PALO ALTO, Calif., March 4, 2002 — The Electric Power Research Institute’s (EPRI) newly published Demand Trading Toolkit offers definitive guidelines for the use of demand trading by power market planners and operators.
The book is an important step in promoting a common language among power traders that will help accelerate the use of demand trading in the electricity marketplace.
Demand trading is based on customer demand-response — the ability of electricity customers to respond to short-term price changes (such as day-ahead or hour-ahead) or a region’s need for power capacity by reducing electric demand at the appropriate times.
“We believe the trading of customer demand-response promises substantial increases in electric market efficiency and stability,” said William M. Smith, Manager of Market-Driven Load Management for EPRI. “The Demand Trading Toolkit explicitly recognizes that the time value of electricity can be used to help optimize the balance of electricity supply and demand by encouraging customers to actively engage in electricity markets.”
Today’s demand-response programs are critical to price-risk management because they provide a link between wholesale and retail power markets, says Joel Gilbert of Apogee Interactive, who developed the toolkit under EPRI contract. “Individual customer size and ability to curtail electricity use can vary greatly, but the aggregation of their reductions provides a highly reliable resource for power market planners.”
Gilbert cited 150,000 megawatt-hours of peak load reductions transacted this past year through The Demand Exchange®, a large Internet aggregator of voluntary demand response. According to Gilbert, Demand Exchange customers have pledged to curtail as little as 100 kilowatts and as much as 150 megawatts, in curtailments that range from one hour to 24 hours.
The concept of electricity demand trading builds on conventional demand-response approaches such as voluntary demand-bidding programs, curtailment options, and real-time pricing. Demand trading then provides an avenue for offering such demand-response resources in regional power markets through a variety of market tools such as futures and options. “We believe electricity market participants will buy and sell customer price-responsive demand reductions just as they now buy and sell blocks of power,” EPRI’s Smith said.
Smith noted that during this era of industry restructuring, customers, traders, energy providers, and utilities are all struggling to create a common language for demand trading. “Building a common ground for bridging this language gap is one the key goals of the toolkit,” he said. “It also gives utilities, energy service providers and other power market participants the insights and tools to put demand-response resources on more equal footing with supply-side resources in their demand trading operations.”
The Demand Trading Toolkit (EPRI 1006017) is available to EPRI members at no charge and available to nonmembers for a fee. Contact EPRI Customer Assistance Center at 800-313-3774 for details.
EPRI ( http://www.epri.com/), headquartered in Palo Alto, was established in 1973 as a center for public interest energy and environmental research. EPRI’s collaborative science and technology development program now spans nearly every area of power generation, delivery and use. More than 1000 energy organizations and public institutions in 40 countries draw on EPRI’s global network of technical and business expertise.