قیمت پاسخگو مدیریت تقاضا برای گرید هوشمندی جهانی
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|8830||2010||14 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : The Electricity Journal, Volume 23, Issue 1, January–February 2010, Pages 7–20
Price-responsive demand is essential for the success of a smart grid. However, existing demand-response programs run the risk of causing inefficient price formation. This problem can be solved if each retail customer could establish a contract-based baseline through demand subscription before joining a demand-response program.
In 2000, the National Academy of Engineering ranked “the vast network of electrification” as the greatest engineering achievement of the 20th century. The industry has changed relatively little during the past century. If Thomas Edison were to return today, he would find that the industry is still operated in much the same manner as he pioneered. Smart Grid is a global movement that promises to transform the electricity network into the information age with the digital technology. Price-responsive demand management is essential for the success of a smart grid. Three decades ago, Fred Schweppe and his affiliates at MIT first envisioned a spot market in a power network that enables consumers to manage electricity consumption in response to dynamic- and location-varying spot prices, resulting in greater efficiency and reliability.2 Despite significant research progress during the past three decades, a recent assessment by the Federal Energy Regulatory Commission indicates that demand response holds significant potential to benefit consumers but price-responsive demand remains an elusive target.3 Why has it been so difficult? Like most major socioeconomic changes, “the difficulty lies not so much in developing new ideas as in escaping from old ones.”1 Apparently, the inertia in the electric power industry is enormous because of its engineering complexity and capital intensity. Also apparently, there is a lack of financial incentives for retail customers and service providers to make the necessary investments in the advanced metering infrastructure and technologies that enable consumers to switch from a fixed uniform retail rate to dynamic real-time pricing. More specifically, the retail electric service retains many characteristics of the fully integrated utility structure that existed prior to restructuring. The retail rate design is based on the same cost-of-service principle that has been practiced for decades. Traditional rate design features cross-subsidies which resist changes. In particular, the cross-subsidization between peak and off-peak consumption under uniform pricing is well established in the public utility economics literature. Therefore, one of the difficulties in adopting real-time pricing is to win over consumers with high load profiles during peak hours.4 With a mandate from Congress, FERC has endorsed demand-response programs in wholesale electricity markets. These programs typically involve paying customers to reduce their demand during high-price periods.5 One of the common characteristics of such demand-response programs, including those administered by the ISO/RTO, is that they depend on the use of an administrative customer baseline to measure the amount of demand reduction.6 However, the customer baseline is a counterfactual consumption level that cannot be observed. Inherently, a consumer has superior knowledge of the customer baseline and can potentially take actions that are difficult to detect to influence its estimation. Therefore, the use of an administrative customer baseline is vulnerable to adverse incentives of moral hazard and adverse selection. Moreover, it could cause inefficient price formation in wholesale markets. As a consequence, the market price may not reflect the true marginal cost. This creates excessive incentive for consumers to under-consume, even when abundant low-cost supplies are available. The price formation problem is rooted in the neglected reality that the use of an administrative customer baseline entails allowing a consumer to sell energy that the consumer doesn’t own. This creates double payment benefits, because the consumer benefits from both the demand reduction payment and retail bill savings. As a result, it creates excessive incentive for consumers to under-consume, even when abundant low-cost supplies are available to meet high-value demands. In principle, the consumer does not own that amount of energy until it is paid for. Under a full-requirement contract, a consumer has the right to procure any amount of energy at a fixed price. But such an unlimited right does not give the consumer the tradable property right to a specific amount of energy. As we will demonstrate later in this article, the double payment benefits cause inefficient price formation in the wholesale energy market. If this problem is not appropriately addressed, demand-response programs could become counterproductive and ultimately undermine the development of efficient price-responsive demand.7 In other words, the cure may become worse than the disease. Demand subscription offers a contract-based two-sided baseline that eliminates the customer baseline problem. It allows retail consumers to contract and secure ownership for specific amounts of energy before they participate in demand-response programs. From the perspective of risk sharing, demand subscription transforms the unlimited quantity option into a spectrum of priority service call options, providing consumers choices and risk hedges. Therefore, it facilitates participation in demand-response programs in an efficient manner that fulfills the objectives of price-responsive demand.
