Demand Response Participation Grows in PJM Interconnect

Demand Response participation has grown significantly in the PJM Interconnection since the implementation of FERC Order 745 rules that compensate participants differently than before.

Since the implementation of Order 745 in January 2012, economic demand response participants receive the full wholesale price when the wholesale price exceeds the monthly net benefits threshold ($25.60/MWh in March 2013), according to a report from PJM. Prior to Order 745, participants were compensated based on the difference between the wholesale price and the retail price for generation and transmission services (LMP-G&T).

During the seven-month period from April through October of 2012 for which compensation under Order 745 was in place, $8.7 million of economic demand response revenue from 133,466 MWh was generated. In contrast, for the 41-month period from November 2008 through March 2012, for which economic demand response was compensated at (LMP-G&T), only $7.1 million of revenue from 166,276 MWh was generated.

The amount of economic demand response in the day-ahead energy market compared to real-time energy market has gone up significantly during the Order 745 period, as well. Following the implementation of Order 745, 44 percent of all load reductions were based on commitments made in the day-ahead market while only 11 percent were based on day-ahead market prior to Order 745.

Although economic demand response activity has significantly increased relative to recent years, the amount of participation is low relative to the overall capability that has already be registered and approved to participate in the wholesale market, according to the PJM Report. The total demand response capability in July 2012 was 2,300 MW but the average hourly load reduction, for hours where there was a load reduction, was only 70 MW. This amounts to only 3 percent of the economic demand response resource capability utilized during the month of July.

In related news, Energy Curtailment Specialists, a demand response provider, is offering a series of online energy-related workshops to be held monthly for businesses within the New York, PJM, California, and Ontario, Canada markets. The workshops will feature information relating specifically to demand response programs as well as other energy topics, broadcast live from ECS’s studio located in Buffalo, NY.

Noticing that many businesses are still not fully aware of what demand response is and how they can earn revenues through participation, ECS developed these workshops to promote the importance of demand response in deregulated energy markets.

In Chicago, the Building Owners and Managers Association is spearheading a smart meter pilot program so that buildings can aggregate their energy information to be able to participate in some sophisticated demand response programs through the PJM Interconnection.

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