Demand Response Demonstrates Value In US

Demand response made significant contributions to balancing supply and demand and preserving reserves during winter 2013 cold weather events.
Published: Fri 09 Jan 2015

Demand response is continuing its upward trend in the US. According to the latest Federal Energy Regulatory Commission (FERC) staff assessment citing EIA data, total US potential peak reduction from retail demand response programs increased by 1,907MW, or 7.2%, to 28,503MW between 2011 and 2012.

Almost two-thirds of this increase could be attributed to increases in demand response programs within the Western Electricity Coordinating Council (WECC), which comprises nine states and portions of four others in the western US.

Further, residential demand response accounted for almost one-third of the total, and commercial and industrial for the bulk of the remainder (although with variation with region).

ISO and RTO demand response

When broken down by Regional Transmission Organization (RTO) and Independent System Operator (ISO) markets,  the 2012 potential peak reduction was 26,346MW, increasing by 2,452MW, or 9.3%, to 28,798MW in 2013. This corresponds to 6.1% of peak demand, compared with 5.6% in 2012.

The largest increase was recorded in the Midcontinent ISO region, which covers the Midwest US and Manitoba, Canada. This was largely due to increased demand response from behind-the-meter generation and load modifying resource programs run by utilities.

However, several RTOs and ISOs also exhibited declines in potential peak reduction from 2012 to 2013. In the New York ISO fewer demand response resources were registered, attributable to a tightening of criteria for qualification. In the New England ISO (ISO-NE), a decline is thought to be at least partially due to Enernoc’s reduced presence in the forward capacity market based on its customers’ view that participation requirements out-weigh the value of participation. In the California ISO, there were reductions in capacity in two of Southern California Edison’s programs, although these were partially offset by an increase in capacity in Pacific Gas & Electric’s programs.

Demand response during extreme cold weather events

Cold weather events in the US in January 2014 caused numerous challenges for electricity system operators, according to the report. In the eastern US, high demand, generation outages, and fuel disruptions that affected electric and fuel markets were experienced. Eastern RTO/ISO system operators utilized demand response during these high load periods to balance the electric system and prevent reserve shortages.

PJM activated about 2,000MW of demand response for several hours during the morning and evening peaks on one day, and over 2,500 MW for several hours on two other days. PJM called on demand response to address issues with transfers, transmission limits and generating unit forced outages. Although demand resources were not obligated to respond during this period, close to 25% of registered demand response resources responded. PJM states that this experience demonstrates the year-round value of demand response.

As part of its 2013-2014 Winter Reliability Program, ISO-NE gained the ability to call on demand response assets up to 10 times during the winter. Demand response resources provided 21MW on five occasions between December 2013 and February 2014. ISO-NE has also included demand response as a component of its 2014-2015 Winter Reliability Program.

Other RTOs also utilized demand response during the winter peak load periods, and for example on one day, NYISO called on reductions from about 900MW of its demand resources.

Demand response programs

According to the FERC report, customers enrolled in incentive-based programs increased by 1.2% from 2011 to 2012 to more than 5.4 million. In contrast, enrollment in time-based programs declined 6.1% to 3.7 million during the period. In both cases, there is wide regional variation, due to the creation of new programs by some utilities, and discontinuation of old programs by others.

Notably there were increases in enrollments in Texas, both in the incentive-based programs run by Centerpoint Energy and the City of San Antonio and in a time-based program at TXU Energy.

Demand response barriers reducing

The report also finds progress in reducing some barriers to demand response. On the standards front, the acceptance and deployment of common information models and protocols such as OpenADR, ZigBee SEP 2.0 and Green Button gained momentum in the past year.

The deployment of enabling technologies also gained momentum with the entry of many new companies and technology platforms into the home automation and smart homes market. For example, Google announced developer programs in June 2014 that will allow other devices within a home to share data with Nest thermostats.

On the other hand, opportunities for customer education and engagement may be being missed. Lack of engagement may partially explain why residential customers have been slow to adopt time-based rates, where they have the option to participate. In response, some utilities have started to offer demand response programs that incorporate sophisticated strategies for engaging customers. For example, Baltimore Gas & Electric’s behavioural demand response offering (supported by Opower) combines a peak time rebate with communication strategies specifically aimed to engage customers. [Engerati-Consumer Engagement Will See Demand Response Take-Off] New York is emphasizing utility customer engagement as part of its REV initiative. [Engerati-Reforming New York's Energy Vision]

With fewer than 1% of US households on dynamic rates, there may also be concerns about the effects on certain customer classes. Based on its study, Sacramento Municipal Utility District (SMUD) plans to make time-varying rates the default for most customers by 2018. However, with few exceptions, such as Massachusetts, other states are not proposing to adopt default time-based pricing plans, despite reported growing demand for such plans.

Despite these advances, a shadow hangs over demand response in the US, with the outcome of a case on FERC Order 745 still to be decided. [Engerati-US Court Ruling Undermines the Value of Demand Response] The Order allowed demand response to compete fairly in the electricity marketplace with more traditional energy resources like coal and natural gas. The case is now awaiting review by the US Supreme Court.

Further reading

FERC: Assessment of Demand Response & Advanced Metering