Cost/ben enefit asses essment of the DRM DRM Pres esent entat ation t ion to stak akeholder eholders* 30 30 October 2014 2014 Parkroy oyal al Hotel, M Melb lbour ourne A ne Air irpor ort Typographical corrections and clarifications raised in presentation added
Agenda • Overview of approach • Approach to and results in the various components – Counterfactual – Take-up – Wholesale market impacts – Network impacts – Costs • Summary of results • Scope items not being discussed today – Distributional impacts* – Qualitative assessment of non-monetised economic benefits * Slides on this topic have been added to this slidepack since the workshop 1
Overview of approach Establish Estimate DRM counterfactual take-up Simulate wholesale Estimate network market impacts impacts (CEMOS) • Augmentation capex • Total supply system costs (LRMC) • Wholesale market prices Calculate estimated • USE • Revenue distributional impacts • Emissions • Network prices • Generator profitability Estimate costs Total resource benefits and costs 2
Counterfactual – two cases developed to date • AEMO 2014 NEFR on its own – Includes explicit consideration of demand response, small PV and energy efficiency – Does not include consideration of other possible technology developments (EVs, storage) • but very difficult to identify a generally accepted forecast of the penetration of these technologies • AEMO plus CRNP – Favourable draft determination published in August 2014 – AusNet Services’ Critical Day Peak Demand Tariff (first implemented in 2011) • Creates a new tariff component for customers > 160 MWhpa: Critical Day Peak Demand • CDPD is set by average demand over 20 hours (2-6 PM on 5 days in Dec – Mar nominated by the distributor) – Provides a documented example of what can be achieved • 7.3% reduction in peak demand for large customers ( >160 MWhpa), 5% for system as a whole • Low implementation costs – Generalised to all DNSPs and assumed to be implemented in 2016 3
Impact of CRNP on Wholesale Market Peak Demand (MW) 2016 2020 2025 2030 2035 NSW -351 -402 -469 -666 -551 VIC -137 -118 0 0 0 QLD 0 0 0 0 0 SA 0 0 0 0 0 TAS 0 0 0 0 0 • Impact on wholesale market peak demand is significantly less than maximum impact of CRNP • This due to the fact that wholesale market increasingly peaks AFTER 6 PM (CRNP is assumed to operate between 2 and 6 PM) • Which in turn is due to – Increasing penetration of rooftop PV in the first instance – But also to the impact of the CRNP itself 4
Timing of wholesale market peak demand – AEMO 2014 NEFR 2015 2016 2017 2018 2019 2020 2025 2030 2033 QLD 10POE 17:30 17:30 17:30 17:30 19:00 19:00 19:30 19:00 19:00 50POE 19:00 19:00 19:00 19:00 19:00 19:00 19:00 19:00 19:00 NSW 10POE 16:00 16:00 16:00 16:00 16:00 16:00 16:30 17:00 17:00 50POE 17:00 17:00 17:00 17:00 17:00 17:00 17:00 17:00 17:30 SA 10POE 17:30 18:30 18:30 18:30 18:30 18:30 18:30 18:30 18:30 50POE 20:00 20:00 20:00 20:00 20:00 20:00 20:00 20:00 20:00 VIC 10POE 16:30 16:30 16:30 16:30 17:00 17:00 17:00 17:00 17:30 50POE 17:00 17:00 17:00 17:30 17:30 19:30 19:30 19:30 19:30 TAS 10POE 08:30 08:30 08:30 08:30 08:30 18:30 18:30 18:30 18:30 50POE 18:30 18:30 18:30 18:30 18:30 18:30 18:30 18:30 18:30 5
Counterfactual – other potentially relevant policy settings considered but not included • RIT-D – No accepted forecasts of impacts – Likely to be lower than expected given reduced AEMO demand forecast and possibly CRNP • Small Generator Aggregator Framework – No small generators as yet operating under the Framework, and DRM would provide an essentially similar arrangement • Connecting Embedded Generators – If enacted, likely to improve the investment environment and reduce time required for connection – Magnitude of impact is difficult to assess, and will affect both the base and DRM cases • Bidding in Good Faith – No position taken as yet by the AEMC; implementation can only improve DRM case • Competition in metering and related services – Little impact: metering & metering services already competitive for DRM segments • Multiple Trading Relationships (MTR) – Provides similar functionality (ability for customer to have commercial relationships with two market entities); DRM requires baseline calculations and payment at spot price for DR – Potential for some ‘sharing’ of implementation costs 6
DISCUSSION 7
