Effects of DR Programs

In this subsection, benefits and their generating mechanisms for each DR program are considered. Also, some conditions of success for expansion of these DR programs are considered.

Reliability Benefit (1)

Emergency Program is provided as a prevention method for serious damages of power systems such as power outage in case that power supply amount would not meet the demand in a certain time slot. Therefore, markets (or system operators) can pay equivalent to the expected loss in serious power system damage as the incentive, if such serious damage would be avoided. To estimate the expected loss, risk values might be used. Generally risk value is calculated by the following formula.

Risk = Probability Consequence (4-19)

To calculate an outage risk, Outage Probability and Outage Consequence are necessary. With respect to the Outage Probability , statistical data can be used and the accuracy of the probability should be improved if outage related data such as power reserved capacity, weather information in a targeted area etc., could be used. With respect to Outage Consequence , estimated financial damage of the outage in the targeted area such as opportunity loss and penalties to be paid can be used.

Using these estimation methods, reasonable incentive should be able to be decided.

Generally incentives for DR programs in Emergency Program type are large amount compared with Economic Program because generally outage damage would be large amount, therefore Emergency Program is very important not only for the market reliability improvement but also for the expansion of DR effectiveness.

Economic Benefit (2)

In this study, economic benefits from a long-term perspective such as reduction of capital investment for new additional power plants construction by DR programs are out of scope, because this study consider if the optimal power system would be achieved with DR programs, new additional power plants were not necessary originally.

The purpose of both Economic Program and Price Menu Based Program is to obtain economic benefit. Although incentive providers for consumers are different in these two types of programs, it is necessary to provide benefits to both power companies and consumers to expand effectiveness of DR programs. Therefore, effective

models of both programs are considered here by formulation of them.

In DR programs, consumers

power companies. Therefore it is necessary for them to obtain benefits more than the sales revenue reduction by the programs.

Here, let benefit of a power company be B(V), power sales amount be V and maximum value ofVbevmax,then the following conditions should be satisfied if economic related DR programs would be provided.

{V : 0 < V < vmax } (4-20)

B(V) B(m) {V : 0 < V m } (4-21)

max B(V) = B(m) (4-22)

B(m) < B(V) {V : m < V } (4-23)

Figure 4-12 Benefit Curve for DR Programs Categorized in Economic Program and Price Menu Based Program.

As showed in Figure 4-12, this model would be achieved under the environment that benefits would be decreased if electricity sales amount would be more thanm. In case that the power company would need to supplydamount of power (d > m, {d, m V}), if consumers would reduce their demand fromdto ( >m, { V}), benefits of the power company would increaseb.

b = B( ) - B(d) (4-24)

From the viewpoints of the power company, the benefit could be larger with sales amount reduction until m even if some cost would be paid, and the cost would be the source for incentive. Therefore, maximum incentiveImaxwould be as follows.

Imax = B(m) - B(d) (4-25)

In order to satisfy above these conditions, multiple different price electricity commodities exist in the participated market and it is necessary for the power company to procure high price electricity commodities more than its profitable price. For example, in case that a power retail company which has procured m electricity from a generation company needs to buy additional high price power from markets if the company need to provide electricity more thanmto their customers, required conditions are satisfied. Only in such case, benefits for both power companies and consumers can be provided.

From the consideration of benefit models of economic related DR programs, major market conditions to generate benefits for both power companies and consumers by these

programs are possibilities of power companies ( ) power supply capacity shortages for the consumers , and availability for such shortened capacity from

power companies cannot procure additional power from markets. On the other hand, this model would be practical in case that a small new entrant aggregates more customers than their power supply capability and can procure power from other power companies or markets. However, it looks very difficult for these power companies to obtain large benefit by only price menu based program.

Conditions Required for DR Penetration (3)

Assuming that the origination of DR program would be the incentive provided by the entities which obtain benefit, conditions of DR program success would be clarified by above various considerations of DR programs and their mechanisms.

a. Emergency Program Provision by System Operators

Because a power outage makes great damage, reasonable cost for preventing outages should be used. This program should be necessary to maintain power system reliability and to provide incentives both DR program providers and consumers for the expansion of DR market.

b. Various Trading Commodities in a Power Exchange

From the viewpoint of DR program providers, it is necessary to prepare countermeasures in case customers would not reduce their demand as required.

Considering the necessity of multiple power commodities with different price and the efficiency of power trading, the revitalization of PX is the critical factor for the success of DR programs.

c. Adequate Power Supply and Demand Size

DR programs can provide benefits only in the market which power supply capacity is not enough for the peak demand and electric power can be procured in the market with higher price if necessary. The U.S. DR markets which have gotten successful results meet these conditions. In addition, it is necessary to consider the regulation design and subsidies for the market efficiency, price stability and environmentally enhancing because regulations and subsidies influence the result of DR programs, although it is not discussed in this study.