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C6-105
CIGRE 2008
Demand-side Integration in a Restructured Electric Power Industry
A. S. CHUANG, C. W. GELLINGS
Electric Power Research Institute
USA
SUMMARY
Modern electric power systems are becoming over-stressed due to shrinking reserve margins,
elevating electricity cost, permitting difficulties, and financial risks of bulk expansion. Demand-side
integration (DSI) addresses these problems through programs that encourage the efficient and effective
use of electricity in support of power systems and customer needs. A growing international
community including CIGRE Working Group C6.9 has adopted DSI to refer to the underlying
technical area encompassing all aspects of Demand Side Management (DSM) in today’s restructured
electric power industry [1] [2]. Common drivers, challenges, and forms of demand-side integration are
shared internationally [1]. However, lack of consistent use of demand-side terminology creates the
need for a framework that defines the relationships between traditional and newly developed methods
of demand-side integration.
The paper identifies concepts and implementation methods of DSM that remain relevant in
restructured environments. The authors analyze a broad range of demand-side implementations to
develop a conceptual framework encompassing both vertically-integrated and restructured industry
environments, including market environments where demand response programs coordinate customer
usage with electricity market conditions. A comparison between load shape impact objectives of
programs reveals noticeable terminology differences in regions where electricity markets exist. In
these regions, the terms Demand Response and Energy Efficiency have increasingly replaced DSM.
Terminology shifts and other industry trends validate the need to extend traditional DSM concepts and
methods to formulate a generalized framework. The proposed DSI framework relates traditional and
new forms of demand-side integration. The framework distinguishes implementation horizons,
incentive methods, actuation methods, and objectives for integration.
System planners and regulators worldwide are utilizing regional codes and standards to increase
energy efficiency and renewable resource adoption. Renewable portfolio standards and regional
energy efficiency requirements speed adoption rates. The demand-side integration framework also
encompasses such forms of implementation.
KEYWORDS
Energy Efficiency, Demand Response, Demand Side Management, Demand-side Integration, Industry
Restructuring, Electricity Markets, Resource Planning, Distributed Resources, Renewable Energy.
achuang@epri.com
1 Introduction
Section 2 identifies fundamental DSM concepts, trends associated with electric power industry
restructuring, and terminology shifts resulting from restructuring. Section 3 proposes a framework for
relating demand-side implementation methods of various types. The framework encompasses
traditional, market operator administered, and emerging forms of demand-side integration. Based on
extensive review of DSM program surveys and recent publications on DSI, the authors propose a
conceptual framework in Section 4 for characterizing demand-side implementations. Section 5 applies
the framework to characterize demand-side programs designed to support system planning and system
operations, respectively. By identifying a few key program attributes, as described in the framework,
close relationships between seemingly disparate programs are revealed. The proposed framework
facilitates improved communication and understanding of concepts and methods for demand-side
integration, despite regional differences in terminology and naming conventions in use.
2 From Demand-side Management to Demand-side Integration
Publications on DSM extend back to the 1970’s. A compilation of early technical articles are
organized in [3] and textbooks on DSM concepts and methods have been published in [4] and [5].
DSM surveys detail program objectives, incentives, and implementation methods applied by utilities
[6], [7]. Many of the previously published concepts are applicable in restructured environments. In
particular, modern implementation methods can be related with traditional ones through comparison of
program objectives for impacting load shape.
2.1 Load Shape Impact
DSM programs are designed to attain desired load shape impacts, as represented by the load shape
objectives shown in Figure 1. The first four, peak clipping (PC), valley filling (VF), load shifting (LS),
and flexible load shape (FLS), represent objectives to alter electricity consumption at targeted times of
days or seasons. Each of these four objectives can be affected in operational timeframes through utility
load management. The latter two load shapes, strategic conservation (SC) and strategic load growth
(SLG), represent objectives to decrease or increase load at levels remaining effective in the long-run.
Each of these load shape objectives are further described in [5].
2.2 Terminology Shift
As discussed in [1] the applicability of DSM terminology has been in question with the advent of
competitive electricity markets. Many end-use customers are no longer under an environment of
centralized management driven by utilities. The concept of customer-driven response or demand
response is more compatible with competitive market principles than centralized utility-driven load
management. In restructured regions, the demand-side is generally comprised of energy retailers (i.e.,
utilities, energy service providers, and other load serving entities) participating in wholesale electricity
markets on behalf of end-use customers. Together energy retailers and end-use customers may provide
valuable demand-side services by utilizing demand-side resources to support grid or market needs.
