Description
The attached document is focused on retail dynamic pricing. It was first posted by me to the Energy Interop and NAESB sites last fall.
Five high level use cases are described that a relevant to both Energy Interop and eMIX.
Cases A through D describe customers with increasing interest and automation to respond to dynamic prices. The last case extends dynamic pricing to include distribution congestion and loss pricing.
A. Customer Changes their Usage in Response to Dynamic Prices
B. Customer Uses Smart Appliances and Devices or Energy Management System (EMS) in Response to Retail Dynamic Prices
C. Retail Dynamic Prices with Ancillary Services
D. Retail Service Provider Quotes Dynamic Forward Prices and Transacts Energy with Customers
E. Distribution Operator Provides Dynamic Distribution Prices and Loss Factors to Retail Service Providers
A. Customer Changes their Usage in Response to Dynamic Prices
Customer awareness of energy scarcity and customer attention to energy use, each maintained by economic signals, are key benefits of the smart grid. The most expensive use of the grid is to cover short term shortages in energy supply. Today such shortages are caused as buildings respond to weather or as the grid responds to unplanned outages. Tomorrow, as we rely more on intermittent energy sources such as sun and wind, they will occur more frequently.
Customers may increase their awareness of energy scarcity using dynamic price information provided by In Home Display Devices (IHD) or other means and can display past, current and projected consumption as well as past current and forward energy prices.
Customers without in-home display devices who are generally aware of current prices and the effect of their usage decisions on their bill also may be able to benefit from dynamic prices.
Customers without automated smart devices will typically want simpler dynamic price protocols and transactions.
In this case, Customers on a dynamic price service are likely to select, be offered, or have as a default a baseline amount of energy that can vary by time of day and season. A Retail Service Provider may provide, either a cost of service rate or a competitive rate for the baseline service. Any amounts above the baseline would be measured by the Customer meter, perhaps hourly, and billed at a real-time price. Any amounts below the baseline amount would be paid to the Customer at a real-time price.
The customer baseline will provide some cost certainty to the Customer on his bill. The real-time price applied to all customers will allow the customer to profit when able to reduce usage below the baseline, but will pass on the high cost from the system when the grid is under stress. Customers may learn over time to shift usage from high cost periods to low cost periods and reduce their overall bill for electricity.
B. Customer Uses Smart Appliances and Devices or Energy Management System (EMS) in Response to Retail Dynamic Prices
The Smart Grid allows customers to become actively involved in changing their energy consumption habits by connecting their personal Smart Appliances and Devices to the utility grid either directly or through an Energy Management System(EMS). Smart appliances and devices have their own domain requirements, in particular safety requirements, and must manage their own behaviors in response to coordinating and economic signals. Communication is through the Facility Energy Services Interface (ESI) or the metering system. And, smart devices may also communicate directly with the Retail Market Domain.
For example, a building with air conditioning can decide to pre cool in the morning and buy power at lower dynamic prices and sell back power in the afternoon at higher forward dynamic prices, thereby reducing costs. If the building has active thermal storage (for example, ice) the building will have even more flexibility to shift consumption to reduce costs. Electric water heating, electric space heating, refrigeration and some industrial process all have thermal inertia that enables dynamic management of usage in response to dynamic prices. With more renewables, the dynamic prices will be more volatile and the management of thermal storage using dynamic prices to accommodate renewables variability will be very helpful.
This case includes Electric Vehicles whether charged at home, work or at a charging station. When the current dynamic price is lower than forward dynamic prices for later in the day, it will generally be less costly to charge at the lower price. At night when there may be excess generation on the grid the price could be very low or negative. When the current dynamic price is high it may be possible to defer charging. The customers driving plans and habits, the efficiency of charging at different rates of charge, the cost of gasoline for a hybrid electric vehicle will all be factors in addition to the dynamic power prices that will determine when and how fast to charge the vehicle batteries. And as dynamic prices respond to grid conditions continuously, the charging plan can be modified automatically. For example if too many Electric Vehicles attempt to charge at the same time, the dynamic prices may increase, and some vehicles will automatically decide to charge at a later time.
This case includes Distributed Energy Resources (DER). A Customer may have on-site solar PV, fuel cell, combined heat and power, storage or other generation behind his meter. Dynamic prices will enable intelligent controllers for each device to determine when to generate, when not to generate and when to store electricity. For example, if the solar PV panels on the house feed more power back into the distribution grid than the house consumes or can store at that time and if the dynamic price to the house is negative, the solar PV panels may be turned off. When battery storage is available, battery controller can decide when to store and when to discharge. And a properly configured the Electric Vehicle may also be able to deliver power back to the building or the grid when dynamic prices are very high.
The availability of intelligent devices to automatically respond to dynamic prices will allow the use of more frequent updating of prices and more dynamic price products to better respond both to Customer preferences and provide customer cost reduction while better interfacing with the grid.
Rather than having smart devices attempt to forecast real-time prices, forward dynamic price quotes provide opportunities to buy sell power forward of the real-time delivery interval and know that the transaction will benefit both the Customer and the overall grid. And the response of load to forward signals will enhance grid reliability and allow central station generation to be operated at a steady rate with less cycling and startup and shutdown which increases costs and GHG emissions.
