The new demand response
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DEMAND RESPONSE IS EVOLVING AND, AS markets continue to change across the United States, it will evolve from a resource of last resort to one with market value, just like generation.
In the past, demand response has been used as an emergency response for reliability by electric utilities. Today, though, it has the ability to be used as an economic resource.
Federal Energy Regulatory Commission Orders No. 719 (issued on Oct. 17, 2008) and No. 745 (issued March 15, 2011) clarified demand response competition and compensation, and the requirement for grid operators to reform their tariffs and practices in this area, according to Jeremy Laundergan, director of utility services consulting for EnerNex.
Prior to joining EnerNex, Laundergan was senior project manager with Southern California Edison, where he worked on emerging markets and technologies for demand response, including pilots to integrate demand response into the California Independent System Operator's Market Design and Technology Upgrade (MRTU) wholesale electricity market.
He says that, while these orders clarified matters on one hand, Order No. 745 put California in a holding pattern for an entire season to determine whether the California approach complied with the order or not.
For purposes of background, FERC Order No. 719, Wholesale Competition in Regions with Organized Electric Markets, offered a series of reforms to improve the operation of organized wholesale electric power markets. As to Todd Griset, an attorney with Preti Flaherty, who blogged about both orders, explained: "Based on the premise that improving the competitiveness of organized wholesale markets is integral to the Commission's mission, FERC required regional grid operators to reform their tariffs and practices in the areas of demand response, long-term power contracting, market monitoring, and the responsiveness of grid operators to their customers-and through them, to the consumers who benefit from and pay for electricity services."
FERC Order 745, Demand Response Compensation in Organized Wholesale Energy Markets, requires regional grid operators to compensate customers fairly for reducing their consumption of electric energy in response to the grid operator's warnings of supply scarcity (i.e., demand response), when that reduction in energy usage is cost-effective and capable of displacing the need for additional generation online.
Technology serving to move DR forward
We are seeing technology being deployed as a part of AMI (automated metering infrastructure), Laundergan said, that is further enabling demand response, and furthering its capabilities. "We are seeing technology deployed in implementations which enables demand response in new ways," he said.
Home energy networks will enable customers to be price responsive, and the California Public Utilities Commission is currently looking at the constructs of just exactly how this will work. With Smart Energy Profile and OpenADR both about to release new versions of their certifications, the options continue to open for manufacturers and utilities.
The state of Texas, Laundergan said, is working with an earlier version of Smart Energy Profile and is, as he puts it "off and running" with new demand response opportunities. As demand response becomes available marketwide for ancillary service response, it truly will morph from poor relation to equal partner as an economic resource option.
Tapping the resource successfully
"While we've had air conditioner and water heater demand response programs for some time," Laundergan said, "What you didn't have is the wholesale market construct to enable utilization of ancillary service."
Next year will see DR making a big step, just as California did with its Proxy Demand Resource (PDR) program, approved by FERC on July 15, 2010, and implemented on August 10 of the same year. Through PDR product,
California is now able to both increase demand response in the ISO market as well as facilitate the participation of existing retail demand response programs in the ISO market.
The trick to successful implementation, Laundergan explained, is to "figure out what their bid prices are going to be, and how often can this resource be tapped?" He added: "The nice thing is that it's fairly quick. Air conditioner cycling can be triggered in short durations, but more frequently, without customers being inconvenienced by a noticeable change in temperature. And it can be dispatched as an economic price-responsive resource.
"It's going to take program design, as well as compensation for the end-use customer."
It's not one-size-fits-all
There is a caveat, though: not all demand response should be placed in the economic resource category.
"Everyone's starting at different points: some have distribution automation (DA) without home area networks (HAN), some have AMI without DA ... utilities are figuring out the next best for investment. They have to con sider: Where are we now? Where is our congestion? Where is our reliability?" he said.
"It needs to be well-planned out before you jump," Laundergan concluded. "How- ever, don't shy away from it, because it's worth it."