Navigant Research Blog

A Tumultuous Year for Demand Response

Brett Feldman — January 6, 2015

The participation of demand response (DR) in the wholesale markets has been fairly stable for the last 5 years or so.  2014 blew those trends out of the water.

The year came in like a lion, with the polar vortex hitting the entire United States during the first week in January.  Virtually every region of the country activated DR resources during that freeze.  Overall, DR performed well, dispelling myths that it could not contribute to winter reliability.

The spring brought the annual forward capacity auctions for the 2017-2018 power year for ISO New England and PJM, which both showed lackluster results for DR.  In New England, while capacity prices doubled around the region, the amount of DR cleared capacity stayed flat from the prior year’s auction.  Meanwhile in PJM, while the capacity price in the eastern region stayed flat and the western price doubled compared to the prior year’s auction, DR cleared 10% less capacity than last year.

Legal Bombshell

Then the fireworks began.  Everyone in the industry had been waiting for a ruling from the U.S. Circuit Court of Appeals on Order 745 from the Federal Energy Regulatory Commission (FERC) on DR compensation in response to a challenge that was raised by the Electric Power Supply Association a couple years earlier.  The court dropped a bombshell by questioning the very jurisdiction of FERC over DR, and the entire DR community stopped in its tracks.

The rest of the year was consumed by appeals and writs and stays and various other legal maneuvers, with some parties trying to get the court’s decision to take immediate effect and others trying to delay it as long as possible and get the U.S. Supreme Court to take up the case.  As we enter 2015, the fate of the order is still in the balance, and probably will be until the spring, when the Supreme Court will likely decide whether to take up the case.

Meanwhile, Elsewhere …

Other accomplishments in the DR world have been overshadowed by the FERC 745 case.  Baltimore Gas and Electric unveiled the first default Peak Time Rebate program.  New York and California are undertaking large-scale utility transformation efforts.  Internationally, many markets in Europe are percolating with DR activity, and Asia is heating up as well, led by South Korea opening up its electricity market to DR in November.  Finally, merger and acquisition activity in the space has accelerated, with EnerNOC going on a buying spree and Constellation selling its DR business to Comverge to create CPower.  Many of the above topics, along with several other interesting developments, can be found in Navigant Research’s free white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond.

Will 2015 be equally eventful?  I certainly don’t expect a repeat of the polar vortex situation, so in that respect, DR should get a respite.  I do expect chaos on the regulatory front to continue, though, regardless of the outcome on Order 745.  The regional transmission organizations will likely continue to squeeze all resources, including DR, for higher reliability standards.  More states are expected to push for retail-level DR, both as a reaction to Order 745 and out of their own needs.  And the international arena is likely to expand strongly, providing a relief outlet for companies looking to diversify outside the United States.

Leave a Reply

Your email address will not be published. Required fields are marked *

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Digital Utility Strategies, Electric Vehicles, Energy Technologies, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Transportation Efficiencies, Utility Transformations

By Author


{"userID":"","pageName":"A Tumultuous Year for Demand Response","path":"\/blog\/a-tumultuous-year-for-demand-response","date":"10\/16\/2017"}