DR affecting utility planning, markets: panel

Platts Electric Power Daily
June 28, 2020

By Jason Fordney

Increasing amounts of demand response on the grid is aiding reliability and changing markets but is also forcing utilities to look at planning in new ways as they are sometimes taken by surprise by demand response resources, panelists said Wednesday.

Demand response providers, a utility executive, and a PJM Interconnection executive discussed the implications of integrating large amounts of demand response on the grid during discussion at the National Town Meeting on Demand Response and Smart Grid in Washington.

Blake Young, president and CEO of demand response provider Comverge, had a message for generators, he said, adding an apology for being “provocative.”

Capacity markets have been very profitable for generators, Young said, who have “taken advantage of these markets.” However, capacity markets are not sending signals to build generation, he added.

“The moral of the story is, if you don’t build it, we will,” Young said in a message aimed at the generation community. There has been “incumbent pushback” to demand response, which he termed a “disruptive” technology.

Demand response, in which electricity users receive a payment to reduce usage at peak times, is enjoying rapid growth as resource, aided by regulatory measures such as Federal Energy Regulatory Commission Order 745. However, FERC’s equal compensation for DR is being challenged in federal appeals court by the Electric Power Supply Association and the California Independent System Operator. Opponents argue that FERC does
not have jurisdiction to regulate demand response, which they say is a retail service.

Even FERC member Philip Moeller has argued against compensating demand response equally to generation, saying in his dissent to Order 745 that it overcompensates demand response resources.

At the Town Meeting, panelists noted that demand response has also raised measurement and verification issues and worries as to how it will affect utility planning and the utility/customer relationship.

Comverge is not seeking to displace the utility relationship with the customer, Young said, adding “we respect that relationship between the utility and the end-use customer…we are a proxy for the utility with respect to that customer relationship.”

Dominion Resources Alternative Energy Solutions Senior Vice President Mary Doswell noted that there are many thirdparty demand response providers that do not go through the utility when contracting with parties that participate in demand response programs, such as large industrial electricity users.

Dominion has been caught by surprise, noticing that peak demand levels might have dropped at certain times due to the presence of demand response resources the company did not know were operating. This affects important decisions such as deferral of generation, she said.

“The only danger there is planning. There are a lot of unknowns,” Doswell said. “We have discovered that we need to get used to that.” She said her message to other senior executives is that Dominion needs to start thinking in terms of small scale, distributed generation, rather than large central station resources.

The growth of DR has the utility wondering if it should offer its own DR solutions, she said, adding that the presence of DR “will change the whole view of things.”

In PJM, demand response has been critical to maintaining system reliability, but also it has also “shown itself to be a competitive option in the capacity market,” PJM Vice President of Market Operations and Demand Resources Stu Bressler said.

Demand response is a cheaper option that building a brand new generation source, he said, and the increasing penetration of demand response into markets “continues to demonstrate its value as a reliability resource.” It is a locational, economic, “day-to-day type of resource,” he said.

Demand response is “proving the naysayers wrong as to the value it can bring to the marketplace,” Bressler said.

FERC Chairman Jon Wellinghoff pushed the issue further when he announced earlier this year that FERC is exploring the possibility of allowing demand response resources to be paid more than generation to reflect their locational and fast-acting advantages. However, FERC has made no public movement toward such a policy since then.

Copyright © 2012 by Platts, The McGraw-Hill Companies, Inc. Reposted with permission.