Indeed regional operators of competitive markets have established market-based demand response
programs to impact system load shape. Applicable terminology therefore depends on status of industry
restructuring in respective geographic regions.
Based on observations from interactions with diverse organizations regionally and internationally, the
authors note several terminology shifts that have occurred. Among them, Load Management is
increasingly being replaced by the term Demand Response. Energy Efficiency is commonly being
used to refer to Strategic Conservation. Also Flexible Load Shape is being replaced by the concept of
Dynamic Energy Management, which is enabled through dynamic systems [8].
Despite these terminology shifts, load shaping concepts originally devised in vertically integrated
utility environments are still applicable in restructured environments. Figure 2 associates load shape
objectives in traditional industries with those in restructured industries. Each objective is grouped into
one of the following three categories:
1
1) Demand Response with the objective of
• reducing demand peaks, particularly when usage approaches supply limits,
• filling valleys of off-peak demand to improve load factor,
• shifting load between times of day or seasons, or
• inducing demand variations or desired load shapes determined in operational timeframes.
2) Energy Efficiency with the objective of reducing load levels in the long-run while maintaining user
comfort or level of service
3) Strategic Load Growth with the objective of increasing load level through electrification.
Traditional Industry
(DSM)
Load Management
Figure 1 : Load Shape Objectives
Restructured Industry
(DSI)
Demand Response
Peak Clipping
Peak Clipping
Valley Filling
Valley Filling
Load Shifting
Load Shifting
Flexible
Load Shape
Dynamic Energy
Management
Strategic
Conservation
Energy
Efficiency
Strategic
Load Growth
Strategic
Load Growth
Figure 2 : Terminology Shifts due to Industry Restructuring
Modern emphasis in demand-side integration focuses on improving the efficient and effective use of
electricity, particularly in resource-constrained regions. Consequently, implementations that have
emerged after industry restructuring tend to target Demand Response and Energy Efficiency objectives
rather than Strategic Load Growth.
3 Implementation Framework
3.1 Implementation Horizons and Types
Demand-side implementation methods each have a time horizon for addressing system imbalance risk.
A method’s associated time horizon indicates how far in advance the method must be applied to
impact imbalance risk. Generally, methods designed for Energy Efficiency are applied in resource
planning timeframes (i.e., at least a year ahead), whereas methods designed to incentivize Demand
Response are used in system operations (i.e., minutes to days ahead). Methods that apply to
operational planning, which occurs in month-ahead to seasonal timeframes, either advance Demand
Response or Energy Efficiency objectives. Resource planning activities like alternative rate structures
and direct incentives for equipment adoption can also advance Demand Response and Strategic Load
Growth objectives.
Table I identifies demand-side implementation methods applicable by system planners and operators
in traditional and restructured environments. Traditional (prior to industry restructuring)
implementations [5] are listed in grey boxes, while other implementations including recently
developed ones [9] are listed in white boxes. The table identifies implementation methods with solid
bullets and examples with sub-bullets below each implementation method. Implementations are
classified by applicable time horizon (i.e., resource planning, operational planning, day-ahead
operations, and day-of operations) and by the following implementation types shown as column
headings in Table I:
2
1. Alternative Pricing
• utilizes pricing and rate structures, dynamic pricing, or rate discounts to directly affect
customer behaviour in the operation of end-use devices and appliances
• induces customer behaviour or response by impacting what customers pay for electric service
2. Direct Incentives
• offers financial incentives to induce participation
• pays participants for customer adoption or demand response performance
3. Outreach and Cooperation
• requires no direct utility financial incentives to end-use customers
• relies on outreach and information exchange to influence customer behaviour and response
• participation is voluntary in nature
4. Regional Codes and Standards
• in lieu of utility financial incentives, relies on regional codes or standards dictating minimum
requirements or operating procedures
• features a desired attribute such as energy efficiency, electric service level differentiation, or
renewable energy
• may require mandatory compliance to achieve desired load shape impact
These implementation types together with the time horizons described above comprise a framework
for relating different demand-side implementation methods. The framework is useful for discerning
relationships between seemingly disparate program implementations (see Section 3.2.2), and can be
applied to reveal trends in program design after industry restructuring (see Section 3.2.1).
