April 30, 2014 Ruppa Minhas Alberta Electric System Operator

April 30, 2014
Ruppa Minhas
Alberta Electric System Operator
2500, 330 – 5th Ave SW
Calgary, Alberta T2P 0L4
Dear Ruppa,
EnerNOC welcomes the opportunity to provide comments on the AESO’s Assessment of Load
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Shed Service for Import (LSSi) Product paper that was posted March 27 , 2014. Section 4.2 of the Paper
includes four potential modifications that the AESO is considering or proposing. Our comments on the
potential modifications are included in the attached document.
EnerNOC appreciates the AESO’s effort to assess LSSi and make recommendations for product
improvements in 2015 and beyond, as well as the opportunity to provide input. If the AESO has any
questions related to the comments provided above please do not hesitate to let us know.
Best regards,
Chris Ashley
Director, Utility Solutions
EnerNOC, Inc. – One Marina Park Drive, Suite 400 – Boston, MA 02210
EnerNOC Response to the AESO’s Assessment of Load
Shed Service for Import (LSSi) Product
Executive Summary
Section 4.2 of the AESO’s Assessment of Load Shed Service for Import (LSSi) Product paper that
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was posted on March 27 , 2014 (the “Paper”) includes four potential modifications. EnerNOC
understands the AESO’s rationale for each of the proposed modifications, however we oppose two
which we believe will result in significant consequences for LSSi and therefore the AESO’s ability to
maximize imports.
EnerNOC strongly opposes the modification to lock-down availability volume at T-85. As
described more thoroughly in our comments below, this change increases provider exposure to
compliance and price risk while introducing significant technology hurdles, resulting in fewer MW and
providers available for LSSi. EnerNOC also opposes the proposed change to eliminate availability
payments under certain conditions. Such a modification will increase revenue uncertainty for providers,
resulting in fewer MW available at elevated arming rates. In both cases, we believe the negative
consequences of the proposed modifications will more than offset any expected benefits.
EnerNOC also reviewed the AESO’s proposed modifications on the use of manual trip and the
establishment of guidelines around compliance expectations and criteria. Our perspective on each of
these topics, as well as an additional suggestion expanding the upper limit of the compliance range, can
be found in our comments below.
Modification Considering Lock-Down of Availability Volume at T-85
On pages 12-13 of the Paper, the AESO states that ATC is allocated at 85 minutes before the
delivery hour, and the arming of LSSi occurs at 20 minutes before the delivery hour. The AESO is
considering a modification to LSSi contract terms to require lock-down of availability volume at T-85 to
match the ATC allocation timing. EnerNOC opposes this modification, as we believe it will reduce the
volume offered and reliability of MW available for LSSi.
Increased Risk
The considered modification will require providers to accurately predict where their load will be
85 minutes into the future, as opposed to the current 25-minute requirement. This threefold increase in
the prediction horizon makes it significantly more difficult to develop an accurate prediction, increasing
the likelihood of the load falling outside the 95%-120% compliance range. As the risk of non-compliance
increases, providers will be forced to offer fewer loads for a given hour, resulting in fewer MW available
for LSSi.
Making offer decisions at T-85 also means that providers will view the risk/reward balance over
an increased time horizon, resulting in increased price-responsiveness. Rather than responding to high
prices, providers will respond to the potential for high prices. This will decrease the number of hours
where the provider chooses to offer their load into LSSi, further compounding the reduction in available
MW. From a provider perspective, these reduced offer volumes will yield decreased payments, which in
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turn will shift the overall balance between costs and benefits of participation. This will likely cause some
providers to abandon their LSSi involvement altogether.
Decreased Reliability
Today the AESO has uncertainty between T-85 and when offers are submitted at T-25, followed
by relative certainty between T-25 and T+75. With the considered modification, those offers that are
submitted at T-85 will inherently be less reliable than offers under the current system. As a result, rather
than eliminating uncertainty between T-85 and T-25, the considered modification will result in
uncertainty throughout the entire 160 minute window.
Technical Challenges
EnerNOC, like most providers, made significant investments in developing the requisite
technology to participate in LSSi. To accommodate the proposed T-85 modification, we would need to
make substantial changes to our existing technology, requiring additional unforeseen investment. This
new investment is particularly troublesome because it is unclear whether the required development will
actually result in the capability to reliably predict future load at T-85. In addition, for those providers
who determine that this new investment makes business sense, they will be hard pressed to accomplish
the required changes during the short period of time between the RFP process and the beginning of the
2015 contract period.
Should the AESO decide to move forward with the T-85 modification, EnerNOC and others will
have to consider whether participation in 2015 is technically feasible and, if so, whether the return on
investment is sufficient to warrant continued participation in light of the costs.
Overall Implication of Move to T-85: Less MW for LSSi
While EnerNOC understands the rationale for considering the T-85 modification, it will result in
decreased MW availability, lower reliability associated with those MW that are made available, and a
reduced pool of capable providers in light of new technical hurdles. These outcomes would reduce the
effectiveness of LSSi in the context of the provincial mandate to restore intertie import capability. For
these reasons, EnerNOC is strongly opposed to the considered T-85 change and encourages the AESO to
exclude it from further consideration.
