Demand response participation can change the viability of industrial facilities Brian Helms, power markets coordinator, Alcoa on industrial scale demand response

Demand Response is a large, expanding and underutilized reliability resource that is utilized to help manage electrical bulk transmission and distribution systems. Participation as a demand response resource became an integral part of Alcoa’s day to day operations in 2005, when the Midwest ISO launched its energy market. Careful coordination of resources allows Alcoa to realize lower operating costs and new revenue streams while assisting the Midwest ISO in delivering reliable power to over 40 million customers.

Alcoa's Warrick Operations, located in southern Indiana, is a fully integrated aluminum production facility with over 780 MW's of coal generation, an aluminum smelter capable of producing 270 metric tons annually and a rolling facility that transforms the primary aluminum into can stock. As a global commodities producer, Alcoa is constantly re-examining the economics of their process to identify ways to lower operating costs. Deterioration of the SO2 market, global competition and new smelters with very low power costs, labor rates and the latest high-efficiency technologies, created huge economic pressures as metal prices fell from $3200 to $1200 per metric ton throughout 2008. Alcoa aggressively explored cost controls and improvements and focused upon demand response as an expanding opportunity.

Prior to the 2005, energy transactions in the Midwest were done primarily through bilateral transactions and long term contracts. If Alcoa's Warrick Operations had extra energy, there were limited resale opportunities; and conversely, if Warrick needed power, the same counter-parties charged premiums for their energy. However, once the energy market opened, the whole paradigm shifted. Each MW could be sold or purchased in real time at a published Locational Marginal Price which yielded immediate opportunities and set the facility on the path for dynamic demand response participation.

Figure 1. OSIsoft Visulaization gives overview of the demand response operations for Alcoa.

What is Demand Response? Simply, it is the ability of a load to manage electrical consumption in response to conditions on the electric system. In the energy-only market, Alcoa utilized a metric for operators to monitor that guided them on where to set generation and load verses market prices. In the first year of following the metric, over 1800 changes to generation vs. load were manually performed to reap big savings. When the Midwest ISO announced their intention to expand their markets to include Ancillary Services, there were two large internal hurdles that had to be overcome before participation. First, in the smelting process, steady state operation was the key to optimal efficiency; however, to provide the highest valued ancillary services, the power to the lines would be required to vary based on market signals. The second hurdle was the notion of allowing an outside entity to exercise direct control over the smelting process. However, the location manager set the tone for the project, "Aluminum is our business but we are not in the business to make aluminum. We are in the business to make money." Continuously supplying Energy and Ancillary Services would challenge the paradigm that said "you couldn't be efficient if you moved the lines."

Once the decision to enter the market was made, Warrick Operations began from scratch in building an infrastructure for the project that included an energy management system, upgraded metering, revamped smelter pot line controls and an historian. However, the new system identified a significant communication problem. The smelter operations talk in amps, while the power plant operators speak in megawatts. In order to allow information to be displayed so that everyone was on the same page, the PI System visualization tools were utilized to streamline the process and highlight the economic opportunities available. The tools allowed the smelter to understand how the market was moving their process. Displays show 5-minute pricing, last hour price and drive home to the floor the critical business metrics. It was critical to understand the economic trade-off of selling power vs. making throughput. Using the PI System, total throughput could be tracked to ensure that the market was not reducing total metal production in the smelter. The reason production remained high was due to the Midwest ISO taking the smelter for more load than for energy, especially during the night when system load was at a minimum and wind generation remained strong. As generation begins to increase, while load stays low, the price signal would drop into the negatives to incentivize generation to lower their output. During those times, the market pays customers to take energy off the grid, which is enhanced by the benefit of extra production.

In a Co-optimized market, price points are established for energy, regulation, spinning reserve and supplemental reserve, then the resource is dispatched to minimize system operating costs and maximize revenue to the resource. Regulation is real-time (4 second) energy changes to chase system load. Spinning reserves is online generation that can be made available within 10 minutes in the event of a system emergency. Supplemental reserves are offline resources that can be quickly brought online and allow spinning reserve resources to be placed back into standby. Alcoa offers all ancillary services from their load. The demand response program helped Warrick Operations weather the financial downturn of 2009.

The total cost to enter the ancillary services market was nearly $700,000. This cost included energy management and control systems installations and upgrades. The investment paid off in 4 months. Initially, the plant offered 60MW's of controllability, usually as 20 MW's regulation and 20 MW's of spin. In 2010, an additional 70 MW's of interruptible load for spinning reserve was deployed, which is worth $4,500 to $15,000 a day, with approximately 3 deployments per month. If you can afford to idle or curtail a process then contact your local ISO and begin some dialogue about Demand Response. It might be able to extend the life of a marginal facility or bring cash in and enhance your business.

Figure 2. OSIsoft tools used to analyze optimization target for operations