Timur Shalabayev, Executive Director, SPAQ

Today, many countries around the world are successfully implementing and using different market mechanisms in their national power systems. New trends in the electric power industry, the emergence of digital interval electricity meters, the development of telecommunications and smart grids have predetermined the possibility of increasing the energy demand elasticity and led to the emergence of the demand response concept.

Today, many countries around the world are successfully implementing and using different market mechanisms in their national power systems. New trends in the electric power industry, the emergence of digital interval electricity meters, the development of telecommunications and smart grids have predetermined the possibility of increasing the energy demand elasticity and led to the emergence of the demand response concept.

Demand response implies a reduction in electricity consumption by the end¬use customers in response to certain electricity market economic signals and receiving financial benefits for such a reduction. Demand response is an effective tool to reduce electricity market prices during peak hours when less efficient units are utilized in order to meet the rising demand. Moreover, demand response helps to balance capacity in the system during peak periods by reducing consumption, rescheduling consumption times or relying on own generation.

Interest in demand response has grown significantly around the world, especially in countries which experienced the energy crisis and are seeking to meet electricity demand not by building high-cost generation and transmission infrastructure, but by using effective market mechanisms.

Despite the fact that 5-10% RES penetration is believed not to cause significant disturbances in the country's power system (as stated in foreign publications), introducing even a 2% share to UPS RK is problematic due to the lack of balancing capacities in the country. This is explained by the power system structure: there is no doubt that in Europe the share I of coal-fired generation (which is not flexible as a rule) is only about 20%, while in our country the figure accounts for 80%.

Taking into consideration the above mentioned, SPAQ proposes to consider a pilot project to introduce a demand response mechanism in UPS RK as one of the ways to tackle the lack of flexible capacities and calls on all stakeholders to discuss this initiative.

DEMAND RESPONSE: CONCEPT AND PRINCIPLES

Demand response constitutes the changes in electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized. Demand response can reduce wholesale electricity prices, which in turn leads to lower retail prices.

"Demand response is widely recognized as a means of ensuring the reliability of energy supply, integrating renewable energy sources, increasing competition in the electricity market and empowering consumers. "

Common examples of demand response include: raising the set point temperature of thermostat so the air conditioner does not run as frequently, slowing down or stopping production at an industrial operation or dimming/shutting off lights - basically any explicit action taken to reduce the load in response to short-term high prices or a signal from the System Operator. Demand Response does not include a reduction in electricity consumption based on normal operating practice or behavior. For example, if a company's normal schedule is to close for a holiday, the reduction of electricity due to this closure or scaled-back operation is not considered a demand response activity in most situations.

The main objectives of demand response are to reduce the peak load, which is necessary both to reduce prices and prevent the excessive construction of capital-intensive peak power plants and power grids, power system emergency response and the integration of renewable energy sources. Demand response is also seen as one of the tools for the transition to a low-carbon economy.

There are two main approaches to customer engagement in demand response:

• implicit demand response (price-based demand response) - application of various types of time-varying electricity prices or incentives for consumers to adapt their consumption behavior,

• explicit demand response (incentive-based demand response, event-based demand response)- direct load control.

Direct load control can include voice and text commands by consumers to change the equipment load, and automated or automatic load control from the dispatch center (by a system operator or aggregators).

ROLE OF AGGREGATORS

Consumers can control load themselves (in some cases, mainly large consumers), and with the help of specialized organizations - demand response aggregators. The need for the emergence of such organizations is due to the fact that retail consumers are not part of the wholesale electricity market, are not connected to its infrastructure, and most of them are not aware of market rules. At the same time, consumers' unit capacity may be too low, and the number of consumers - too large for the market operator. Aggregators combine the regulation capabilities of several consumers into a larger unit that meets the shedding requirements of the market and act as an intermediary between consumers and the market infrastructure. In addition, aggregators can provide a consumer with the equipment necessary to reduce consumption, advise on shedding technology, develop an optimal plan for consumer participation in demand response, etc. The role of aggregators can be played by energy retailers or independent companies.

EXAMPLES OF DEMAND

RESPONSE IMPLEMENTATION

Two steelworks in Belgium - one owned by ArcelorMittal and one owned by Aperam (spun out of ArcelorMittal in 2011) - have implemented demand response practices, shedding about 150 MW of load. The technological cycle of enterprises did not allow them to meet the demand response requirements in Belgium. A solution was to include the regulation capabilities of these plants in the REstore aggregator portfolio, which includes many industrial plants of various owners. In the case when the resource is unavailable during the demand response event, it can be replaced by the regulation capabilities of other enterprises.

Midwest Energy Pump$mart program by Midwest Energy, serving electricity and gas consumers in Western Kansas. The program provides for the engagement of agricultural consumers in demand response, namely, the shutdown of irrigation pumps by the dispatch center without adversely affecting production. Load shedding can be carried out in summer months from Monday to Saturday, excluding holidays, from 2 pm to 9 pm upon notification (by phone or e-mail) sent from the dispatch center no earlier than two hours in advance. Pumps can be switched off for no more than 4 hours no more than 20 times during the program period, with the total duration of shutdowns not exceeding 80 hours. Midwest Energy pays customers 20 USD per 1 kW of shed load, while shifting irrigation pump consumption from peak hours to a different time of the day.