C. Retail Dynamic Prices with Ancillary Services
In addition to responding to Dynamic Energy Prices, the Retail Customer or a Distributed Energy Resources with Smart Devices may be able to provide ancillary services such as frequency regulation or spinning reserve capacity that can be called on by the grid operation under certain grid emergencies. The Retail Service Provider combines retail schedules for ancillary services into an aggregate schedule into the wholesale market operations scheduling system. The Retail Service Provider transmits any ancillary services dispatches from the Grid Operator to the Retail Customer and uses data from the Customer Meter to determine compliance and any deviations from schedules and operations dispatches.
D. Retail Service Provider Quotes Dynamic Forward Prices and Transacts Energy with Customers
Customers want to know the prices of products before they buy. It is beyond the scope of this specification to specify how Retail Service Providers would determine the price levels to quote to Customers. However it is useful to provide a high level description as to how Retail Service Providers might operate so that we can specify the message protocols for dynamic prices and transactions.
A Retail Service Provider typically assembles a portfolio of transactions by purchasing and selling power products in wholesale markets to support the sale and purchase of power products in retail markets. Wholesale markets involve generators, system operator markets, brokers, exchanges, and marketers. A Retail Service Provider will also pay for the costs and losses to schedule, transmit and distribute the power products to Customers so that the price to customers is an actionable price covering all costs. Retail Service Providers, whether cost of service or competitive, do this today.
Where permitted and facilitated by State regulatory policies, multiple Retail Service Providers may compete to serve a given customer. With the Smart Devices and the message protocols specified here it will be possible to purchase power in a given interval from one Retail Service Provider and in another interval from a different Retail Service Provider. And at a later time, the Customer may purchase additional power in the same intervals from a third Retail Service Provider, or sell back to that Retail Service Provider.
Dynamic Price Retail Service Providers will provide dynamic price quotes forward of each Delivery Interval. For example, at 8 am today, for the 2 pm to 3 pm delivery hour tomorrow, the Retail Service Provider may quote a price for the Customer to buy (ask price) and a price for the Customer to sell (bid price) for amounts of power to be delivered during the 2 pm to 3 pm hour tomorrow. The ask price typically will be slightly higher than the bid price. As conditions on the wholesale market and the grid change and as Customers respond to price quotes, a Retail Service Provider may increase or decrease its price quotes to better reflect current supply and demand. Different Retail Service Providers may make different price quotes and the Customer's Smart Devices can choose the best prices for transactions. Many frequent quotes for small amounts of energy with automated response will support grid and market stability and reduce risks to both Customers and Retail Service Providers.
Retail Service providers will post forward price quotes for a set of delivery intervals over the next day or so. This will provide a forward price curve for smart devices (especially those with storage and thermal inertia) to plan their operation and contract for the power required.
Retail Service Providers will also quote longer term prices for power products days, weeks, months, and perhaps years ahead of delivery. Customers may purchase these products to lock in their power cost but still be open to later transactions to buy more or sell back based on dynamic prices closer to delivery.
A special case of forward priced service is customer baseline service based on cost of service prices. In this case a cost of service Retail Service Provider offers a baseline amount of power in each hour of the day. The amount may vary by hour of the day and season. The price of this baseline amount would be cost based. However, the customer would be obligated to pay for this baseline amount, but could sell back to Retail Service Providers or buy more from Retail Service Providers at dynamic prices quoted by these providers.
After the delivery interval, Retail Service Providers will also quote prices for real-time energy measured by interval meters. Customers will pay or be paid by Retail Service Providers in excess of their forward purchases from all Retail Service Providers. Customer may be able to chose the best price quotes for settling real-time actual energy deliveries.
Customers may also have the option to quote prices to Retail Service Providers. However, it can be difficult for Customers to know what price to offer, especially when the price offered depends on the prices received in other intervals for energy that may have been shifted in time using storage, thermal intertie or changes in process operations or other customer activities.
E. Distribution Operator Provides Dynamic Distribution Prices and Loss Factors to Retail Service Providers
Retail Service Providers will typically quote bundled prices that include distribution costs and losses. Alternatively, Retail Customers could buy at wholesale locations and separately pay for distribution services, but the bundled pricing is likely to be more convenient for Customers.
Today Distribution Operators charge cost of service prices and average loss factors for distribution services. However, the distribution grid may face increased loads from simultaneous charging of Electric Vehicles and other loads. It also may face two way flows from distributed generation including solar PV. The need may arise to use congestion pricing and marginal loss factors on the distribution grid in the same way that the transmission grid uses congestion pricing and marginal losses in jurisdictions with wholesale locational pricing.
Distribution marginal losses on heavily loaded distribution feeders and equipment can be much higher than losses at low loads. Dynamic Retail Prices that incorporate dynamic distribution marginal losses will provide the correct economic signals to Retail Customers to reduce, increase or shift load when they can.
A dynamic distribution price on a distribution feeder, for example would signal to Customers on the feeder that the feeder is full. In the case where the feeder is full because of the simultaneous charging of several electric vehicles, a higher dynamic congestion price will induce some customers to curtail charging while other customers who see value in charging now can continue. The congestion price will be paid to those who curtail charging by those who continue to charge.
How the congestion prices and marginal losses would be determined is beyond the scope of this document.
