DC event reveals DR growth in shifting landscape

Smart Grid Today
5/22/14

Demand response is changing as grid operators rely on it more and firms that offer it change their strategies, experts said yesterday at the National Town Meeting on Demand Response & Smart Grid presented by the Assn for Demand Response & Smart Grid (ADS). A panel of ISO executives from five of the seven markets revealed similarities in issues their markets face: retiring generation due to prices and/or regulations, a growing appetite for natural gas on their system that roiled several markets this winter and the modernization of the grid.

ISO-NE saw continuous ramping up of DR and did not see that as necessarily a good thing for the historic way the industry has worked, said the ISO's Director of Resource Strategy Henry Yoshimura. "In order to meet the challenges I see, the business model of demand response needs to evolve," he added.
"I think that requiring customers to be resources to the grid – to interrupt their real-time energy consumption in exchange for a wholesale payment – that has been a value but I think in the long run, it's not viable," he added.

As grid modernization goes forward, DR providers can help customers adapt to the more complex system that features DG, growing efficiency and EVs, but as grid operators need to call increasingly on the historic "supply-side" DR, it will be less attractive to customers whose businesses almost always get more value out of using power, Yoshimura said.

"We don't see the market shrinking," EnerNOC VP of Product Strategy & Technology Micah Remley told us in an interview at the event. "The main problem with capacity markets: There's some price volatility in specific markets."

The changes PJM made to the operational requirements of DR were in line with what previously happened in other markets and they were designed to make sure the product fit the need, Remley said. EnerNOC's early focus was on capacity markets and it is starting to diversify, but Remley noted the market constructs proved to be good as a customer-acquisition tool for the firm.

Once customers start getting payments to be available for DR events, they want to learn what else EnerNOC can do for them. The firm is ramping its efforts in energy efficiency and helping its customers manage their overall bills.

C&I customers have part of their power bills based on their biggest use day and EnerNOC is working with customers to help them cut their demand on the highest use days to help manage their costs, Remley reported.

Other ISO/RTOs expect to rely on traditional DR well into the future and some are even working on ways to bring more of it into their markets. PJM saw DR grow in its capacity markets with some shrinkage due to price changes as coal plants retired due to cheap gas and EPA regulations.

But the resource will be called on more often, said PJM Manager of Demand Response Operations Peter Langbein, adding that the area the RTO needs to improve on the most on DR is its operational characteristics.

California has new landscape

Cal-ISO is about to get more control over the ample DR in its footprint under utility programs as the PUC approved the "bifurcation" of the resource into the supply-side and the demand side, said the ISO's Regulatory Policy Manager John Goodin in his presentation at the event. The PUC's decision gave the ISO lots of clarity on how it will meet the state's loading order and it created comparability between DR and generation, he added.
The ISO plans to file tariff revisions with FERC to implement the new policy.

Texas offers new venue

Hopes for a capacity market for ERCOT dried up when the votes for the concept on the PUC were revealed to be too few, but the Texas grid still has new opportunities for DR, said ERCOT Senior Analyst of Market Design Paul Wattles. Load in the ISO's "Security Constrained Economic Dispatch" (SCED) will start a pilot soon and ERCOT and stakeholders are working on rules to implement the system in a more permanent way, Wattles said.

One of the big issues is how to get DR into the dispatch stack without leading to uplift payments for generators that then have to be backed down when load they were expecting to serve goes away, he added.

Both Texas and California have substantial amounts of renewables online and that is one area where EnerNOC is very focused on growing its products. DR can help integrate renewables by providing ancillary services, Remley told us.

Such ancillary services are a major focus for his firm as it expands in Europe, he added.

Can DR help MISO?

MISO has well-known capacity issues for 2016 as power plants are retiring and from retrofits to comply with EPA regulations, but its Demand Response Advisor Mike Barber wondered in his remarks at the event whether DR could take advantage of that opportunity.

"The question is, can you get enough of a DR program set up in the states and operational, tested and what have you, between now and then in order for that to make a substantial difference?" Barber said.

"Something I've thought about is, we're retiring GWs and we're bringing new MWs online from the DR standpoint. My fear is that – while DR could have been a nice marginal solution had their been a gradual change with the resource fleet… – now you need such a baseload-type volume, I worry that the DR opportunity may have been squelched."

© 2014 Modern Markets Intelligence, Inc. IMPORTANT: This article was reproduced from the May 22, 2020 issue of Smart Grid Today with the limited permission of the owner. To view the full story on Smart Grid Today’s website, please visit http://www.smartgridtoday.com/public/DC-event-reveals-DR-growth-in-shifting-landscape.cfm.