Advocates find better communication of demand response benefits needed

SNL

July 14, 2020

By Matthew Bandyk

The majority of the members of the Association for Demand Response & Smart Grid and other attendees at the group's "National Town Hall Meeting" on July 13 in Washington, D.C., said in a vote that the biggest barrier to the growth of demand response in the U.S. is a lack of understanding among stakeholders, an issue seen as more important than other factors, such as price signals.

But FERC Chairman Jon Wellinghoff said that contrary to a lack of understanding, there is a "critical mass" of federal government entities and state regulatory commissions committed to demand response. FERC and the U.S. Department of Energy have recently promoted coordination among a coalition of stakeholders as the primary way to implement a "National Action Plan" on demand response.

"I think we are now poised for a rapid acceleration of the industry," Wellinghoff said while speaking at a panel. "We have the opportunity to have this industry to take off much like the solar industry has been doing in the last four or five years."

He acknowledged that there have been some recent roadblocks for the spread of demand response. He said he was "troubled" by a Minnesota Public Utilities Commission decision to prohibit the entrance of third-party demand response providers into the market. "I am concerned that by that commission, and other commissions in the Midwest, limiting the choices of consumers to participate with the demand response aggregators in the wholesale markets is going to limit the customers' overall choices to be able to integrate demand response into their systems," Wellinghoff said.

He said FERC plans to try to persuade these states to promote demand response. But its growth also needs help from the private sector. Wellinghoff urged greater participation by demand response providers in the Midwest ISO's capacity market. "We need to ensure that demand response is as integral a part of the capacity markets in MISO as it is in PJM," Wellinghoff said, noting that the PJM Interconnection LLC cleared more than 14,000 MW of demand response assets in its last capacity auction.

One problem in promoting greater understanding of demand response is that the benefits can be difficult to quantify. "It really is hard to measure on a kWh basis undefined and being able to say, by deploying smart meters and demand response, we're going to be able to reduce your kWh cost by 10%, 12%, 15%," said Wayne Gardner, a commissioner of the Pennsylvania Public Utility Commission. Despite demand response being "very high" in that state, there is an "undercurrent of high concern, especially on the consumer advocate side, from the overall cost of deploying smart grid technology," according to Gardner.

Wellinghoff said the benefits can be quantified in instances. During PJM's biggest peak demand period in August 2006, demand response saved PJM more than $200 million in one week, he said.

The voters at the town hall meeting also cited the lack of clear price signals as a barrier to demand response. According to former FERC Commissioner William Massey, the lack of price signals should be seen as the most important factor hampering innovation.

"Let the innovators into the marketplace. Don't pose barriers to them," Massey said during a panel discussion. "Let them in and give them price signals."

Massey is also the counsel for the COMPETE Coalition, a lobbying group that supports allowing more alternative suppliers into retail markets.

In an interview, Massey said allowing dynamic pricing at the state level would be the best policy fix to promote demand response. He pointed to Pennsylvania and Texas as two states that have successfully implemented dynamic pricing to some degree.

Reliant Energy Retail Holdings LLC is one company that has experience in both markets undefined it is based in Texas but has recently expanded to Pennsylvania and other areas on the East Coast. Reliant Energy Vice President of Residential Marketing Bill Harmon said during a panel that Texas' attitude toward dynamic pricing has allowed the company to pursue smart grid policies there to a much greater extent than elsewhere. Texas allows the company access to pricing data based on 15-minute intervals, and also allows retailers to access home area networks to install smart meters. "Without easy access for the customer and the retail electric provider to that data … it's practically impossible" to put customers on dynamic pricing plans, Harmon said.

According to Harmon, competition in the Texas market is what made Reliant Energy interested in the smart grid in the first place. "Competition is extremely robust in Texas," he said, estimating that Reliant Energy has about 50 competitors. "My electrons are the same as my competitors," Harmon said. "We view the smart grid as the key way we can differentiate ourselves."

Reliant Energy is a subsidiary of NRG Energy Inc.

http://www.snl.com/InteractiveX/article.aspx?CDID=A-13033567-13614&KPLT=2