An interview with Hans Nilsson, Chair of the Executive Committee of IEA’s Demand-Side Management Programme (DSM),
and Ross Malme, Operating Agent for a recently created DSM project dealing with electric power “Demand Response Resources” (DRR).

OPEN Bulletin: The IEA Demand-Side Management (DSM) Programme has recently created a new project on Demand Response Resources (DRR). How did that come about?

Hans Nilsson: Last year's electric power blackouts in several countries rang many alarm bells around the world. The implications regarding system reliability were of course very serious, but the blackouts also demonstrated that ensuring adequate service to customers was still an issue requiring attention within the newly liberalised markets. This new DRR project, or “Task”, addresses not only the technicalities of demand response as such, but also the need to introduce essential functions that will enable the liberalised market to work properly because the customers are acting on a level playing field.

Creating this project is a recent move by our 17-country DSM Programme, whose basic objective is to help demand-side management technologies reach their full market potential, thus optimising the effectiveness of energy systems and utility investments, and maximising returns for gas and electricity customers. As well as its role as a load and investment management tool, DSM is increasingly finding new applications as a market-based option in liberalised energy markets, notably in emerging energy efficiency policy measures. This new DRR project is a perfect illustration of how such applications can be brought into play. A need for this Task was identified and participating countries were quick to join forces in taking the DRR concept farther ahead.

In all, the DSM Programme has initiated thirteen Tasks since its inception. They deal with such areas as co-operation on energy standards, evaluation of climate-related projects, market-based instruments such as White Certificates and addressing the shape of the electric power load curve. The DSM Programme's Website provides full information and its newsletter updates on latest developments.

OPEN Bulletin: What exactly will the new Demand Response Resources project seek to accomplish?

Ross Malme: The Demand Response Resources project seeks to bring public and private sectors together to utilize customer demand response as a risk management tool in the electricity sector. In this way DRR become a sort of “shock absorber” to address unexpected events affecting grid reliability, risk management and extreme price volatility. Just like in the oil industry, to build this risk management tool to a market portfolio of assets requires a partnership between the public and private sector.

The DRR Task's objective is to deliver products, methodologies and tools that enable electricity consumers to tailor demand to any fluctuations in supply. Such action is attracting increasing interest as a means of maximising network security and economic efficiency in liberalised electricity markets. Uniting state-of-the-art expertise, the DRR's international stakeholder community will facilitate fast-track access to optimum solutions drawing on best practice in technology and application. Participation in the DRR project is open to public-and private-sector entities in both IEA and non-IEA countries.

Some of the specific objectives and deliverables from the project will be to assess the economic and technical potential of customer demand response in the markets of participating countries. We will also create economic tools which countries can apply to determine the economic value of customer demand response, both from a private standpoint and in terms of the overall public policy benefit from higher reliability, reduced transmission and distribution congestion, lower price volatility and less impact on the environment. This project will be managed though a Project Internet Portal which will connect all of the project participants wordwide into a collaborative project community where we can share information and experiences in real time.

As you can see, this project focuses very much on making significant contributions to enhancing participating countries' energy security, environmental protection and economic growth.

OPEN Bulletin: How many countries have signed up to join this Task, or seem likely to do so?

Ross Malme: Response to this project from the international community has been nothing short of outstanding. The United States has agreed to lead the project through the United States Department of Energy (DOE). The DOE and the Federal Energy Regulatory Commission (FERC) have both come out in strong support of the project and have facilitated a United States stakeholder group, which includes four system operators and a number of major electricity companies, as well as private technology companies, to oversee United States participation in the project.

Nine other countries participating in the IEA DSM Programme are joining the project. These countries are Norway, Sweden, Finland, Denmark, Italy, Spain, Korea, Japan and Australia. We are optimistic that the Netherlands, Canada and the UK will join the project shortly. In addition, we are in discussions with several countries not currently part of the IEA DSM Programme with a view to their participating in the project. These include New Zealand, South Africa, Mexico, Thailand, China and China Taipei.

OPEN Bulletin: What sort of feed-back have you been getting on people's motivation for joining the project?

Committed or prospective participants in the DRR project have cited numerous motivations. Take our colleagues from Northern Europe, for example, where electricity systems are highly dependant upon hydro generation. In periods of dry weather they can experience problems with both energy and capacity. Demand Response Resources are one of the best ways for them to ensure they have adequate security for electrical system in periods of tight supply, and they consider an international team ideally placed to advance the concept.

Participants' enthusiasm clearly reflects the view that the IEA DSM Programme is an extremely cost-effective way in which countries can collaborate on important work like the DRR Project. There is certainly a high degree of confidence that the new DRR Task will identify ways of hedging price volatility risk and delivering tremendous benefits to all consumers of electricity.

As we have seen in over the past year in Italy, Sweden and the USA, our electrical transmission systems can be subject to reliability issues. Joining forces internationally to address the issues is considered a sensible way to ensure that Demand Response realises its potential as an extremely flexible and useful tool for addressing transmission congestion issues.

The Internet will play a large role in the project. It is regarded as an extremely valuable means of enabling customers to participate in electricity demand response programs. The IEA DSM DRR project will identify the best practices from a technology standpoint to allow participating countries to leverage the power of the Internet for demand response deployment.

The following words from a Department of Energy participant on the United States position would no doubt be echoed by other participants: "We in the USA are very excited as the IEA DRR project provides a natural forum for major US stakeholders, including electric utilities, demand response industry, and especially federal regulators, to get together and develop demand response business and public policy models that can be deployed in both liberalized and non-liberalized markets."

To learn more about this new project, OPEN Bulletin readers can consult the DRR's Task Summary and its Web pages.

OPEN Bulletin: A final question to the Executive Committee Chair of the DRR project's parent body, IEA's DSM Programme: who triggers creation of new IEA international collaborative effort, such as the DRR project, the IEA or potential partners?

Hans Nilsson: When the International Energy Agency (IEA) was created in 1974 in response to the oil crisis, jointly financed co-operative programmes were cited by founding countries as one of the tools that should be developed for addressing energy conservation, development of alternative sources of energy and energy technology R&D. Joining forces was considered a good idea in 1974 and, thirty years on, the concept is still going strong. Roughly forty of these Implementing Agreements, as they are called, are currently keeping on top of the key energy development and dissemination issues, as they evolve, across the full span of energy technologies.

New programmes are created when a need arises. The initiative usually comes from a group of like-minded institutions from different countries who share the conviction that working cooperatively will help accelerate progress towards meeting a particular challenge they all face. Experience has shown that they are generally right.

On the administrative side, technical, legal and other kinds of support for the initiative are provided by the IEA, whose Governing Board has to give its blessing on creating each new programme. Within each programme, the various different Tasks address specific aspects of the programme's focus. IEA has produced a brochure that explains how Implementing Agreements function.