Table I : Categorization of Demand-side Implementation Methods (bullets) and Examples (sub-bullets)
Implementation
Alternative
Time
Type
Pricing
Horizon
• Pricing and Rate
Structures
o Demand charge
o Time-based rate
o Off-peak rate
Resource
o Inverted rate
Planning
o Seasonal rate
o Variable levels of
(years)
service
o Promotional rate
o Conservation rate
o Net metering
Operational
Planning
(months)
Day-ahead
Operations
(days)
Day-of
Operations
(minutes to
hours)
o Time of use
Direct Incentives
Outreach and Cooperation
Regional Codes and
Standards
• Paid for Adoption
• Trade Ally Cooperation
• Energy Efficiency
o Cash grant
o Training
Standards
o Rebate
o Certification
o Building codes
o Buyback program
o Cooperative ads and marketing o Appliance efficiency
o Low/no interest loan
o Selected product sales/service
standards
o Subsidized installation • Direct Customer Contact
(e.g., Energy Star)
or modification
o Industry efficiency
o Energy audit
o Employee rewards for o Direct installation
requirements
successful program
o Exhibits/displays/clinics
•
Renewable
Energy
marketing
• Ads and Promotion
Standards
o Billing credit
o Mass media
o Renewable portfolio
o Point of purchase advertising
standards
o Resource Adequacy
o Customer education
• Paid for Performance
o Seasonal Conservation
Credit
o Installed Capacity
o Regional operator
• Dynamic Pricing
economic demand
o Critical peak
response (DR)
pricing
o Demand bidding of
o Real-time pricing
forward energy
o Regional operator
emergency DR
• Discounted Rate
o Demand bidding of
o Curtailable load
ancillary services
o Interruptible load
o
Curtailable load
o Dispatchable
standby generation o Interruptible load
o Direct load control o Dispatchable standby
generation
o Direct load control
o Public conservation appeal
(e.g., radio, TV, Internet,
newspaper appeal)
• Variable Service
Subscription
o Demand subscription
service
o Demand limiting
(e.g., day-ahead demand
• Public Appeal
subscription)
o Voluntary day-ahead DR
(e.g., day-ahead appeal for DR) o Premium power
(e.g., dispatachable
o Voluntary emergency DR
standby generation)
o Voluntary emergency standby o Optional binding
generation
mandatory curtailment
o Priority service
o Voluntary emergency load
reduction
• Emergency Operating
(e.g., pre-planned voluntary
Procedures
interruptible/curtailable load)
o Rolling blackout
3.2 Implementation Methods
3.2.1 Post Industry Restructuring
The proposed implementation framework distinguishes day-ahead from day-of operations,
respectively, to reflect distinct timeframes for coordination of demand response. Generally, programs
3
supporting coordination through day-ahead operations enable demand response based on economics,
whereas programs supporting coordination in day-of operations are used to resolve system
emergencies.
As indicated by the grey boxes in Table I, many traditional demand-side implementations apply to
system planning and day-of system operations, respectively. The concentration of white boxes in the
last two rows of the table reflects a proliferation of program implementations designed to support both
day-ahead and day-of system operations. These programs filled a void in demand-side activities in
restructured regions. In North America, utilities in restructured regions questioned their role in
planning and discontinued many DSM programs. They along with regional system operators of
electricity markets created new programs to better coordinate demand-side response with regional
market and system conditions. So the pattern of grey and white boxes in the table is attributable to
industry restructuring and increased reliance on demand-side options to support system operations.
The implementation framework also encompasses renewable energy programs, as illustrated in the
first row of Table I which shows Net Metering and Renewable Portfolio Standards (RPS). Net
Metering is an example of a resource planning option utilizing Alternative Pricing, while RPS is an
example utilizing Regional Codes and Standards. Since renewable energy sources are capable of
impacting demand for grid-supplied electric service, their inclusion in the framework is useful for
broader demand-side program analysis.
The last two columns in Table I identify implementation methods that do not require direct financial
incentives from utilities to customers. Examples of non-traditional methods include public appeal for
voluntary demand response, regional standards mandating minimum renewable energy procurement,
and variable service subscription programs. Although versions have been piloted in the past,
restructuring has led to new examples of variable service subscription, which offers individual
customers a choice in level of electric service. Enhanced customer choice is a natural outcome of
competition, which tends to foster innovation and increased product/service differentiation. Likewise,
variable service subscription enables electric service differentiation.
3.2.2 Descriptive Summary
This section summarizes the implementation methods (bulleted items) in Table I and provides
examples with an emphasis on non-traditional methods. References are also provided.
Pricing and Rate Structures
Utility planners influence customer behaviour by structuring retail prices and rates for electric service.
