Clarus Energy Services Company - Demand Response Product Development Project
Demand Response Product Development Project

The project was undertaken by Clarus, in the period between September 2012 and March 2014. It was carried out by Loukas Daoutis (PhD), Emanouil Voumvoulakis (PhD) and Fotios Papadakis (MsC). It was partly financed by the National Strategic Reference Framework (ESPA), through the “Development of Human Resources” program. A brief exposition of the current state of affairs as well as the objectives of the project are presented below. Also available are outlines of the deliverables of the project. Full copies are available on request by Clarus Esco.

The Challenge - Demand Response Markets

The development of Demand Response Markets is driven by the technological breakthroughs in information and communications technology (ICT) and will lead to major restructuring of the way electricity is produced and consumed. Among these changes, the capabilities ICT makes available to the market participants (Smart Grid) will ensure that retail electricity prices better reflect wholesale prices. This will provide incentives for drastic improvement in the productivity of the electricity supply process1 (utilization of assets). Experts in the field estimate that the net social benefit of enabling dynamic pricing through investment in smart grid in the US is in the area of 35 billion USD2. A similar rough estimate for the Greek electricity system undertaken by Clarus ESCo provides a comparable benefit of about 650 million USD or about 0,5 billion euros. In order for this market to develop in Greece there exist certain challenges/barriers which must be addressed/overcome:

  • The regulatory framework in Greece for this type of services, even in their simplest form (i.e. curtailment as substitute for spinning reserve) is currently at best incomplete.
  • The investment required to offer sophisticated demand response services (i.e. dynamic pricing) is quite high and the awareness of the opportunity among even the current market participants is minimal.
  • Smart grid investment must be undertaken under financial constraints and innovative Public/Private ownership schemes must be deployed to ensure that the benefits are realized in monetary terms.

Objectives of the project

The project helps address these challenges by:

  • Including work on market design issues, leading to practical modifications of the electricity market rules to accommodate low cost demand response products by standardizing curtailment contracts and establishing reliability related demand response as ancillary service3 . This could lead to the creation of a demand response market as part of the ancillary services market in Greece within a very short time period (months). The ancillary services “market” in Greece today is dominated by the main utility and its value is estimated at more than 300 million euros per year. It is feasible that at least 10% of this market could be met by simple demand response resources provided by small innovative information technology intensive supply companies which aggregate curtailment on demand during peak hours or emergencies.
  • Including work on the market potential and cost / benefit analysis of the investment in dynamic pricing enabling infrastructure (smart grid) which will increase the awareness of the opportunity to all stakeholders of the Greek electricity market (Utilities, Suppliers, Regulators and Customers).
  • Including work for the design of Public/Private Investment schemes that will enable the financing of the smart grid infrastucture and ensure the accrual of the social benefits anticipated.

  1. The demand for electricity is highly concentrated in the top one percent of hours. In most parts of the United States, these 80-100 hours account for roughly 8 to 12 percent of the maximum or peak demand. In California, they account for some 11 percent. In the 12 Midwestern and Northeastern states that form the PJM Interconnection, they account for 16 percent. In the Canadian province of Ontario, the top 32 hours account for 2,000 MW of demand out of a peak demand of 27,000 MW.
  2. Ahmad Faruqui et al.: "The power of five percent" Brattle Group Discussion paper June 2007
  3. For example similar to the early contracts between companies such as EnerNOC, Comverge and several Independent Systems Operators such as PJM, New England ISO or Utilities primarily in California such as San Diego, Southern California etc.

Outlines of the deliverable documents

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