Demand Side Management (DSM)

Dr. Faheemullah Shaikh

 Electricity Supply & Demand
Growth Trends
5000%
Forecast
4500%

4000%

3500%
% of 1974

3000%

2500%

2000%

1500%

1000%

500%

0%
1970 1974 1979 1984 1989 1994 1999 2000 2005 2010

Total Capacity Peak Demand Sales (GWh) Customers Constant GDP

GROUP DIALOGUE

 Available options to meet future demand

growth

 Options need to be financially viable and,

socially & politically acceptable
Two Options to Meet Growth

12,000

10,000

8,000

6,000

DSM Effect on Sales

4,000

2,000

0
1970 1974 1979 1984 1989 1994 1999 2000 2005 2010

Total Capacity Peak Demand Sales (GWh) SSM DSM

Supply Side Management (SSM)

 Management of Supply-side resources

to meet changes in demand
(e.g Installation/ Updating/ Upgrading/ Augmenting)

 Installation/ retirement of generation

capacity
 Rehabilitation/ Life extension
 Augmentation of Network
 Other updating/upgrading of resources
Demand-Side Management (DSM)

 Intervention by a utility on the “customer

side of the meter” to change the way
customers use electricity

 Efforts and activities by an electric utility

to change the shape of system load/
demand profile, by influencing customers’
consumption levels and patterns
Objectives of DSM

Peak Clipping Valley Filling Load Shifting

Strategic Conservation Strategic Load Growth Flexible Load

Comparison between DSM & SSM

SSM DSM
Still evolving in many parts of the
Mature and well established concepts
world
Bit complex, mainly due to non-
Reasonably straight forward
traditional aspects

Highly cost intensive (Inclining Costs) Flexible/ low cost (Declining Costs)

Requires medium to long-term plan Can be implemented on short-term

for execution basis
Requires firm and generally inflexible
Offers flexible options
planning
Provides higher levels of security of Offers optimum utilization of available
supplies resources
Other benefits of DSM

Customer Society Utility

Lower bills without Capital freed for other
sacrificing lifestyle or projects & Reduce foreign Lower cost of service
productivity debt

More manageable
Lower business costs; more
Improved utility generation &
competitive economy &
service transmission expansion
opportunities for job growth
schedule
Conservation of energy
Improved operating
Non-energy business resources & reduced
efficiency & customer
benefits negative environmental
service
impacts
Major benefits of DSM

 As a rule of thumb DSM can offer

solutions to short-medium term
demand changes for costs that are
between 1/2 to 1/10 of the costs of
counterpart SSM solutions

 Compared with SSM, DSM has

substantially smaller lead time for
implementation and/or roll back
Importance of DSM

 DSM is now regarded a “resource” by

resource planners

 DSM is an integral part of Integrated

Resource Planning (IRP) of many
utilities in the US, Europe and many
other parts of the world.
Utilities and Applications of DSM

 DSM was originally introduced to tackle the

“complex & peculiar” supply & demand
relationship in electricity industry

 The applications of the concept of DSM can

now be noticed and applied in other
consumer sectors involving fluctuating supply
and demand situations;
 Banking
 Telecommunications
 Water
 Gas
Which one is more important?
Neither is!!

 SSM is an important planning activity

 DSM complements SSM to ensure

optimum utilization of Supply-Side
assets

 They offer maximum benefits when

combined together
DSM IN INTEGRATED
RESOURCE PLANNING
What is Resource Planning?

“A utility Resource Plan refers to a detailed

plan of supply resources to ensure reliable,
secure, uninterrupted and quality supply of
electricity to all customers. A resource plan
estimates requirements for new supply
resources based on projections/forecasts of
growth in demand and expected retirement
of existing resources.”
Integrated Resource Planning (IRP)

“Integrated Resource Planning (IRP) is

an approach to resource planning that
equally treats a broad range of options,
including traditional supply-side options
and demand-side options, as potential
contributors to an optimum resource
plan.”
Why Do IRP?