Alternative pricing strategies are applied when customers are familiar with the equipment or
technology involved and participation is neither excessively complicated nor inconvenient for the
customer. Alternative pricing and rate structures are discussed in DSM literature [5]. Many examples
are summarized in utility survey summaries [6],[7].
Dynamic Pricing
In Dynamic Pricing customers are provided with opportunities for bill savings by avoiding peak
prices. Examples of Dynamic Pricing include Real-time Pricing (RTP) and Critical Peak Pricing (CPP)
schemes. Typically these implementation forms mitigate operator exposure to price risk by financially
exposing end-use customers to retail prices that can change over time. Although actuation of a
response is not guaranteed, customer exposure to high prices financially incentivizes demand response
during peak price events, and thereby helps mitigate commercial risk to energy retailers stemming
from wholesale markets. [9]
Discounted Rates for Demand Response
Discounted Rate methods offer price breaks or discounts on retail rates in return for customer
participation in demand response programs. In lieu of payments for performance, customers are
provided with opportunities for bill savings by paying a lower rate for energy, demand, or both.
Examples include Interruptible Load and versions of Direct Load Control that incentivize participation
through rate discounts. Since customers “pay for energy used” rather than are “paid for energy not
4
used”, this approach is more compatible with utility billing systems. DSM survey summaries capture
many utility load management programs that offer discounted rates in return for customer participation
in curtailable/interruptible load, direct load control, and standby generation programs [7].
Paid-for-Adoption
Utility planners also influence customer behaviour through financial incentives for a desired action or
response, such as customer adoption of energy efficient appliances or direct load control equipment.
Examples of Paid-for-Adoption type programs include grants or rebates for equipment adoption, low
interest rate loans to finance adoption, and bill credits for program adoption. Also program employees
may receive financial rewards for successful program marketing leading to customer adoption.
Generally, utilities use direct incentives to increase short-term market penetration of demand-side
options by reducing the net cash outlay or payback period required. In this way, the upfront investment
becomes more attractive. Furthermore, these financial incentives help reduce customer resistance to
demand-side options, and are particularly important in the absence of proven performance history [5].
Paid-for-Performance
Paid-for-Performance schemes compensate customers for measured reductions in electric energy
usage. A net reduction in load on the electric grid may be enabled through direct load control,
interruptible/curtailable load, or standby generation. For payment purposes, the reduction is a
calculated value based on the customer’s actual and historic usage. Paid-for-Performance incentives
are commonly used in restructured regions of North America and Europe to compensate demand
response participants. Examples include Regional Operator Emergency and Economic Demand
Response programs, respectively, including Demand Bidding. Under Paid-for-Performance,
participants receive payments commensurate with their delivered response, which is computed or
verified after triggered events. The operator calculates the amount of actuated response by comparing
metered usage against an established customer baseline. Although Paid-for-Performance incentives are
prevalent in restructured regions, the baseline and payment requirements increase administrative
overhead, as discussed in [9].
Outreach and Cooperation Methods
Outreach and Cooperation methods influence customer behaviour and adoption by increasing
customer awareness, knowledge, and receipt of customized services. Through targeted
communications and other methods of outreach, system planners can engage customers without direct
financial incentives. Examples include printed or broadcasted ads and promotions that increase
customer awareness of program options, and direct customer contact to administer customized
information or professional services. Direct contact enables greater levels of customer interaction
through face-to-face interaction with utility representatives or trade allies via energy audits, direct
installation, or other means of customized service delivery. Furthermore, direct contact through
workshops, store fronts, and exhibits provides venues for obtaining customer feedback [5].
Alternatively, system operators may resort to Public Appeal to engage customer cooperation in
voluntary demand response. Customers who respond voluntarily to such appeals generally are
motivated by the desire to avoid system outages [9].
Regional Codes and Standards
Regional Codes and Standards encourage customer adoption through regional requirements or
procedures. Implementation methods of this type are listed in the last column of Table I. Each involves
application at a regional level. Examples include Energy Efficiency and Renewable Energy Standards
established by regional governments, Emergency Operating Procedures enforced by regional system
operators, and Variable Service Subscription programs operated within utility service territories.
References [9] and [10] compel the need for variable service levels through customer subscription.
Through Regional Codes and Standards, public interests in other desired attributes like energy
efficiency or green power can be advanced. Compliance may be mandatory as in the case of national
appliance efficiency standards, local building codes, and Renewable Portfolio Standards.
