Monday, May 21

Demand Response

Demand response is a tool for reducing peak demand, balancing the electric grid, managing transmission congestion and reducing cost.

Certain kinds of demand response have the potential to help integrate intermittent renewable generation resources, particularly wind and solar, coming onto the electric grid in the years ahead.

Federal and state regulators are calling for greater quantities of demand response in both wholesale and retail markets. The Federal Energy Regulatory Commission has created market rules that put demand response on a basis essentially comparable with generation dispatch.

Demand response is now competing in capacity and reliability markets at a cost per kW curtailed that can be lower than the cost of generating that kW.

As it has become a viable resource on par with generation, grid operators, regional planners and utilities are incorporating demand response into their planning and operations.

This emphasis on demand response brings new expectations. Utilities in numerous states are expected to bid demand-side resources in wholesale forward capacity markets. Not all are prepared to respond strategically given complicated and changing rules  and standards for measurement and verification.

Utilities in ISO New England and PJM Interconnection states have bid conservatively to avoid potential penalties for under-performance. A foremost challenge for market participants can be selecting the number of MWs to bid into capacity auctions and the commitment length. Capacity prices have been low and the future is uncertain.

Utilities are additionally hesitant to pursue supplemental wholesale market options such as reconfiguration auctions and bilateral contracts. This is because the rules are complex and utility regulation does not reward risk taking.

Electricity markets will continue to evolve to allow even greater quantities of demand-side resources to compete in wholesale markets.

FERC Chairman Wellinghoff’s vision of a supra-region electric grid with large amounts of demand response rests on an accurate accounting of this resource.

Complex measurement and verification can impose significant transaction costs. This is because M&V involves the counter-factual; it is necessary to estimate how much power would have been consumed in the absence of curtailment. Estimates of baseline consumption need to be created to estimate savings. Baselines have become the most complex and contentious element of M&V.

Demand response markets will continue to evolve. FERC intends to pursue additional market reforms in 2012-13. These include adopting M&V standards developed at NAESB, eliminating barriers to integration of demand-side resources into wholesale markets and pursuing market rules permitting energy efficiency resources to participate more broadly.

  • Demand Response Experience

    AESP Webinar. Moderated a Brownbag, "NAESB Standards for Measurement and Verification of Demand Response", November 10, 2011.

    Northeast Utilities. Participated on a team with MGALLC to help NU strategically participate in ISO-NE’s forward capacity markets.

    Southern California Edison. Analyzed impact evaluation methodologies for four state-wide demand response programs, 2012.

    NAESB. Active participant in two working groups to craft M&V wholesale and retail standards for demand response, 2010-2011.

    Connecticut Municipal Utilities. Participated in a smart grid infrastructure project to install communication and data management systems for demand response and dynamic pricing.

    PLMA Fall Conference. Moderated a session at a Peak Load Management Association conference, "Monitoring and Verification for Demand Response", November 9, 2010.

    Southern California Edison. Helped SCE develop strategies for participating in the California ISO’s Proxy Demand Resource programs.

    Hydro Quebec. Participating under subcontract to Jacques Harvey Consultant & Associes on a Demand Response Market Potential Study.

    Southern California Edison. Supported SCE in shaping and tracking industry M&V standards for demand response.

    Missouri Department of Natural Resources. Participated in the development of an industrial program in which a reverse auction was used to procure bids for capacity savings.

    Southern California Edison. Conducted interviews with ISOs/RTOs that include demand response resources in capacity markets, 2011.

    Sustainable Energy Analytics. Participated in a project to qualify on-site generators as demand response resources by reducing emissions using selective catalytic reduction technology.

    Industrial Laundry. Participated in a strategy for demand response in a transmission congested zone of the electric grid.

    North American Electric Reliability Corporation. Analyzed implications for a client of possible inclusion of a demand response function within the NERC reliability model, 2012.

    FCM Training. Completed ISO-NE Forward Capacity Market certification.