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As capacity markets mature, experts predict more demand response growth

SNL Energy
June 27

By JP Finlay

Though demand response resources have proved their importance to capacity markets, many opportunities for growth exist and will continue to emerge for the sector, according to Comverge Inc. President and CEO Blake Young.

Young spoke June 27 at the Association for Demand Response and Smart Grid National Town Meeting in Washington, D.C., and explained that federal and state initiatives give him hope for the prospects of future demand response tools. Young referred to FERC Order 745, passed in March 2011, which allowed organized markets to pay market rates for demand response resources, to illustrate regulatory support for demand response.

The industry remains in the early stages of the growth cycle and Order 745 will "awaken a sleeping giant," Young said. Comverge offers demand response and energy management solutions for utilities.

Stu Bresler, vice president of market operations and demand resources at PJM Interconnection LLC, offered a similar view on the future of demand response. Bresler called demand response a "critical tool" for capacity markets and said demand response can compete with electric generation, normally "right on par" from a price standpoint and at times a "cheaper option."

To continue growing, demand response must move beyond a capacity market resource to be implemented in emergencies and become more integrated into markets, according to Bresler. PJM uses demand response as a reliability resource, he said, but PJM also wants to develop demand response as an operational tool. He added that the emergence and exponential growth of the natural gas market highlights the need for a longer-term capacity market.

"The rapid growth of natural gas highlighted the criticality of and the need for a longer-term capacity market," Bresler said. "I cannot overstate the value of longer term market look."

Young called demand response a disruptive technology and said pushback from generators over demand response resources is of little surprise.

"We don't seek to displace the utilities' relationship with the consumer. We respect that relationship," Young said. "Demand response built a foothold that threatens a natural incumbent. Any kind of disruptive technology, you're going to see that pushback."

Bresler talked about the importance of standardized measurements and verification for demand response. He said an accepted series of measurements would serve well to explain the value of demand response to state regulators and to prove critics of the technology wrong. He called measurement and verification of demand response "critical to harnessing the operating value of the resource and proving value to the rest of the industry."

Another disruptive technology that has not fully emerged on the electric gird is energy storage, according to a Department of Defense official. In 10 years, storage will be more disruptive to the utility industry than demand response, said Dorothy Robyn, deputy undersecretary of defense for installations and environment.can let utilities build from an "existing platform of trust and customer satisfaction, introduce new pricing programs that can appeal to more customers, and allow them to potentially achieve greater cost savings."

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