 A number of “resource options”, other

than traditional generation option, are
now available

 Electricity generation is no longer a

decreasing cost industry

 IRP can reduce costs associated with

supply and security of electricity
Traditional Resource Planning vs.
Integrated Resource Planning

 Four major differences

 Resource options
 Resource ownership
 Major planning considerations
 Involvement in planning
Resource Options

Traditional Planning IRP

Also considers:
Typically: • Renewables
• Conventional large • Cogen / IPP
central plants • DSM/ Energy Efficiency
• Captive Power etc.
Resource Ownership

Traditional Planning IRP

Also considers:
Typically: • Other utilities
• Utility-owned plants • Customers
only • Third parties (IPPs)
• Regional imports
Major Planning Considerations

Traditional Planning IRP

Also considers:
• Customers bills
Primarily: • Fuel diversity
• Rates • Risk/uncertainty
• Reliability • Environmental impacts
• Value of service
• Flexibility
Involvement in Planning

Traditional Planning IRP

May also involve:

• Customer service
Primarily: • Marketing strategies
• System planning • Customers
• Financial planning • Public interest groups
• Regulators
• Others
Broad Objectives of IRP

 Conform to national, regional, and local development

objectives
 All households and businesses have access to electricity
services
 Maintain reliability of supply
 Minimize short or long term economic cost of delivering
electricity services
 Minimize environmental impacts of electricity supply
and use
 Enhance energy security by minimizing the use of
external resources
 Provide local economic benefits
 Minimize foreign exchange costs
Key Considerations for an IRP

 Meeting customer needs with a mix of

resources at lowest possible cost
 Equal emphasis on all resources options
 Conventional supply-side
 Renewable resources
 Demand-side management
 Purchased power
 Cogeneration
 Integrated planning framework
Key Considerations for an IRP

 Portfolio of resource alternatives

 Equal priority to all resource options (“level
playing field”)
 Analysis of benefits and costs
 Methodology and tools for
 Screening of alternatives
 Detailed evaluation
 Uncertainty analysis
 Understanding the customer and the market
Process of IRP

 Establish objectives
 Survey energy use patterns and develop demand
forecasts
 Investigate electricity supply options
 Investigate demand-side management measures
 Prepare and evaluate supply plans
 Prepare and evaluate demand-side management plans
 Integrate supply- and demand-side plans into
candidate integrated resource plans
 Select the preferred plan
 During implementation of the plan, monitor, evaluate,
and iterate (plan revision and modification)
Process of IRP
Utility Govt

Public/ Political
Regulator
Groups
IRP
Objectives

Current
Socio-Econ-
Supply/ Demand
Political
Demand Forecasts
Forecasts
Situation
F Fuel

Renew

DSM Plan SSM Plan Imprts

Others

Estimated Investment Resource Investment

Impacts Requirements Requirements Requirements

Comparative
Assessment

Selection of
Identification of
Suitable IRP Implementation
Competing IRP
Options
Options

Monitoring/
Evaluation
Load Forecasting

 Provides the basis for traditional supply-side

and integrated planning
 Little difference between traditional load
forecasting and load forecasting for IRP
 End-use forecasting methods often support
data collection / requirements for DSM
planning and vice-versa
Load Forecasting Elements

 Economic growth scenarios

 Demographic, technical and behavioural
characteristics of end-users
 End-use load data
 Load forecasting
Supply-Side Planning Elements

 Identification of options, sites

 Estimation of costs
 Assessment of reliability
 Estimation of environmental impacts
 Capacity expansion modelling
 Production of costing modelling
Supply-Side Analysis

Existing Generation Reliability

Units Constraints

Capacity Expansion Economic Data

Planning Options Model

Environmental
Costs
Impacts
Capital Costs Plant Operation • Emission levels
Fixed Costs (dispatch) • Emission
Variable Costs
controls
• Fuel In Service Date
Timing of Units • Compliance
• O&M
Demand-Side Planning Elements

 Pre-screening of options
 Technical / economic potential assessment
 Program concepts
 Load impacts of standard vs efficient
technologies
 Assessment of customer economics
 Determination of eligible market size, market
penetration
 Benefit / cost analysis
Demand-Side Analysis

Technology Information for

Characteristics Load Shapes
integrated
resource planning

DSM OPTIONS DSM PLAN

Market DEVELOPMENT
ANALYSIS
Segments DSM Plan
 Technologies
Analysing cost-
 Marketing Strategies
%
effective program
 Incentives
packages
 Benefits/Costs

Customer
Acceptance

Utility $ Tariff (Rate)

Structures
Characteristics Supporting Data
Integrated Analysis Elements

 Financial analysis
 Risk and reliability analysis
 Environmental Impacts
 Resource optimisation
Integration
Load Forecasting

End-Use Load Shape Database

Residential
Economic,
Demographic Load Shape
and Customer Commercial Forecasting
Characteristics
Database
Industrial

