Wellinghoff expects demand response to expand rapidly

Platts Electric Power Daily
July 14, 2020

By: Martin Coyne

Demand response in wholesale electricity markets is a hot commodity that is poised to experience the same kind of growth that has occurred in solar technology, Federal Energy Regulatory Commission Chairman Jon
Wellinghoff told a national demand response conference on Wednesday.

Speaking in Washington at the national town meeting convened by the Association for Demand Response and Smart Grid, Wellinghoff discussed the market potential for demand response as a resource for US wholesale
power suppliers.

“We’re now poised for a rapid acceleration” of demand response use, Wellinghoff said. “We’re at enough of a critical mass where we could see growth like the solar industry, which has been expanding at a 30% to 40% clip the last five years.”

FERC policies and oversight of power markets have helped in several ways, he said. FERC and DOE have completed work on a national implementation plan for demand response.

The commission has also written policies for compensating demand response for the “value it brings to the markets,” he said. “We’ve said demand response should be paid the full locational marginal price,” he said.

FERC’s approach yielded 14,000 MW of demand response in PJM latest capacity market auction, Wellinghoff noted.

The commission’s policies also mean that demand response can be a fast responding resource, he said.

The PJM Interconnection’s experience with demand response has prompted the regional transmission organization to suggest there is saturation of the market for demand response, Calvin Timmerman, an assistant executive director at the Maryland Public Service Commission, said in framing a question to Wellinghoff. Asked whether demand response needs to be thought of in terms beyond capacity markets, Wellinghoff said, “You sort of answered your own question.”

Demand response providers “should be participating in capacity markets, they should participating in ancillary services and they should be participating in distribution,” he said.

Despite the success of demand response in PJM, progress on the use of demand response has been uneven because other RTOs are not as advanced as PJM, Wellinghoff said.

In a move that he hopes will increase the use of the resource, FERC expects the Midwest Independent Transmission System Operator to file by Friday a proposed capacity market as part of MISO’s resource adequacy construct.

Wellinghoff expressed concern when an employee from Xcel Energy said the Minnesota Public Utility Commission had decided not to accept new demand response resources because of successful “legacy programs.” A decision like that “limits the customer’s choices not only at the commercial and industrial
level, but at the residential level.”

Wellinghoff spoke on a panel that included Pat Hoffman, DOE assistant secretary for electric delivery and energy reliability. Hoffman was among the speakers who acknowledged the complex job the electricity sector has in explaining the benefits of demand response and smart grid concepts to customers. She said a role that DOE can play is doing the research that is necessary to better understand how to communicate demand response and energy efficiency as “two key components” of a whole energy system that the public must understand better.

FERC Commissioner Cheryl LaFleur, who was in charge of demand response during her career at National Grid, spoke on a subsequent panel. She recounted how far the debate over demand response has advanced since her days as an industry executive. “There’s been a real sea change of how widely demand response and energy efficiency are accepted,” LaFleur said. Before, a utility executive championing these resources might be viewed by peers as a “freak show” for wanting to “get her customers to buy less electricity.” Today demand response is seen in the industry and beyond as a resource that “saves money, helps reliability and saves the environment,” she said.

Platts Electric Power Daily