By Abbas Chagani

Since deregulation in 2001, Alberta electricity users have been exposed to high levels of price volatility associated with the hourly spot market. But in looking at Figure 1 showing a ranking of hourly spot prices from highest to lowest for the last calendar year it is evident that the very high prices cover a relatively narrow band of hours. An end-user who can strategically reduce demand during those very infrequent high-price hours can achieve significant electricity cost savings. Thus, “Demand Response” represents a significant opportunity for Alberta electricity users.

So, What Exactly is Demand Response?

Demand Response (DR) is defined as “actions taken by electricity end-users that result in short-term reductions in their peak energy demand.” In a competitive electricity market, DR typically occurs in response to a price signal from the electricity hourly market, or a trigger initiated by the electricity grid operator. DR is different from energy efficiency, which is performing the same services but using less power.

Demand Response Actions

Demand response actions are short term in nature, typically from 1 to 4 hours. Electricity loads (lighting, HVAC equipment, or a portion of a manufacturing plant) are reduced according to a pre-planned load shed procedure. An alternative to load shedding is onsite generation to displace load drawn from the electricity power grid.

Benefits to the Overall System

The ability of customers to shed loads during periods of peak demand through demand response activities is beneficial to the electric system as a whole for two main reasons. First, under tight electricity supply and demand conditions demand response can significantly reduce peak prices and overall price volatility for all users. Second, by reducing system peaks, demand response may reduce the need for very expensive new generation, transmission, and distribution facilities to meet these peaks in demand.

Benefits to the End User

In Alberta, there are currently no demand response incentive programs such as those offered by the Ontario Power Authority. Thus, any DR activity in the province must be justified by market prices alone.

Figure 1 is a price duration curve for the hourly electricity price for the Alberta market for the calendar year 2007. During the 200 highest price hours, prices averaged 635 $/MW or 9.5 times higher than the average hourly price for the year. If an electricity end-user were to curtail one megawatt for these 200 highest priced hours, it would save approximately $125,000 for the year. Therefore, customers who can reduce loads during a limited number of high price hours can realize significant savings.

Figure 1: Price Duration Curve