Demand-Side Planning Supply-Side Planning

Market
DSM Options Supply Options Screening
Penetration
Database Database Methodology
Model

Cost/Benefit
Production Costing
Screening

Integrated Resource Planning

Screening Analysis of Monitoring and Evaluation

Capacity Planning Uncertainty and Risk Analysis Financial Analysis
Alternative Portfolios Plan

Utility System Database

Role of Externalities in IRP

 Externalities are Costs (and benefits) to

society that arise from energy production and
consumption, but are not currently accounted
for in the energy resource development and
use decisions of governments and individuals
 Externalities are generally not included when
comparing the costs of supply-side and
demand-side options
Incorporating Externalities in IRP

 Externalities in energy production and use

 Externality valuation -- 2 methods
 Incorporating externalities in utility planning
 Incorporating externalities in non-utility planning
Externalities in Energy Production and
Use

 Impacts to land, air and water (i.e., impacts

to crops, wildlife and humans)
 Example: coal-fired generation emissions
 particulates
 nitrogen oxides
 sulphur oxides
 methane, etc.
Incorporating Externalities in Utility
Planning
 Two basic steps
 Valuation
 to determine magnitude
 valuation can be expensive, and therefore
is sometimes omitted
 subjective or qualitative approaches
substituted
 Inclusion in Planning
 to influence planning or use decisions
How Much Do Externalities Cost?
Externality Valuation Methods

 Damage Cost method

 Determines cost of associated damage to
land, air, water (crops, wildlife, humans)
 Alternately determine the cost to repair
the damage
 Control Cost method
 Determines marginal cost of reducing,
abating or mitigating an externality
 Pollution controls on plant can partially
mitigate externalities
Incorporation in Utility Planning -
Where Values Exist

 Include cost of pollution controls to supply-

side costing
 Monetised values (for remaining externalities)
 Generally added to supply-side models as a
“cost adder” or demand-side models as an
externality “benefit”
Incorporation in Utility Planning -
Where Values Do Not Exist

 Insight gained through subjective or qualitative

approaches must be used in the planning stage
to set “artificial” limits in supply-side modelling
 Subjective or qualitative approaches
 Rule-based approaches
 Qualitative techniques
 basic qualitative assessment
 rating and weighting schemes
Rule-Based Approaches

 Energy classes -- fuel-based vs renewable

resources -- have broadly different external
costs
 No valuation, typically treated subjectively in
resource decisions
 Broad-brush, often used as interim approach
 Ontario (Canada), at least 6 US States
Qualitative Techniques
 Basic Qualitative Assessment
 Resource options described in terms of
environmental attributes -- high, medium or low
impact
 Expert review/qualitative assignment of
priorities
 Does not provide insights into specific
externality tradeoffs in selecting a resource
portfolio
 Rating and Weighting Schemes
 Formalised -- ranking system to reflect relative
magnitude of externalities for all options
 Typically performed by experts
 Qualitative and quantitative information
Incorporation of Externalities in Non-
Utility Planning

 Regulatory standards
 Tradeable emissions permits and offsets
 Environmental taxes
Other Resources on Power Sector IRP

 Most utilities in the US are required by regulators

to submit annual IRPs, e.g;
 PaicifiCorp (www.pacificorp.com/Navigation/Navigation23807.html)
 Idaho Power (www.idahopower.com/energycenter/2004irp.htm)
 Utah Power (www.utahpower.net/Navigation/Navigation36807.html)
 PGE (www.portlandgeneral.com/about_pge/regulatory_affairs/filings/2002_resource_plan.asp?bhcp=1)
 And many more

 “Best Practices Guide: Integrated Resource

Planning For Electricity” can be downloaded from
www.iie.org/programs/energy/ pdfs/Integ%20Resource%20Planning.pdf
Core DSM Activities

1. Defining DSM Objectives

2. Estimating Potential for DSM
3. Identifying DSM Options
4. Designing & Developing DSM Programs
5. Implementing DSM Programs
6. Tracking, Monitoring & Evaluating DSM
Programs
1. Defining DSM Objectives

 Two categories of DSM Objectives;

 Load Profile
 Non Load Profile

 Two types of Load Profile objectives;

 Broad
 Specific
Defining DSM Objectives

 Two types of objectives;

 Broad
 Specific
 Broad objectives are defined on the basis of
supply and demand situation and
projections, and long-term objectives of the
state and the utility
 Specific objectives are defined on the basis
of;
 Broad objectives
 Estimated DSM potential
 Available DSM Options
Broad Load Profile Objectives

