© Image 100

On the one hand, efforts to reduce supply costs by authorities and power sector agents are made difficult by the lack of local sources of primary energy at reasonable costs of development, leaving a power-generating infrastructure based mainly on petroleum derivatives. Thus, actions to reduce supply costs must continue to be a part of the country's strategy. On the other hand, customers have invested large amounts of money to reduce shortage costs individually. This has resulted in an everyone-for-himself policy. Such installed capacities in the industrial sector have surpassed 1,500 MW. From a national point of view, there is an excess of installed electric capacity, but nonetheless, shortage costs are very high as a result of poor system reliability, due to a total lack of integration and coordination. While it is very difficult to decrease supply costs, technological progress and consistent market rules could offer an alternative to substantially reducing shortage costs based on demand responsiveness

Demand responsiveness differs from a process of direct control. The response is voluntary to help keep adequate reserves at all times and locations. It is performed using protocols where, for example, customers are equipped with devices in anticipation of a call from power systems to which they will respond to price signals. Higher price signals could result in automatic or manual responses by customers to reduce their loads. The demand responsiveness could also include customers generating electricity (including stored) either disconnected from, or connected to, the grid in response to higher electricity prices.

As a result of recent costly blackouts in large geographic areas, 11 developed nations, including the United States, Japan, and Italy, are executing the first round of a demand-responsiveness project to produce necessary tools in their electricity markets for mitigating systemic risk. Systemic risk is the risk of system failure initiated by a fault by one system element that will have repercussions on other elements due to the interlocking nature of electric systems. The subject has created so much interest that a second round of discussions is being organized, which will include China, India, South Africa, Kenya, Tanzania, Zambia, and Thailand. The Dominican Republic has also been invited to participate in the second round.

Demand Responsiveness in the Dominican Republic

With a total estimated national load of 2,400 MW, electricity customers in the Dominican Republic have systemically invested in individual risk management solutions to reduce high interruption costs arising from low-reliability electric power services. Even residential customer investment in back-up generation and storage (battery inverters) has been exceedingly large. Such investments show that for most customers, the cost of power outages is perceived to be much higher than that of the backup supply. The electricity shortages remain one of the highest risks of supplying reliable electricity to customers; shortages could also reduce local and foreign direct investments and hamper plans for national projects and development. A successful deployment of DRRs to break such economic barriers can become proper marketing and risk management tools for any developing nation.

DRR is also a unique risk management innovation based on advanced metering, computers, telecommunications, and control strategies, which may efficiently ration electricity supply shortages on a voluntary basis. Risk management with a customer orientation suggests: 1) in the long run, managing the system reliability based on constantly meeting agreed upon systemic risk targets (i.e., loss of load probability that results in maximum welfare) is the most economical way of dispatching generation and performing demand responsiveness, and 2) demand responsiveness is performed to keep the system in the normal operating state economic deadband. With DRRs, system reliability can be kept sufficiently high at all levels of the supply chain. Customers can be differentiated into suppliers and purchasers of coordinated DRR services according to their perceived reliability needs. Key to the innovation is the development of a business model for recouping their profits. DRR elements represented by customers and a vibrant telecommunications industry for transmitting signals are strategic advantages of a developing country. The DRR approach is systemic because the vicious cycle of introducing individual solutions for power shortages is reversed as DRR increases, which in turn increases the system reliability and leads to a virtuous cycle.

Demand Responsiveness Benefits

DRR has important efficiency benefits. As large asset-based resources invested by customers, DRRs can be placed at proper locations to reduce system demands effectively and to maintain an economic level of reserves. In addition, operating distribution circuits at a higher level of reliability will avoid the local inefficient customers' practices to invest in unjustified transmission substations just to reduce interruption costs; the integration of new customers' loads that are operated in isolation from the grid with those arriving from new investments as economic barriers are dismantled could increase the system's economy of scale and facilities' capacity factors and reduce involuntary high interruption and fuel consumption. Such increases in the value added by DRR could help direct the industry to financial sustainability. Also, DRR is a transition tool to integrate unconventional distributed energy sources to the system when required for environmental and economic sustainability.

With expected nontechnical losses at 30% by the end of 2005, DRR could eventually reduce theft in the Dominican system. By requiring demand-responsiveness capability as a condition of service, free riding and theft risks could be properly mitigated. The second round IEA project participants should add a task among developing countries to develop low-cost power devices (like cell phones in the telecommunication industry) with metering and demand-response capability to create a mass market de facto standard. With such a standard for preserving the rights of poor customers to a valued service that balances electricity costs, poor customers can choose to become active, legalized, and, thus, profitable customers. Hence, the poor can offer and benefit from DRR and thus lower their electricity bills without subsidies in the long run. Financing energy-efficient appliances to the poor and legalized customers could lead to social sustainability. The new version of the Program to Reduce Blackouts (PRA in Spanish) can benefit from the DRR deployment to target and efficiently reduce subsidies.

Finally, with the support of multilateral banking community, the Dominican Republic can also be positioned as a test ground for DRR research, development, and demonstration projects. The country can be available to IEA DSM DRR project participants by developing stable and self-consistent market rules, under an orientation that differentiates customer service reliability levels to give wholesale and retail customers' affordable choices.

For Further Reading

F.C. Schweppe, M.C. Caramanis, R.D. Tabors, and R.E. Bohn, Spot Pricing of Electricity. Norwell, MA: Kluwer, 1988.

P. Senge, The Fifth Discipline: The Art and Practice of The Learning Organization. New York: Doubleday, 1990.

E. Rechtin and M.W. Maier, The Art of System Architecting. Boca Raton, FL: CRC Press, 1997.

J.A. Vanderhorst-Silverio, "An alternative business case for demand response," 2005 [Online]. Available: http://www.energypulse.net

Biography