SCOTUS Saves Demand Response

Last week the U.S. Supreme Court breathed new life into “demand response” (DR) programs across the nation. Specifically, in a 6-2 decision the justices upheld the Federal Energy Regulatory Commission’s authority to regulate wholesale demand response programs. This legal and regulatory mumbo jumbo means that Ohio energy consumers can continue to participate in the PJM demand response programs.

From the standpoint of managing the electric grid, demand response is an important asset to satisfy peak demand in an economical manner. During critical times when power plants cannot reasonably satisfy demand, PJM (the transmission grid operator for Ohio) will signal participants enrolled in demand response to reduce consumption. When load is curtailed the stress on the grid is reduced thereby increasing reliability for everyone. Those customers that reduce consumption get paid a fairly lucrative incentive by PJM.

In addition to individual customer benefits, there are also societal benefits from demand response. As more and more participants enroll, the aggregated effect is a whole fleet of “virtual” power plants that can respond during critical peak hours. This virtual fleet can lower the cost of electricity in the wholesale energy and capacity markets which in turn leads to lower retail electricity rates for all.

If you have any operational flexibility then you should seriously look into this program. Many manufacturers will do a full or partial shutdown of operations while others continue operations and fire up their backup generators instead. Historically there have been very few actual events in Ohio; however, that does not mean that there won’t be events in the future. If no actual events occur then the participant must complete a one hour test to prove that they are able to curtail. The estimated value for participation in the PJM emergency program this year is around $33,000 per MW.

In order to enroll in the PJM program you must contract with a PJM Curtailment Service Provider. This third party will send you any event notifications, payments from PJM, and will usually insulate you from out-of-pocket penalties for under-performance. For these services, the CSP will take a share of your PJM payment. This share percentage can be negotiated if you have enough volume to provide some bargaining power. The enrollment window will end in May but we have seen certain CSP’s deplete their demand response offering inventory around early April. If you would like to learn more about the program please contact me via the OMA.