4 Characterization Framework
Based on extensive analysis of demand-side implementations worldwide [2, 6, 7, 9], the authors
propose an over-arching framework to characterize demand-side programs in both vertically-
5
integrated and restructured industry environments. Through a few program attributes, system planners
and operators may readily associate their demand-side programs despite regional differences in
terminology and naming convention. This is a useful initial step for facilitating regional collaboration
towards overcoming industry challenges in achieving widespread demand-side integration.
The characterization framework is an extension of a framework developed in [9] for characterizing
demand response programs. The proposed framework encompasses additional types of programs
including those targeting energy efficiency and strategic load growth objectives. The resulting
generalized framework characterizes programs by objective, incentive method, and in the case of
demand response programs, actuation method. These program attributes are shown in the heading of
Figure 4 and described below.
4.1 Program Objective
Each demand-side program is designed to achieve a primary program objective. The objective of
Alternative Pricing and Rate Structures is to impact load shape in one of the ways depicted in Figure
1. Customer adoption is a common objective of Regional Codes and Standards as well as Paid-forAdoption programs. In contrast, Outreach and Cooperation type programs target a diverse set of
objectives, such as customer awareness, knowledge, feedback, and adoption as well as trade ally
support. Finally, programs supporting system operations are designed with the objective of mitigating
an operational risk (i.e., price risk and/or quantity risk). Each of these is a possible entry under the
Program Objective column of Figures 4 and 5. These objectives are described in traditional DSM
literature, expect for operational risk mitigation which is explained in [9].
4.2 Incentive Method
Every program aims to achieve an objective using a specific incentive method to encourage
participation. The incentive method defines an incentee to be engaged, incentive structure (or rationale
for engagement), and an administrator (i.e., the entity that administers services to achieve the
identified program objective). Figures 3 and 4 concisely summarize the participation rationale,
incentee, and administrator for each program type identified. Programs designed to support system
operations commonly engage the customer as incentee and involve the system operator as
administrator. Programs designed to support operational planning are administered by planners and
engage the customer as incentee. Program options supporting resource planning typically are
administered by system planners or regulators and engage one of many possible incentees such as
customers, trade allies, independent contractors, vendors, and builders.
4.3 Actuation Method
Programs designed to support system operations are also characterized by actuation method. The
actuation method specifies the actuator and type of information trigger used to coordinate demand
response with actual system or market conditions. Coordination is required to address daily
operational risk. Actuation of demand response is managed by the actuator, the entity responsible for
actuating a response based on a pre-designated trigger. The trigger is the information signal used to
coordinate demand response with system or market conditions. Examples of triggers include
notification, price, and control signals as well as local measurements of demand or frequency
deviations. Triggers are associated with demand response programs and procedures in Figure 4.
5 Application of Framework
5.1 Programs Supporting System Planning
Demand-side programs applicable in system planning (Figure 3) are typically implemented anywhere
from months to years in advance of real-time system balancing. The first three columns of Figure 3
indicate the implementation horizon, type, and method associated with each program identified in the
fourth column. These first four columns are useful for relating programs by implementation
characteristics. The remaining columns in Figure 3 characterize programs by program objectives (fifth
column) and incentive methods (last three columns). Such a structure enables comparison of programs
6
by primary characteristics, and reveals program relationships based on implementation characteristics.
As indicated in Figure 3, programs applicable to resource planning address diverse objectives. System
planners structure Alternative Pricing and Rate schemes to incentivize customers to alter usage
patterns. Through Advertisement and Promotion, planners enhance customer awareness of demandside equipment and program options. Customer awareness and public perception is influenced through
mass media communications, point of purchase advertising, customer education (e.g., bill inserts,
brochures, information packets, displays, clearinghouses, direct mailings), and joint marketing with
trade allies. Planners offer Paid-for-Adoption incentives to reduce the net cash outlay or payback
period for customer adoption of promoted equipment and programs. They also utilize Direct Customer
Contact to influence customer adoption and Trade Ally Cooperation to achieve the indicated program
objectives in Figure 3. In Direct Customer Contact, a trade specialist administers customized service
(e.g., evaluation, installation, information services) to enhance customer adoption rates.
