and Conservation
  Strategy (The Strategy) 2001
• National targets set for energy efficiency and
  renewable energy (energy efficiency - 20 by
  2012 renewable energy - 30 PJ by 2012 - about
  8,300 GWh a year)
• Climate change policy
• Kyoto Protocol ratified includes carbon charge
  from 2008
• Projects mechanism

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The Strategy measures on Demand Response

• Energy Supply Action Plan Objective
• Investigate how greater demand side
  participation (demand response) in the market can
  be achieved

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Demand Response History

• Demand Response known as load control or ripple
  control
• Historically, ripple control equipment has
  dominated our distribution industry
• No real interest or enthusiasm in Demand Response
  as a market tool

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Price Volatility 2000-2003
Haywards GXP Spot Prices in August 2000
(Normal, August 2001 (Dry), August 2002
(Normal)
2000 Normal year
2001 Dry year
2002 Normal year
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Price Volatility 2002-2003
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Price Volatility 2000-2003
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Price Volatility 2000 2001
Prices shown in NZ
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Drivers for Demand Side Response a dry year

• Winter 2001
• Dry, cold, increased demand, 10 savings
• Government lead campaign
• Outcome no shortage
• Winter 2003
• Dry, high demand
• Outcome 10 savings campaign industry lead
  campaign government action to minimise the risks
  of repetition

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EECAs Demand Response Initiatives (1)

• Short term
• National Publicity Campaigns
• Longer term
• EECAs specific demand side project initiatives
• Assessing future role of ripple-control
• Raising customer understanding and opportunities
• Contribution to the Electricity Commission

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Press and Radio Campaign (1)
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Press and Radio Campaign (2)
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EECAs better off campaign (1)
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EECAs better off campaign (2)
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EECAs Demand Response Initiatives (2)

• Meridian Energy - Demand Exchange
• One retailer, 70 MW of demand response potential
  created, 250-900MW potential
• Energy Intellect web-based real time metering
• Trial with users to determine commercial benefits
  of real time energy monitoring
• Current Demand Exchange Initiative
• Auckland lines company Vector, financial
  assistance from government

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Current Demand Exchange Initiatives Project 3
(1)

• Government funding to facilitate the
  establishment of Regional Demand Exchanges
• First Initiative establishing a Demand Exchange
  host in Auckland
• Focus is on large energy users (gt5 GWh annually
  and 500,000 on electricity)
• Targets - 200 suitable customers and 350 MW of
  load by June 2004

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Current Demand Exchange Initiatives Project 3
(2)

• Desired outcome - reduction in spot price
  volatility
• Other benefits
• EECA energy efficiency goals, improved demand
  management
• Stakeholders cost reduction, improved
  understanding, other efficiency benefits
• Likely difficulties?

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Current Demand Exchange Initiatives Project 3
(3)

• Longer term issues
• Financial issues
• Financial benefits
• Avoided new generation
• Roles and responsibilities
• EECA
• Others eg Electricity Commission

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EECAs key findings so far (1)

• Incentives for retailers to provide demand
  response services to consumers?
• Those with exposure to hydrology risk have some
  incentive
• End users are not in a strong position to demand
  better services / not aware of the options

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EECAs key findings (2)

• Retailers contracts on offer vary between
• Fixed price, variable volume
• Fixed price fixed volume
• Partial spot market exposure
• Customers uneasy about spot exposure in an
  uncertain world
• Commercial and smaller end users not in a strong
  position to quantify risk

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EECAs key findings (3)

• Demand Exchange is one of many demand side tools
  on offer
• The demand side has an important role to play in
  balancing the supply-demand equation
• As a country we need to act or face shortages
  its better to be prepared than use a last resort

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EECAs next steps

• Further quantify the national benefits of
  capturing the Demand Response target
• Communicate the benefits to end users in dollars
  and cents
• Educate end users to demand better services and
  become aware of the options
• Keep working for firmer prices at or ahead of
  trading periods

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Conclusions

• NZ electricity market has a generator focus
• Sector reform has left end users confused
• Sector governance is essential in getting the
  demand voice heard
• EECAs role is to facilitate change

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Thank you

• www.eeca.govt.nz

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New Zealand on-top of the world
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EECAs Demand Response Actions
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New Zealand - Electricity Users
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Demand Response Portfolio

• Peak load management load shifting from high to
  low priced periods
• Voluntary demand response reacting to
  day-ahead exchanges or real-time prices
• Direct load control peak load avoidance on
  distribution networks
• Interruptible - as one of the ancillary services

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EECAs Demand Response Initiatives - Project 1

• Demand Response Ltd market research identified
  250-900 MW of increased demand response possible

• Report recommended
• A day ahead market is needed
• Market information needs to be more freely
  available
• Create a forum for discussion on demand
  management (New Zealand equivalent to the Peak
  Load Management Association)

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EECAs Demand Response Initiatives - Project 2

• Energy Intellect Ltd bringing prices and
  consumption profiles together in a simple format

The red line in the graph depicts the Same day
last week kW consumption profile. This
historical profile is overlaid with todays ½
hourly kW consumption profiles in green. The red
bar is the accumulated 5-minute kW consumption as
recorded in real-time in the latest half hour
period.
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Demand Response Barriers

• Industry structure problems
• Line - retail split
• Split incentives on retailers
• Market Information
• Price and volume risk
• Ex-poste market
• Customer Participation
• Limited understanding
• Limited ability to participate

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Other work

• New Zealand electricity market working groups
  (industry representatives)
• Real time pricing (5 minute prices) to add to the
  three other prices in the Market
• Improve demand forecasting with the result of
  improving forecast prices