Central Research Institute of Electric Power Industry

Demand Response Experiments in Smart Grid Projects in Japan

Toru Hattori Socio-economic Research Center

European Utility Week October 17, 2013

Power Supply on a Tightrope

2013 2

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Monday,  Aug  19

Tuesday,  Aug  20

Wednesday,  Aug  21

Thursday,  Aug  22

Reserve  Margin

MW

Peak  Demand Capability Reserve  Margin

Kyushu Electric Power Co. Area Kansai Electric Power Co. Area

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0

5000

10000

15000

20000

25000

30000

35000

Monday,  Aug  19

Tuesday,  Aug  20

Wednesday,  Aug  21

Thursday,  Aug  22

Reserve  Margin

MW

Peak  Demand Capability Reserve  Margin

Source: Kansai Electric Power Co. and Kyushu Electric Power Co.

Expectations for Residential DR u  After the earthquake, enabling more demand response has been

recognized as a key to solve the problem of capacity shortages in the medium and the long terms, and the roll-out of smart meters is to be accelerated to cover 80% of demand by FY2016

u  Visualizing consumption information and/or offering time-of-use/dynamic pricing menu to enable demand response is one of the keys to the business case of smart metering

u  One of the major focuses of the current SG projects in Japan is to investigate the potential for demand response of residential customers through dynamic pricing

2013 3

Status of Smart Meter Roll-out

2013 4

1,660370

13,000

8,100

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Kansai (as of Nov. 2012) Kyushu (as of Mar. 2013)

(thousands)

Installed number of smart meters Total number of customers

The Current Status of Roll-out by Two EPCOs Source: Expert Panel to Review Electricity Rate System and Its Operation (left) and Study Group on Smart Meter Scheme (right)

Demand coveredby FY2016

Roll-outcomplete by

Hokkaido 63% 2024Tohoku 71% 2024Tokyo 72% 2023Chubu 73% 2025Hokuriku 71% 2024Kansai 81% 2023Chugoku 62% 2026Shikoku 66% 2024Kyushu 66% 2025Okinawa 54% 2032

The Roll-out Plan of Ten EPCOs

The Electric Power Companies plan to roll out by annually replacing about 10% of the existing meters with the smart meters

Residential DR Pilot Programs Program Area Year Scale

Types of Pricing/Tech.

Smart Meter Pilot Project Tokyo and Osaka areas 2010-2011 900 TOU, CPP, DLC

Keihannna Eco-City Next generation Energy and Social Systems* Kyoto 2012-2013 680 TOU, V-CPP

Kita-Kyushu Smart Community Project* Fukuoka 2012- 230 V-CPP

Kyushu Electric Power Co Kyushu 2012- 1,050 TOU, CPP

Toyota City Low-carbon Society Verification Project* Toyota 2013- 160 CPP

Yokohama Smart City Project* Yokohama 2013- 3,000 TOU, CPP

2013 5

Source: Ministry of Economy, Trade, and Industry, and Kyushu Electric Power Co.

TOU: Time-of-Use Pricing, CPP: Critical Peak Pricing, V-CPP: Variable CPP, DLC: Direct Load Control *Government-sponsored Smart Community Project

Smart Community Projects

2013 6

Yokohama*

Keihanna (Kyoto)*

Kitakyushu

Toyota*

-Large-scale deployment of PV (27MW) -Smart house/building (4,000 locations) -Next generation transport system

-Efficient energy use in households (70 households) -Efficient energy use in communities -Low carbon transport system

-Large-scale deployment of PV (1,000 households) -Nano-grids in homes/buildings -Local energy production for local consumption

-Real time energy management by smart meters -New energy (10% of energy consumption) -System to transfer the outcomes to Asia

* Local electric power company is involved

For more detail, visit the Japan Smart City Portal

http://jscp.nepc.or.jp/en/index.shtml

Source: Ministry of Economy, Trade and Industry

Demand Response Experiments

2013

10

20

30

40

50

60

70

0 0 3 6 9 12 15 18 21 24

hour

yen/kWh

Standard Fixed Rate

Time-of-Use Rate [TOU]

(Already offered in Japan)

Critical Peak Pricing [CPP]

*Extremely high price for limited number of hours conditional on critical peak event

Off-peak Off-peak Shoulder Shoulder Peak

Illustrative example of dynamic pricing

7

In some projects, the monitors are given tablet terminal to receive notification of critical peak and see their “point balance”

