WG C5.26 Auction markets and other procurement mechanisms for demand response services

Demand response (DR) which enables customers to reduce their electricity consumption in response to prices and system needs, is playing an increasingly important role in power system operation.  WG C5.26 has produced Technical Brochure 874 which has examined the state of DR procurement mechanisms in a number of countries and how well they have been incorporated into the different market structures.  The Australian member of the WG was Gregor Verbic. 

Power systems are generally designed to cater for peak load.  This often leads to some of the installed capacity being required for relatively short periods.  Rather than install long lived infrastructure assets, demand response services are being used to lower the demand at these peak times.  If these services can be efficiently procured, this should lead to lower market prices and improved reliability.  The importance of this facility has been amplified by the significant increase in penetration of renewable energy resources as they may not be available at peak demand times.  The scope of the Technical Brochure included examination of: 

• The role of TSOs and DSOs in managing DR services
• The current development of the DR auction mechanisms
• The performance of existing DR procurement mechanisms
• The feasibility and viability of standard DR procurement models for different markets.

 The study has identified that there is considerable interest from load customers in offering DR services and these are typically classified on:

•  Their mode of procurement (fixed period contracts or auctions)
• Their operational domain (energy services or capacity)
• Their participation time frame (day ahead or real time)
• The type of DR program (economic or emergency/reliability) 

The WG has produced a comprehensive review of the current frameworks and programs for various electricity markets in eight countries, including Australia.  The brochure provides an interesting comparison across the countries of the initiatives to reduce peak demand.  The three most important drivers for DR programs were peak demand reduction, security of supply and reduction of market price volatility (for existing markets).  Increasing penetration of renewables was also important, particularly for Australia due to the rapid increase in roof top solar and, more recently, large scale solar farms. 

A number of metrics were considered when planning DR programs in terms of the value that the DR could provide based on estimated future value or measured impacts from previous installations.  These included technical resilience, system safety margin, enhanced welfare, peak load reduction, cost savings, reduced congestion costs, reduced number of interruptions, reduced outage durations and renewable energy integration.  Some of the metrics have a direct monetary value while others have positive benefits without being monetised. 

Initial challenges to the development of DR programs include the maturity of the enabling technology and the response plan.  Operational challenges include rescheduling, inconvenience and on-site issues. 

Up front challenges for DR program owners include metering and communication, billing systems and customer education.  Their operational challenges include administration, marketing, incentive payments and evaluation complexity. 

The TB can be downloaded from e-cigre and is free for members and 110€ for non-members.