Modification Proposing Eliminating Availability Payments When AB–B.C. Intertie Is On Outage or LSSi
Cannot Increase Import Capability
On page 13 of the Paper the AESO proposes to revise the LSSi Agreement so that availability
payments are not made during periods when maximum import capability is below the threshold at
which LSSi would be armed to enable increased import capability, or when the AB-B.C. intertie is on
outage. EnerNOC opposes this proposed modification as it introduces considerable uncertainty into
providers’ expected payments. The resulting change in provider offer behavior could lead to an overall
increase in cost for a given MW, while reducing the total number of MW available.
Impact on Cost and Available MW
LSSi providers make long-term and real-time economic decisions about participation based on
their individual business needs. The combination of LSSi availability, arming, and tripping payments must
account for the provider’s fixed costs (technology, setting up and maintaining processes and procedures,
administrative elements, risk) and variable costs of participation (staff time and opportunity costs of
each interruption). Importantly, the cost of participation is not linear with the hours a provider is
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available. Therefore, a reduction in availability hours does not correspond to a proportional reduction in
the provider’s cost to participate in LSSi. Put differently, uncertainty around availability hours will reduce
the benefit to providers for participating without reducing their cost.
As a result, providers are likely to take a range of actions. For some, the reduced payment
certainty will make it harder to justify participation at all. During periods of payment uncertainty, other
providers may choose not to submit offers, regardless of whether or not availability payments would
have been paid. Others still may adjust arming rates in order to compensate for the perceived reduction
in availability payments, negating any savings to LSSi associated with decreased availability payments.
For those who do adjust arming rates, they are likely to make conservative assumptions, compounding
the financial impact. The combination of factors described above is expected to result in less MW
available at a higher cost per MW.
Timing and Notification Associated with Elimination of Availability Payments
If the AESO moves ahead with this proposed modification, advance notification to providers
informing them of any hour where payments will not apply will be critical. Absent such advance
notification, the AESO would be asking providers to make an economic decision in real-time based on
the expectation of an availability payment that the AESO may elect after-the-fact not to make. As
described above, providers will be increasingly wary of offering MW in any hour where payments are
uncertain, resulting in fewer MW available for LSSi.
As an aggregator, EnerNOC manages a portfolio of LSSi loads. A decision to eliminate availability
payments for certain hours after-the-fact would create a situation where end-use customers may expect
to be compensated for offering into LSSi, but the aggregator would not receive a corresponding
payment from the AESO. Whether it is EnerNOC, the loads in our portfolio, or other providers,
retroactive communications on availability payments will further compound the impact on available MW
and arming rates.
Information on Impact of Availability Payment Exclusions
If the AESO moves ahead with the proposed modification, EnerNOC asks for additional clarity on
the number of expected hourswhen availability payments will be excluded. Absent such clarity,
providers will employ estimates that could be significantly more conservative than the AESO’s own
estimates, resulting in an unnecessarily large impact on MW made available and corresponding arming
rates.
Overall Implication of Availability Payment Exclusions: Less MW for LSSi at Higher Arming Rates
EnerNOC believes that the proposed modification to availability payments will result in less MW
made available and elevated arming rates. These expected outcomes are likely to offset the perceived
benefit of better matching costs and value across hours. To the extent the AESO moves ahead with the
proposed modification, advance notification and additional clarity on the frequency of availability
payment exclusions are necessary to help reduce the magnitude of these negative implications.
EnerNOC, Inc. – One Marina Park Drive, Suite 400 – Boston, MA 02210
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Modification Proposing Revision of LSSi Contract Requirements to Include Manual Tripping
On page 13 of the Paper, the AESO proposes to revise the LSSi contract requirements such that
participating loads can be manually tripped by the System Controller in the event of an AB-B.C. intertie
contingency.
EnerNOC understands the need for manual tripping and respectfully suggests that the AESO
provide as much clarity as possible on the conditions under which a manual trip would occur and the
expected number of such trip events per year. This will help providers determine whether or not the
inclusion of the manual trip capability changes the risk profile of making MW available. Absent such
clarity, providers may adjust the magnitude of MW they offer and/or corresponding arming rates to
compensate for a perceived increased risk of trip events.
Modification Proposing Establishment of Guidelines for Compliance Expectations and Criteria
Page 14 of the Paper includes a proposal by the AESO to provide greater clarity in distinguishing
between those non-compliance events that count as a violation contributing to potential termination of
LSSi agreements and those that do not. EnerNOC supports this proposal and appreciates the AESO’s
decision to introduce further clarity on this topic. This proposal, if adopted, will serve to further increase
alignment among providers and the AESO, as all parties work to address non-compliance issues and
focus on LSSi reliability.
Additional Suggestion by EnerNOC Not Included in the AESO Paper – Increase Upper Ceiling of
Compliance Band
EnerNOC’s experience working with a variety of end-use customers indicates that the AESO
could increase enrollment in LSSi if requirements were adjusted to encourage a wider variety of load
types. One of the biggest impediments for some of these loads is the narrow compliance band of 95120%. If the AESO raised the upper limit of the compliance band, while maintaining the current lower
operating limit of 95%, we expect that a number of loads currently unable to participate as a result of
the narrow upper limit would be able to reliably provide LSSi MW without exposing the grid to
additional risk.
EnerNOC, Inc. – One Marina Park Drive, Suite 400 – Boston, MA 02210
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