Source: Japan Smart City Portal

e.g. Keihannna Eco-City Project u  The monitors are given 7,000 points and

consumed according to their demand during the peak hours: Ø  The points are consumed at 40, 60, 80 points/

kWh during the critical peak hours for CPP monitors and at 20 points/kWh during the peak hours (1pm – 4pm) for TOU monitors

Ø  Critical peak days are declared total 15 times

u  The monitors will be paid based on the point balance (remaining points) at 1 point = \1 after the experiment period

2013 8

Example of tablet terminal screen showing point balance

Example of the DR request screen displayed on the tablet terminal

Source: Japan Smart City Portal

Economics Works

2013 9

Source: Compiled from reports/presentations from each project, with provisional translation by the author

y  =  -­‐0.071ln(x)  -­‐ 0.0283-­‐18.0%

-­‐16.0%

-­‐14.0%

-­‐12.0%

-­‐10.0%

-­‐8.0%

-­‐6.0%

-­‐4.0%

-­‐2.0%

0.0%1.0   2.0   3.0   4.0   5.0   6.0   7.0  

Price  Ratio  (Treatment/Control)

Keihanna

Kyushu

Kita-­‐Kyushu

SM_Pilot

Elasticity of Substitution

2013 10

Year Area Estimated elasticity of

substitution

2010 Kanto (Tokyo area) -0.063 ~ -0.081

Kansai (Osaka area) -0.066 ~ -0.081

2011 Kanto (Tokyo area) -0.057 ~ -0.065

Kansai (Osaka area) -0.076 ~ -0.083

2003-2004 California Statewide Pricing Pilot -0.086 ~ -0.090

2006-2007 PSE&G Mypower Pricing -0.063 ~ -0.137

2008 BGE Smart Energy Pricing Pilot -0.096 ~ -0.180

Source: Study Group on the Smart Meter Scheme

Elasticity of Substitution between Peak Consumption and Off-peak Consumption

Need Information Feedback? u  The results from Keihannna project suggests that 3.6% of peak load

reduction is due to visualization of consumption information u  The results from Kyushu Electric Power Co indicates that

information feedback may not be necessary to induce peak load reduction

2013 11

-­‐25.0%

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0.0%

Notificationonly TOU CPP_40P CPP_60P CPP_80P

Notification  only TOU CPP-­‐18.0%-­‐16.0%-­‐14.0%-­‐12.0%-­‐10.0%-­‐8.0%-­‐6.0%-­‐4.0%-­‐2.0%0.0%

B1 B2 B3 K1 K2 K3

Uniform  Price  Monitor                                TOU  Monitor

TOU CPP

No feedback of information on consumption

Keihanna Project Kyushu Electric Power Co. Project Source: Keihannna Eco-City Project and Kyushu Electric Power Company

What about Winter? u  Peak load reduction induced by economic incentive may be limited

in winter time

2013 12

-­‐25.0%

-­‐20.0%

-­‐15.0%

-­‐10.0%

-­‐5.0%

0.0%

Notification  only TOU CPP_40P CPP_60P CPP_80P

Notification  only TOU CPP

-­‐25.0%

-­‐20.0%

-­‐15.0%

-­‐10.0%

-­‐5.0%

0.0%

Notification  only TOU CPP_40P CPP_60P CPP_80P

Notification  only TOU CPP

Keihanna Eco-City Project Summer 2012 Winter 2013

Source: Keihannna Eco-City Project

The Way Forward

2013 13

Cost reduction is necessary for energy management system

Critical peak notification is stressful for customers

Government funding will not be available after experiments

Peak time “rebate”, rather than “pricing” may be an alternative, though it has its own problem e.g. Competitive offer by some retail electricity providers in Texas and regulated standard rate by Baltimore Gas & Electric in Maryland

Automated demand response (Auto-DR) technology needs to be developed to reduce the customers’ burden for DR

The benefit of DR may not be realized in the short-run

The daily benefit of DR for customers is very small

Collaboration with other business may be necessary

Game-like program needs to be implemented

Psychology Overcoming psychological barriers of customers

Technology Achieving technological breakthrough

Strategy Creating strategic solution for funding DR project

A Collaborative Approach

2013 14

Source: Based on Nikkei Business Daily article

ON OFF

Normal Day Critical Peak Day

Information on Sales plus Coupon /Discount Ticket

Local Supermarket /Movie Theater, etc.

SALES

Sponsor of the Program?

2013 15

Thank you for your attention