Time
Horizon
Op Plan
Op Plan
Op Plan
Op Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Implementation
Type
Implementation
Method
Program Name
Program Objective Incentive Structure
Incentee
Administrator
Alternative Pricing
Alternative Pricing
Direct Incentives
Outreach & Coop
Outreach/Cooperation
Outreach/Cooperation
Outreach/Cooperation
Outreach/Cooperation
Outreach/Cooperation
Outreach/Cooperation
Outreach/Cooperation
Outreach/Cooperation
Variable Service Subscrip
Pricing & Rate Structures
Paid for Performance
Ads and Promotion
Ads and Promotion
Ads and Promotion
Ads and Promotion
Direct Customer Contact
Direct Customer Contact
Direct Customer Contact
Direct Customer Contact
Trade Ally Cooperation
Demand Subscription Service
Time of Use
Seasonal Conservation Credit
Public Conservation Appeal
Mass Media (radio, TV, Internet, news)
Point-of-Purchase Advertising
Customer Education
Energy Audits
Direct Installation
Store Fronts/Exhibits/Displays
Workshops/Energy Clinics
Cooperative Advertising and Marketing
Peak Clipping
Load Shifting
Strategic Conservation
Strategic Conservation
Customer Awareness
Customer Awareness
Customer Awareness
Customer Adoption
Customer Adoption
Customer Adoption
Customer Adoption
Customer Awareness
and Adoption
Trade Ally Support and
Advice
Product/Service
Validation
Customer Adoption
Load Shifting
Peak Clipping
Valley Filling
Load Shifting
Strategic Conservation
Dynamic Energy Mgmt
Strategic Load Growth
Strategic Conservation
Customer Adoption
Customer Adoption
Customer Adoption
Customer Adoption
Customer Adoption
Customer Adoption
Customer Adoption
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Trade Ally
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Res Plan Outreach/Cooperation Trade Ally Cooperation
Training
Res Plan Outreach/Cooperation Trade Ally Cooperation
Certification
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Outreach/Cooperation
Alternative Pricing
Alternative Pricing
Alternative Pricing
Alternative Pricing
Alternative Pricing
Alternative Pricing
Alternative Pricing
Alternative Pricing
Direct Incentives
Direct Incentives
Direct Incentives
Direct Incentives
Direct Incentives
Direct Incentives
Direct Incentives
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Res Plan
Direct Incentives
Regional Codes/Stds
Regional Codes/Stds
Regional Codes/Stds
Regional Codes/Stds
Regional Standard
Alternative Pricing
Trade Ally Cooperation
Pricing & Rate Structures
Pricing & Rate Structures
Pricing & Rate Structures
Pricing & Rate Structures
Pricing & Rate Structures
Pricing & Rate Structures
Pricing & Rate Structures
Pricing & Rate Structures
Paid for Adoption
Paid for Adoption
Paid for Adoption
Paid for Adoption
Paid for Adoption
Paid for Adoption
Paid for Adoption
Selected Product Sales/Service
Time-Based Rates (TOU)
Demand Rates
Off-Peak Rates
Seasonal Rates
Inverted Block Rates
Variable Levels of Service
Promotional Rates
Conservation Rates
Low/No-Interest Loan
Cash Grant
Subsized Installation/Modification
Rebate
Billing Credit
Buyback Program
Employee Rewards for Successful
Program Marketing
Customer Adoption
Paid for Adoption
Resource Adequacy
Energy Efficiency Stds
Appliance Energy Efficiency Standards Customer Adoption
Industry Energy Efficiency RequirementsCustomer Adoption
Energy Efficiency Stds
Customer Adoption
Energy Efficiency Stds
Building Codes
Customer Adoption
Energy Efficiency Stds
Energy Star
Customer Adoption
Renewable Energy Stds Renewable Portfolio Standard
Strategic Conservation
Pricing & Rate Structures Net Metering
Pay and served per seasonal demand subscription
Save by avoiding peak times
Billing credit for seasonal performance
Reduce likelihood of system shortages
Public awareness through mass media
Public awareness through point-of-purchase ads
Customer awareness through directed media
Customized evaluation services
Customized installation services
Customized information
Customized information
Subsidized advertising
Subsidized training
Trade Ally Planner
Stamp of approval or distinction
Trade Ally Planner
Various (rebates, free advertising, etc)
Save by avoiding peak times
Save by reducing peak demand
Pay lower rate for off-peak end uses
Save by seasonal shifting of usage
Save by reducing block usage
Pay for subscribed level of service reliability/PQ
Save on total energy cost through electrification
Pay lower rate if meet minimum efficiency targets
Finance adoption at below-market interest rate
Subsidized adoption
Subsidized installation
Rebate for equipment adoption
Billing credit for equipment adoption
Subsidized installation
Rewards for successful adoption outcomes
Trade Ally
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Installer
Program
Employee
Developer
Vendor
Industry
Builder
Vendor
Utility
Customer
Subsidized resource expansion
Meet minimum appliance efficiency standard
Meet industry energy efficiency requirements
Meet mandatory building efficiency requirements
Meet voluntary product certification requirements
Meet minimum regional renewable requirements
Pay net of usage and electricity production
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Planner
Regulator
Regulator
Regulator
Regulator
Regulator
Planner
Figure 3: Programs designed to support system planning are characterized by objective and incentive method. A
few support operational planning (Op Plan), while the rest support resource planning (Res Plan). Each is a
demand-side planning option, except the last two which are planning options for renewable energy integration.
