Xcel Energy explored increasing its demand response portfolio by 50 percent with Minnesota stakeholders from 2017-2019. The results highlight considerations for utilities looking to deploy larger portfolios of advanced demand response. This blog, the first in a three-part series, shares demand response design principles and filing objectives developed by stakeholders to inform Xcel Energy’s planning for new demand response programs.
(Note: This was originally posted on the e21 Initiative website. Co-convened by the Great Plains Institute and Center for Energy and Environment, e21 brings together key interests to enable Minnesota’s continued leadership in shaping an electric system for the 21st century.)
STAKEHOLDER FEEDBACK NEEDED AS UTILITIES LOOK TO THE EXPANDING OPPORTUNITIES OF DEMAND RESPONSE
Across the United States, the way that electric systems are being planned and operated is changing. This includes a shift away from large power plants towards variable and distributed wind and solar, increasing demand for electrified transportation and buildings, a desire for more consumer choice, and pressure to reduce greenhouse gas emissions. Utilities, their regulators, and energy system stakeholders across the nation are grappling with how to address these changes while attending to the need to operate electric systems safely, reliably, and affordably.
Demand response encompasses a collection of programs and technologies that shape customer loads to provide system-level benefits. While traditionally used to pay customers to reduce demand during emergency events, demand response is evolving to offer other system services, including the following:
- shape loads to accommodate variable electricity generation resources like wind and solar
- reduce operations costs by deferring or avoiding infrastructure investments
- reduce emissions by avoiding the operation of fossil fuel power plants
- enhance overall system reliability
- provide choice to customers in how much they pay for electricity based on when and how they use it
- provide ancillary services such as frequency regulation
As newer forms of demand response are developed to deliver these services, utilities must take into account the interests of a wide range of stakeholders, including regulators, environmental advocates, consumer advocates, and businesses.
This blog is the first in a three-part blog series that will highlight recommendations and insights coming out of a diverse stakeholder workgroup that explored increasing demand response in Xcel Energy’s “Northern States Power” service territory by 50 percent.
- Part 1 will highlight a set of consensus recommendations from the stakeholder group to Xcel Energy.
- Part 2 will look into a potential study that evaluated whether and how Xcel Energy might increase its demand response portfolio by 50 percent.
- Part 3 will check in on what’s happening today, including what happened with demand response in Xcel Energy’s most recent integrated resource plan filing.
REGULATORY REQUIREMENT TO INCREASE DEMAND RESPONSE BY 50 PERCENT
In January 2017, the Minnesota Public Utilities Commission required Xcel Energy to include in its next resource plan the procurement of 400 megawatts (MW) of additional demand response resources by 2023 and to evaluate the cost-effectiveness of 1,000 MW of additional demand response by 2025.
That requirement was based on a potential study completed by The Brattle Group in 2014 that looked at demand response technical potential in Xcel Energy’s Northern States Power territory; the study did not include cost-effective analyses. In 2014, Xcel Energy had 918 MW of demand response capability.
However, after testing and verification exercises to ensure customers on interruptible rates would respond when called upon, Xcel Energy’s portfolio dropped to 850 MW by 2018. Yet the 400 MW requirement based on their 2014 baseline stood, requiring Xcel to look at a 50 percent increase in demand response capabilities by 2023.
To inform the development of the new demand response offerings, Xcel Energy hired the Great Plains Institute and the Center for Energy and Environment, which co-convene Minnesota’s e21 Initiative, to bring together stakeholders over several meetings from late 2017 to early 2019. Xcel Energy also hired The Brattle Group to conduct another potential study, taking into account cost-effectiveness.
Several things came out of these conversations, including:
- a set of guiding principles for designing demand response programs,
- a set of objectives for filing demand response programs to seek regulatory approval, and,
- perhaps most importantly, a more nuanced understanding of the considerations that must be taken into account as utilities grow their demand response portfolios.
In this first blog, we’ll look at the design principles and filing objectives that stakeholders developed to give Xcel Energy guidance in developing new demand response programs.
DESIGN PRINCIPLES AND FILING OBJECTIVES
Demand response is a complex and wide-ranging topic. Programs can be designed to offer services at the distribution and wholesale market level, engage every type of customer, and relate to or overlap with other program offerings including energy efficiency and time-varying rates.
Given this complexity and the fact that Xcel Energy’s demand response programs were still in development at the time these stakeholder convenings took place, the Great Plains Institute and Center for Energy and Environment asked stakeholders to collaborate in developing a set of consensus-based principles that could provide guidance to any new or expanded demand response offering. This would allow flexibility on behalf of the utility to design programs in consideration of the parameters set by stakeholders.
In response, the stakeholders in this process developed two lists—Design Principles and Filing Objectives:
- Design Principles: guidance for designing demand response programs or portfolios of programs.
- Filing Objectives: describe what information stakeholders would like to see when new demand response offerings are filed to seek regulatory approval.
These two lists are interrelated and therefore intended to be taken as a package. In other words, while all stakeholders may not have supported each of these objectives or principles on their own, they found the full set acceptable. Importantly, these were also meant to be general guidelines and not absolute requirements.
These simply offered a starting point for developing demand response offerings that have a higher likelihood of earning stakeholder approval in the regulatory process. While these are specific to Xcel Energy in Minnesota, they may be insightful for other fully regulated utilities.
What would stakeholders like to see from a demand response portfolio of any size from Xcel Energy in Minnesota?
What’s clear from these design principles is that stakeholders were willing to give Xcel Energy plenty of flexibility in designing demand response programs, as long those programs were fair, transparent, and offered adequate consumer choice.
However, stakeholders were also very clear that when new demand response programs are filed to seek regulatory approval, they want to be able to thoroughly evaluate them. The filing objectives below provide guidance for what this diverse group said they needed to see at the point of filing.
What would need to be true to earn stakeholder support when new or expanded demand response offerings are filed to seek regulatory approval?
While these design principles and filing objectives are specific to Minnesota, they provide insights into key considerations for developing new demand response programs. Fairness, transparency, customer choice, and thorough evaluation of costs and benefits are all important to winning support for new programs.
In the next part of this series, we’ll look into the potential study that sought to determine whether Xcel Energy could cost-effectively increase its demand response portfolio by 50 percent, and what insights came out of that discussion.
Looking to read more about the stakeholder process? Check the official process summary here.