Demand Response Grows—Despite Participants’ Contradictory Goals

The contradictory goals held by electricity generators and consumers that lie at the heart of the demand response could put a damper on the growth of the approach. Indeed, the tension already has done so in Australia. Dealing with this core issue is important as such are implemented in the United States.

Demand response financially rewards consumers of electricity if they shift usage to less critical times – such as the middle of the night – when demand is lower. Such shifts can mitigate or avoid brownouts and blackouts when demand skyrockets, such as mid-afternoon on a hot day.

In Australia, according Financial Review, plans to implement demand response were squelched by big electric companies. The story, which quotes U.S.-based EnerNOC Managing Director Jeff Renaud, says that demand response is not liked by the energy companies because they make most of their money during these peak periods.

Indeed, a November heat spell led the Australian Energy Market Operator (AEMO) to order distributor Electranet to cut off power to about 40,000 customers for 30 to 40 minutes and asked generation firm AGL Energy to shed load. That led to AGL asking Tomago Aluminum, a big smelter, to temporarily scale back on operations, the story says.

The profile of demand response programs seems set for growth in the United States. Earlier this month, The Federal Energy Regulatory Commission (FERC) issued an order that will enable customers to participate in state and federal programs, at least in New York. ElectricityPolicy.com reports that the order stems from a complaint brought by the Natural Resources Defense Council (NRDC) and the New York State Public Service Commission (NYPSC) that federal/state bifurcation made compensation for demand response for both distribution and bulk transmission difficult.

FERC accepted the logic of the argument, the story reports:

To remedy this problem, NRDC and the NYPSC group argued that “buyer side mitigation rules” of the New York Independent System Operator, developed to deal with a different issue, were “unjust and unreasonable” in forcing DR customers to choose whether to participate in either state or federally regulated DR markets. They asked that DR resources be exempted from NYISO’s buyer side mitigation rules to remedy this problem. FERC agreed and ordered NYISO to modify its buyer-side mitigation rules to exempt DR.

Progress also is being made in New England. National Grid last week asked for corporate volunteers for a pilot demand response program in Massachusetts and Rhode Island, according to the Worcester Business Journal. Participants, the story says, can earn as much as $3,500. The two-year program will enable participants to earn $35 per kWh reduction for a commitment to reduce use for a minimum of 20 hours during the summer.

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