The first four programs listed in Figure 3 support operational planning by engaging end-use customers
in energy efficiency or demand response programs that are applied seasonally. For example, planners
may utilize Seasonal Conversation Credit and Public Conservation Appeal to encourage energy
efficiency during high energy usage seasons. They may encourage demand response be applying Time
of Use for load shifting and Demand Subscription Service for peak clipping.
The incentive structure of each program listed is concisely summarized in the figure. Although the
majority of programs involve system planners engaging customers, some are administered by nonplanners to engage other entities. For example, regulators use energy efficiency and renewable energy
standards to mandate compliance of utilities, builders, and businesses with regional codes and
standards. Besides customers, incentees of resource planning programs could be manufacturers,
product vendors, installation contractors or trade allies.
5.2 Programs Used in System Operations
Demand-side programs are designed and installed in resource planning timeframes. However,
7
programs implemented to support coordination of demand response are used in operational
timeframes. Figure 4 identifies a wide range of programs used to support system operations. The last
two columns of the figure specify the actuation method (i.e., actuator and trigger) that enables
coordination of demand response with actual system or market conditions.
Demand response is provided through demand-side resources like standby generation,
interruptible/curtailable load, storage, and other sources capable of impacting demand for gridsupplied electric service. An operator applies these resources to mitigate operational risk (i.e., price
and quantity risks) inherent in day-to-day system operations. Programs designed to mitigate price risk
typically pass all or a portion of the commercial risk stemming from fluctuating wholesale market
prices to end-use customers. In contrast, programs designed to mitigate quantity risk have provisions
that enable operators to rely on a designated quantity of demand response from customer resources.
Reference [9] describes risk mitigation objectives of system operators, incentive structures, and
actuation methods for most of the programs characterized in Figure 4. The term Variable Service
Subscription, however, is newly introduced in this paper to encompass all demand response programs
that provide customers a choice in level of electric service. Variable Service Subscription is typically
tied to alternative pricing or rate structures that introduce variability in level of service per customer
preferences (i.e., Variable Levels of Service, a resource planning option in Figure 3). Variable service
is enabled by onsite resources like dispatchable standby generation and technologies like advanced
meters and demand-limiting fuses. Variable service is compared to Rolling Blackout below.
Implementation
Type
Implementation
Method
Direct Incentives
Direct Incentives
Direct Incentives
Direct Incentives
Direct Incentives
Direct Incentives
Alternative Pricing
Alternative Pricing
Alternative Pricing
Alternative Pricing
Alternative Pricing
Outreach/Cooperation
Paid for Performance
Paid for Performance
Paid for Performance
Paid for Performance
Paid for Performance
Paid for Performance
Discounted Rate
Discounted Rate
Discounted Rate
Dynamic Pricing
Dynamic Pricing
Public Appeal
Public Appeal
Outreach/Cooperation
Regional Codes/Stds Emergency
Operating Procedure
Regional Codes/Stds Variable Service
Subscription
Regional Codes/Stds Variable Service
Subscription
Regional Codes/Stds Variable Service
Subscription
Regional Codes/Stds Variable Service
Subscription
Program Name
Program Objective Incentive Structure
Incentee
AdminActuator Trigger
istrator
Direct Load Control
Dispatchable Standby Generation
Regional Operator Emergency DR
Demand Bidding - Ancillary Service
Regional Operator Economic DR
Demand Bidding - Forward Energy
Direct Load Control
Dispatchable Standby Generation
Interruptible/Curtailable Load
Critical Peak Pricing (CPP)
Real-time Pricing (RTP)
Voluntary Demand Response
Voluntary Emergency Standby
Generation
Rolling Blackout
Mitigate Quantity Risk
Mitigate Quantity Risk
Mitigate Quantity Risk
Mitigate Quantity Risk
Mitigate Price Risk
Mitigate Price Risk
Mitigate Quantity Risk
Mitigate Quantity Risk
Mitigate Quantity Risk
Mitigate Price Risk
Mitigate Price Risk
Mitigate Quantity Risk
Mitigate Quantity Risk
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Customer
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Mitigate Quantity Risk Equally pay and equally served
Customer
Operator Operator
Control
Premium Power
Mitigate Quantity or
Better served with dispatchable
Price Risk
standby generation
Mitigate Quantity Risk Better served for performance
Customer
Operator Operator
