We've talked a lot this year about Demand Response (DR), in particular ERCOT's Emergency Response Service (ERS) program. The market for demand side management and system operator incentives for load curtailment grew rapidly in recent years and as a result, the ERS program has been experiencing some growing pains.
As popularity and consumer engagement grew for DR, program design flaws began to surface. The Protocols originally set forth simply didn't have enough information for successful program implementation and execution, resulting in Qualified Scheduling Entities (QSEs) being assessed administrative penalties for their failure to comply during different Emergency Response Service (ERS) events. Additionally, several suppliers were unable to meet their commitments to the ERS program due to factors beyond their control.
Factors contributing to non-performance:
- Cumulative effect of the market bottoming out and related production-dependant trends.
- 60-day lag time before QSEs are notified of non-performance (45-days to receive utility data plus up to 15 days for processing by the system operator).
- Lack of real-time metering use.
- Lack of training from ERCOT personnel on ERS program implementation and best practices to potential new partipants in the ERS market and in an open-forum with all existing Market Participants.
- Minimal controls in place for auction submissions
- Inadequate system limitations within ERCOT using an antiquated submission process that doesn't work compared to the CRR, DAM, RTM, and Ancillary Services markets.
There are many market-related causes that would impact a QSEs and its participants to fall short of their commitments, but it's important to consider what was happening in the market at the same time. Last year, natural gas plummeted, unemployment was at 5%+, and production levels slowed for many manufacturers. Participants whose businesses are driven primarily by the cost of fuel were forced to reduce their production as NG prices began to plummet.
Data Timeliness: Legacy Issues and Real-time Metering
In addition to these market factors, legacy issues related to timeliness of data receipt and processing caused many QSE's to default on back-to-back auction periods. How so? The system operator takes 45 days to get energy usage data from the utility, and it can take up to an additional 15 days for the system operator to process the data and deliver the results.
By the time QSE's receive this report, the next auction period would have already been half-way over. This leaves QSE's scrambling to reasses baselines and commitments ahead of the subsequent auction period. Since there's little-to-no buffer time built-in between the auction periods, refinement in bidding strategies may take up to two auction cycles to be corrected.
Demand Response Timeline
For suppliers like Links Energy LP, this served as an opportunity for the QSE to investigate different methods for data collection and analysis. The implementation of real-time metering for all of its participants has resulted in average of 120% availability since implementing the use of smart meters. In general, the access to smart meter data in Texas and use of IDR meter data have been beneficial to both the QSE and program participants.
Training and Updates
The ERS program is still relatively young and is constantly evolving. QSE's, such as Links Energy LP, have worked with ERCOT to stream-line the enrollment process, implement control measures to reduce human error, and requested additional training and program requirements from ERCOT to ensure that all participants are able to perform. Rest assured, everyone is working together to ensure grid stability in Texas.
WHAT'S UP NEXT?
As the ERS program continues to mature and the protocols evolve, it's imperative that QSE's work with ERCOT and the PUCT to redefine the program tenets to ensure that each QSE is set up for success. Many times ERCOT, the PUCT, and QSE's won't know what the program's flaws are until there's an event where it's made apparent. While there are some negative consequences, they are generally short-term and ERCOT, with support and feedback from market participants, will continue to revise the program as necessary.
SHOULD I PARTICIPATE IN DEMAND RESPONSE?
Even with these minor challenges, the program is constantly improving. In a time where budgets are tight, business owners are even more focused on doing more with less. Demand Response is still one of the easiest ways to realize a revenue stream that can increase a business' bottom line with little to no upfront investment costs.