Take-up – summary of approach • Industrial sector – ClimateWorks data in Industrial demand side response potential (Feb 2014) served as primary source – Adjusted to NEM (ABARE data) and extrapolation further adjusted to reflect ratio of large, medium and small enterprises by industrial sector within each state • Commercial sector – ABARE Table F to estimate of the energy consumption by ANZSIC Division and sub-sector level for aggregated large, and medium to large sites by state – Assumed peak demand would be 150% of the average, based on non 24/7 operation – Used industry knowledge and literature to identify potential for DR and estimate likely take-up • Standby generation – Industrial – used the levels of standby identified in ClimateWorks data (with same adjustments as above, ) – Commercial – literature review to obtain an indication of levels of standby available (e.g., NSW DEUS survey) • Further adjustments for – Amount of DR already in the market – Impact of DRM on availability of DR at various spot prices – Impact of CRNP 8
Take-up – approach detail Industrial sector • ClimateWorks data in Industrial demand side response potential (Feb 2014) served as primary source – Provides solid insights into the potential practices of industry, but some limitations – Interviews undertaken to assess potential in total, not DR specifically – So size of opportunity, associated costs issues and the impact of notification periods are not entirely applicable to the DRM – Augmented with information obtained from responses to Consultation Paper and follow-up discussions with stakeholders • Adjustments included: – ABARE data - to remove WA and NT from each of the industrial sector – ABS data on employee numbers and turnover - to evaluate the ratios of large, medium, and small facilities by industry sector within each state, which affects the types of end-use processes present and therefore the likely potential for DR • This was used to refine the extrapolation of DR potential from the very large enterprises interviewed by ClimateWorks to each industry sector • Some conservatism here as certain types of DR were not necessarily applied to all of the sectors in which one would expect them to be applicable 9
Take-up – approach detail (2) Commercial sector (ANZSIC Divisions F, G, H, J, K, L, M, N, O, P, Q, R, S) • ABARE Table F data - to obtain an estimate of the energy consumption by state • Applied info from NSW/VIC at sub-sector level to obtain estimates of energy consumption for aggregated large sites and medium to large sites • Estimate average demand for each sectors – Assumed peak demand would be 150% of the average, based on non 24/7 operation – Average calculated by the following assumptions: • for large facilities - 90% of total consumption occurs during the working week, 10 hrs/day and 250 days/yr • for medium sized facilities - all consumption occurs during the regular working week • Identified typical energy use in key end-uses and their contribution to peak demand • Used industry knowledge and literature to – identify potential for DR – estimate the probability of participation to obtain estimated DR take-up • Base DRM case includes only large commercial facility DR potential/take-up 10
Take-up – approach detail (3) Standby generation • Commercial sector – Literature review to obtain an indication of levels of standby available (e.g., NSW DEUS survey) – Used population / industry splits to estimate likely levels of standby generation by state and sub- sector – Note: available surveys never had more than 80% response rates and this was not extrapolated – may be a source of some minor conservatism – Base case assumed 40% participation rate • Industrial sector – Used the levels of standby identified in ClimateWorks data (with same adjustments as above) – Split between states using same ratios as in commercial – Projected participation rates same as for commercial 11
Take-up – approach detail (4) Estimate take-up by state and price point • Subtract DR already being exercised as identified in AEMO NEFR • Allocate to state level based on earlier analysis of ABARE data • Judgementally changed proportions of available DR at various spot prices from AEMO to sculpt DR potential estimated above Trigger spot price ($/MWh) Cumulative % of total DR potential that will respond AEMO Assumed for DRM case $300 19% 25% $500 22% 30% $1,000 23% 40% $7,500 59% 80% MPC 100% 100% 12
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