Peak Clipping Valley Filling Load Shifting

Strategic Conservation Strategic Load Growth Flexible Load

Non Load Profile DSM Objectives

 Tariff restructuring and revenue control

 Cost reduction
 Value added service to customers
 Meet government policy requirements
 Introduction of non-energy business
line(s)
 Improved ability for asset/resource
planning
2. Estimating Potential for DSM

 DSM potential to be in line with broad

objectives;
 Impact on load (Peak or other)
 Impact on energy consumption
 DSM Potential to be estimated by;
 region,
 customer sector,
 customer segment,
 end-uses of electricity, and
 end-use technologies
Estimating Potential for DSM

Utility

Province 1 Province 2 Province 3

Top Down

Sector 1 Sector 2 Sector 3

e.g. Residential e.g. Commercial e.g. Industrial

Segment 1 Segment 2 Segment 3

Bottom Up
e.g. High Users e.g. Av Users e.g. Low Users

End-use 1 End-use 2 End-use 3

e.g. Lighting e.g. Aircond e.g. Cooking

Technology 1 Technology 3 Technology 3

e.g. Incand e.g. Flouro e.g. CFL
Estimating DSM Potential (Methods)

 Engineering Estimates based on;

 Customer mix (residential/industrial/commercial)
 Electricity intensity
 Appliance saturations
 Analytical/Diagnostic Methods
 Analysis of historic generation, sales and load data
 Analysis of historic billing data
 Classic and customized load forecasting models
 End-use simulation models
 Classic Load Research
3. Identifying DSM Options

“DSM Options are means of execution

of DSM activities to create desired
impacts (that may be equal or less than
estimated potentials) to achieve DSM
objectives”
Identifying DSM Options

 Education/ Awareness
 Increasing awareness about issues concerned
with DSM objectives e.g. energy efficiency
and environmental impacts or fuel switching
 Marketing of DSM products and services
 Technology
 Promoting replacement of old equipment and
installation of new efficient equipment
 Promoting “retrofits” and/or “add ons” to the
existing technology to become DSM
technology
 Special DSM equipment that is not necessarily
energy efficient e.g. storage cooling
Identifying DSM Options

 User behaviour
 Change in user behaviour can achieve DSM
objective e.g. promoting turning off
unnecessary loads during peak period
 Regulations
 Mandatory energy performance standards for
equipment and buildings
 Incentives
 Direct financial rewards/ penalties
 Tariff change
4. Designing & Developing DSM Programs
 Parameters of a DSM program design
 Program focus/target;
 Region
 Sector
 Segment
 End-use
 End-use technology
 Program options
 Program potential and estimated impacts
 Program objectives (sub-objectives of DSM plan)
 Costs benefits analysis
5. Implementing DSM Programs

 Identification and understanding of

Program Target/Focus population
 Pilot Programs
 Identification of Barriers and Solutions
 Program Packaging
 Program attributes
 Costs and benefits
 Incentives and penalties
 Ease of participation and exit
 Volume flexibility
 Availability of financing
5. Implementing DSM Programs

 Marketing/ Promotion
 Communication Channels
 Marketing Message/Selling Pitch
 Summary of Attributes
 Eligibility
 Directions/Contact/More Information
 Recruitment
 Channels of participation
 Ease of Participation
 Post Recruitment Support
 Help/Service Desk
 Field support
 Other Issues
6. Tracking, Monitoring & Evaluating
DSM Programs

 Tracking & Monitoring

 Establish processes to “track” “implements”
of DSM programs
 Tools and processes to collect data at each
stage of implementation
 Tools and processes to collect customer
recruitment/participation data
 Tools and processes to collect post-
participation customer usage data
 Process and analyse data to establish
ongoing state of the program
Tracking, Monitoring & Evaluating DSM
Programs

 Evaluation (& fine-tuning)

 Analyse implementation data to
establish efficiency of each
implementation stage
 Analyse recruitment data to establish
participation rates and compare
against expectations
 Analyse post-participation usage data
to establish program impacts
GROUP DIALOGUE

 What are the current DSM objectives for Pakistan?

 What is estimated DSM potential for Pakistan?

 What are the most suitable options available?

 Are there any current DSM programs?

 Information on design, development, implementation, and

evaluation of such programs?

 What regulatory issues may restrict development of DSM in

Pakistan?

 General feedback