Walmart is an example of engaging commercial consumers in demand response. Walmart is one of the leading demand response market players in the United States, thanks to its smart meters installed in stores. When a signal is received, the energy management system (EMS) reacts to it in accordance with a predetermined load shedding algorithm, adjusting ventilation and air conditioning systems, lighting and refrigeration equipment. Together with subsidiary Sam's Club, Walmart participates in 17 demand response programs organized by municipalities, infrastructure providers and system operators, including ISO New England, California ISO and PJM. These programs cover approximately 1,300 stores in 23 states.

DEMAND RESPONSE IN RUSSIA

In order to tackle the issue of capacity reservation in Russia, in accordance with the Decree of the Government of the Russian Federation No. 287 dated March 20, 2019, a pilot project on demand response was launched, and the report “Demand Response in the Electric Power Industry of Russia: Opening Opportunities” was published. In particular, the report notes that the potential of the demand response market in Russia is 4-6 GW, and the total economic effect may amount to 67-105 billion RUB a year.

"According to some estimates, the potential of the demand response market in Russia can reach 8 GW, which corresponds to 3-6% of the peak capacity demand."

The pilot project is being implemented within the system services market. In 2019-2020, a new type of service - demand response - was introduced in the market by the decree of the Government of the Russian Federation. The system operator selects the providers of these services (aggregators) and concludes contracts with them.

Demand response aggregators are specialized organizations coordinating the ability of retail consumers group to manage their electricity consumption, converting it into demand response services and returning to consumers a part of the proceeds received from the sale of this service. Thanks to aggregators, in the short term, consumers can benefit from replacing inefficient generation with demand response resources and reducing electricity prices, and in the long term - from the volume of demand response in the capacity market.

The retail consumer demand response aggregator model created by the system operator as part of the EnergyNet National Technology Initiative roadmap gives retail electricity consumers the opportunity to participate in price-dependent consumption reductions. Wholesale consumers have the opportunity to use price-dependent consumption tools on their own since 2017.

The pilot project started in June 2019. During this time, three selections were carried out: in Q3 2019, price-dependent consumption services were provided by 20 aggregators that united 45 aggregated response facilities, in Q4 2019 - 19 aggregators that united 46 aggregated response facilities, in Q1 2020 - 47 aggregators that united 156 aggregated response facilities.

For Q2 2020, 43 retail market aggregators were selected, representing 155 electricity consumers. Aggregators include energy retailers and guarantee suppliers, power grid and generation companies, as well as independent aggregators. Retail consumers, whose ability to reduce consumption will be represented by aggregators, belong to various sectors of the economy - mechanical engineering, food processing, oil production and transport, telecommunications, agriculture, as well as office and shopping centers and other types of electricity consumers. Among them there are state and private companies, including subsidiaries of foreign companies, as well as state-funded organizations. A reduction in consumption of individual power receiving devices is in the range from 0.006 to 32 MW.

CONCLUSION

All in all, today, the interest in demand response has grown significantly around the world, especially in countries that have survived the energy crisis and are trying to satisfy electricity demand not by building high-cost generation and transmission infrastructure, but by using effective market mechanisms. As a result, the system operator specialists of the Russia's UES state that, the demand response mechanism is an alternative to creating flexible capacity infrastructure.

Taking into account the fact that in Kazakhstan 70% of electricity is used by industrial enterprises, 10-11% - by households and about 2% - by agriculture, this demand response practice could also be implemented in our country. Therefore, SPAQ proposes to consider a pilot project to introduce a demand response mechanism. Such a pilot project could be launched with the support of international financial organizations, as well as taking into account the accumulated experience of Russia.

The implementation of such a mechanism and the pilot project as a whole will contribute to the development of flexibility and gradual transformation of the country's energy system towards market mechanisms. Moreover, the demand response mechanism can partially contribute to solving the problem of balancing capacity and integrating RE facilities into the grid. Thus, this initiative can also have a positive effect on the energy system in the face of a shortage of flexible capacities and will supplement legislative initiatives aimed at their further development.

In addition, the introduction of such a mechanism will also allow the use of emergency demand response to avoid unforeseen supply interruptions during periods of limited electricity supply. Under emergency demand response, load shedding or limited power consumption is mandatory to maintain power system reliability in the event of an insufficient energy resource supply or in emergency situations. This is also relevant for our country due to a growth in the number of accidents at conventional generation facilities.

References:

International Energy Agency, The Power of Transformation: Wind, Sun and the Economics of Flexible Power Systems 2014, www.ferc.gov, www.energy.gov, grid/demand-response, www.smarten.eu, www.emissions-euets.com, www.enelx.com, government.ru, energynet.ru and others.