Control
Customer
Operator Customer
Notification
Mitigate Quantity Risk Pay and served per subscribed
demand limit
Mitigate Quantity and Pay and served per subscribed
Price Risk
priority of service
Customer
Operator Operator
Demand
Customer
Operator Operator
Various
Optional Binding Mandatory
Curtailment
Demand Limiting
Priority Service
Paid for performance
Paid for performance
Paid for performance
Paid for performance
Paid for performance
Paid for performance
Pay lower rate
Pay lower rate
Pay lower rate
Save by avoiding peak times & prices
Save by avoiding peak prices
Reduce likelihood of system outages
Reduce likelihood of system outages
Operator
~Customer
~Customer
~Customer
Customer
Customer
Operator
~Customer
Customer
Customer
Customer
Customer
Customer
Control
Notification
Notification
Notification
Notification
Notification
Control
Notification
Notification
Price
Price
Notification
Notification
Figure 4 : Programs designed to support system operations are characterized by program objective, incentive
method, and actuation method. Implementation characteristics associate programs of common implementation
method and type. (The symbol ~ is used in the table as an abbreviation of the word “typically”).
Rolling Blackout
Upon threat of severe system-wide supply shortages, regional operators may initiate Rolling
Blackouts, in which outages of circuits on the distribution system are coordinated in rotating sequence
until system balance is restored. In the absence of electric service reliability differentiation
distinguished in retail tariffs, most customers pay equally for service reliability and consequently are
equally served in the event of rotating outages.
Variable Service Subscription
Although Rolling Blackout and Variable Service Subscription programs differ by incentive structure
and actuation methods, each is applicable as a procedure of last resort during system emergencies.
Variable Service Subscription enables customers to select service level preferences that remain in
effect during system emergencies. For example, Premium Power [11] dispatches customer-sited
standby generation to deliver more reliable power to participants despite service disruptions that may
occur on the utility grid. Also in Optional Binding Mandatory Curtailment (OBMC) [12], participating
customers are exempt from rotating outages in return for reducing load on their distribution feeders
during extreme supply shortages. This is unlike traditional practice of only exempting loads that
8
supply essential public services, such as hospitals and airports, from rotating outages.
Other examples of Variable Service Subscription include Priority Service [10] and Demand Limiting
[9], which enable customers to pay rather than perform for subscribed levels of service. Demand
Limiting however does not require the breadth of regional coordination that Priority Service does to
enforce customer preferences. Regional coordination through system operations enables delivery of
greater levels of service reliability to higher priority end uses and lower costs to lower priority uses. In
resource constrained regions where system reliability is at risk, such options that differentiate
customer demand for service reliability [13] are compelling. Dispatchable standby generation, demand
limiting meters and fuses, and control technologies at the customer’s site can be used to actuate
demand response and manage delivery of premium service. Furthermore, modern advanced metering
capabilities enable management of Priority Service subscriptions in day-of system operations. This
improves upon implementations of Demand Limiting and Demand Subscription Service that require
longer lead times (e.g., truck rolls) to adjust service subscriptions.
6 Conclusion
The paper identifies DSM concepts and implementation methods that remain relevant in restructured
environments, as well as terminology shifts resulting from industry structuring. A framework [9] for
characterizing demand response programs is extended in this paper to characterize additional types of
demand-side programs, including those targeting energy efficiency and strategic load growth
objectives. The framework defines distinct attributes of programs applicable to system planning as
well as programs used in system operations. Through extensive review of traditional as well as newer
forms of demand-side integration, the authors also propose a framework for relating implementation
methods by type and applicable time horizon. An over-arching framework enables a common
reference point for analysis and discussion of demand-side integration concepts and methods.
Centering future discussion using the DSI framework developed here should provide the electric
power industry with a solid foundation for improved collaboration towards resolving industry
challenges in demand-side integration.
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