Another ho-hum summer for demand response (DR) has concluded as September comes to a close. The last two summers have been light in regards to the need to activate DR resources for most of North America. The East Coast had a second consecutive relatively mild season, with no true heat waves until September. Even Texas, which saw record heat this summer, did not require a large amount of DR to support its grid through peaks. The lone exception is drought-stricken California, which needs all the help it can get to meet its energy and water needs.
This reality lies in stark contrast to the summers of 2012 and 2013, when the weather was hot, new peak load records were hit, and DR was utilized multiple times in markets across the United States. The past couple of years have gained notoriety for needing DR in the winter due to the polar vortex of 2014 and for ever constraining natural gas pipelines as the amount of gas-fired generation grows. It appears that the expansion of energy efficiency programs and solar photovoltaic installations have permanently lowered peak load growth in many regions, diminishing the need for peak support but potentially raising new needs to firm up new load shapes.
This lull just may be the calm before the upcoming storm, however. There was no lack of activity in the court system regarding DR this summer as the actual DR resources sat idly by. One small issue that surprisingly arose was the U.S. Environmental Protection Agency’s (EPA) Reciprocating Internal Combustion Engine National Emission Standards for Hazardous Air Pollutants (known as RICE NESHAP). In 2013, the EPA issued a rule that allowed backup diesel generators to participate in emergency DR programs for up to 100 hours per year. Some states and generator groups appealed this ruling (for different reasons), and in May 2015, the U.S. Court of Appeals threw out the EPA’s rule and told the agency to go back to the drawing board. The EPA has been granted a stay, so its existing rule can remain in place until it comes up with a new one, but the situation has created uncertainty for the 20% or so of DR that utilizes diesel generation.
However, the real fireworks will come on October 14, when the U.S. Supreme Court hears arguments on the case regarding the Federal Energy Regulatory Commission’s (FERC) Order 745 on DR compensation. The two issues at stake are whether DR should get compensated the same as generators in the wholesale energy markets, and, more significantly, whether DR should be allowed to participate in wholesale markets at all. FERC, EnerNOC, and a plethora of state agencies and other DR providers will line up on one side of the aisle, while generators and hardcore economists line up on the other. This could be the heaviest hitting we see until Super Bowl 50 next year.
It’s not too often that someone covering something as esoteric as DR gets to go to the Supreme Court, so I can’t pass up the chance. I will be reporting and live tweeting from the hearing (@BfeldmanEnergy) as much as is allowed and access provides. It promises to be the most riveting courtroom drama since Tom Brady’s hearing against the NFL in the Deflategate saga. I promise not to draw any unflattering courtroom sketches of FERC chairman Norman Bay or anyone else involved.