نتیجه گیری انگلیسی
Price-responsive demand is essential to realize the benefit of the Smart Grid. Fixed uniform retail rates remain a strategic barrier to price-responsive demand. Demand-response programs enable consumers to capture the early benefits of price-responsive demand management. But the use of administrative customer baseline could create adverse incentives and cause inefficient price formation. Demand subscription defines a contract-based baseline that fosters demand response with efficient incentives. Demand subscription provides consumer choices and allows third-party service providers to compete in innovative value-added services and products. It provides the missing link for price-responsive demand management in a smart grid world. 1 John Maynard Keynes, The General Theoryof Employment, Interestand Money (Macmillan/Cambridge Univ. Press, 1935). 2 Fred Schweppe, Power System 2000: Hierarchical Control Strategies, IEEE Spectrum, July 1978, at 42–47. Fred Schweppe, Richard Tabors and John Kirtley, Homeostatic Control for Electric Power Usage, IEEE Spectrum, July 1982, at 44–48. The intellectual development of price response demand largely follows the literature of public utility pricing. See Michael Crew, Citrus Fernando and Paul Kleindorfer, The Theory of Peak-Load Pricing: A Survey, J. Regulatory Econ., 8(3) 1995, at 215–248. Hung-po Chao, Peak Load Pricing and Capacity Planning with Demand and Supply Uncertainty, Bell J. Econ. 14(1), 1983, at 179–190. Severin Borenstein., Michael Jaske and Art Rosenfeld, Dynamic Pricing, Advanced Metering and Demand Response in Electricity Markets, UCEI, Berkeley, CA, 2002. 3 See Federal Energy Regulatory Commission, Demand Response and Advanced Metering, Federal Energy Regulatory Commission Staff Report, Docket AD06-2-000, 2006. FERC, A National Assessment of Demand Response Potential, Staff Report, prepared by Brattle Group Freeman, Sullivan & Co Global Energy Partners, LLC, June 2009. FERC Staff, Possible Elements of National Action Plan on Demand Response: A Discussion Draft, Docket No. AD09-10, 2009. 4 The cross-subsidization between peak and off-peak consumption under uniform pricing is well established in the public utility economics literature. See Michael Crew and Paul Kleindorfer, Reliability and Public Utility Pricing, Amer. Econ. Rev., Vol. 68, 1978, at 31–40. Hung-po Chao, Shmuel Oren and Robert Wilson, Reevaluation of Vertical Integration and Unbundling in Restructured Electricity Markets, in Competitive Electricity Markets, Perry Sioshansi, Ed. (Oxford, UK: Elsevier, 2008). 5 Jon Wellinghoff and David Morenoff, Recognizing the Importance of Demand Response: The Second Half of the Wholesale Electric Market Equation, Energy Law J., Vol. 28, No. 2 (2007), at 389–419. 6 The customer baseline is an estimate of the consumption level before demand reduction occurs. The concept is inherited from integrated utility resource planning process. See Amory Lovins, The Negawatt Revolution: Solving the CO2 Problem, Keynote Address at Green Energy Conference, Montreal, 1989. 7 Critics on the current demand program approaches can be found in James Bushnell, Benjamin Hobbs and Frank Wolak, When It Comes to Demand Response, Is FERC Its Own Worst Enemy?, CSEM WP 191, UCEI, Berkeley, CA, 2009. 8 For more general observations, see Ahmad Faruqui, Ryan Hledik, Sam Newell and Johannes Pfeifenberger, The Power of Five Percent, Electricity Journal, Oct. 2007, at 68–77. 9 Generally, demand response offers other social benefits such as transmission and distribution network capacity benefits, generation reserve benefits, power quality benefits, environment benefits and renewable energy credits. However, this article focuses on the energy market within the specified wholesale and retail market structure. We assume that these other benefits are properly priced and are considered outside the scope of this paper. 10 A frequently cited paper on the double payment issue in demand response is Larry Ruff, Economic Principles of Demand Response in Electricity, Edison Electric Institute, Washington DC, 2002. Concerns with paying demand response too much were recently raised by William W. Hogan, Providing Incentives for Efficient Demand Response, Prepared for Electric Power Supply Association, Comments on PJM Demand Response Proposals, Federal Energy Regulatory Commission, Docket No. EL09-68-000, 2009. 11 The analysis uses an economic model with a hybrid market structure that is summarized in a separate paper. See Hung-po Chao, An Economic Framework of Demand Response in Restructured Electricity Markets, 2009, at http://www.hks.harvard.edu/hepg/Papers/2009/Demand%20Response%20in%20Restructured%20Markets%2002-08-09.pdf. For an application to the ISO New England Market, see ISO-NE, Status Report on the Future of Price-Responsive Demand Programs Administered by ISO New England Inc, Feb. 13, 2009, at http://www.iso-ne.com/committees/comm_wkgrps/mrkts_comm/mrkts/mtrls/2009/feb202009/a2_iso_status_report_prd_draft_version_1_02_13_09.pdf. 12 For expositional purposes, real-time price (RTP) and locational marginal price (LMP) are interchangeable in this article. 13 In ISO New England, the existing Day-Ahead Load Response Program pays customers for demand reduction at the full LMP when the LMP exceeds a threshold level. NYISO has similar programs in which customers are paid the full LMP for load reductions in addition to saving the retail rate. PJM had a similar structure until 2008, when it eliminated the extra incentive by deducting the customer's retail rate from the wholesale payment for load reductions. 14 For a risk management perspective, see Hung-po Chao, Shmuel Oren and Robert Wilson, Restructured Electricity Markets: A Risk Management Approach, Electric Power Research Institute, Palo Alto, CA, 2005. 15 For research on multi-level demand subscription, see EPRI, “Priority Service: Unbundling the Quality Attributes of Electric Power”, EA-4851, Project 2440-2, Nov. 1986; Hung-po Chao, Shmuel Oren, Steve Smith and Robert Wilson, Multilevel Demand Subscription Pricing for Electric Power, Energy Econ. 8 (1986), at 199–217; Hung-po Chao and Robert Wilson, Priority Service: Pricing, Investment, and Market Organization, Amer. Econ. Rev., Vol. 77, 1987, at 899–916.