When the U.S. Environmental Protection Agency (EPA) released its draft Clean Power Plan (Section 111d) proposal last year, demand response (DR) was not specifically called out in any of the potential building blocks used to calculate state emissions targets. While it may reasonably be included in the End-Use Energy Efficiency block, some players in the DR space feel that a more explicit role is required to ensure that it gets the proper attention by states when they are developing their compliance plans.
To date, there has been no definitive analysis showing that DR can actually reduce carbon emissions. The case is not necessarily as clear as it is for energy efficiency, where more efficient equipment simply replaces less efficient equipment, leading to a straightforward engineering analysis of energy savings:
- DR is not a permanent replacement, but rather, a temporary reduction in load in response to reliability or economic signals.
- The reduction must be measured against some kind of baseline, for which there is no industry standard.
- Some of the loads may be shifted to other times, so there may not be full kilowatt-hour (kWh) savings.
- Some DR participants use behind-the-meter generation to respond, so depending on the fuel source, emissions could even increase instead of decrease.
Clearly, more analysis will be required to make states and the EPA comfortable with including DR in their plans.
In order to take a first pass at the issue and get some initial thoughts into the comment record for the Clean Power Plan, the Advanced Energy Management Alliance contracted with Navigant in November 2014 to perform some high-level modeling and analysis to see if DR even passed the sniff test and is worth maintaining in the conversation. Navigant employs detailed market models that could perform such analysis on an hourly basis if a specific case should arise, but for this exercise, a simplified version was utilized to get an annualized view of the results.
Navigant looked at the PJM Interconnection, Electric Reliability Council of Texas (ERCOT), and Midcontinent Independent System Operator (MISO) markets, focusing on two different types of emissions savings: direct and indirect. Direct emissions reductions include peak load reductions through capacity and emergency DR programs and ancillary services markets like spinning reserves and frequency regulation where DR can participate. Indirect emissions consist of DR contributing to coal plant retirement decisions and allowing for increased levels of renewables penetration.
The analysis found that DR could directly reduce carbon emissions by more than 1% and that its indirect role in the economics of fuel mix and plant operations could result in reducing carbon emissions by an additional 1%.
Direct Emissions Reduction from DR Peak Load Reduction
(Source: Navigant Research)
This emissions reduction potential is significant when compared to the EPA’s targets, which propose to reduce carbon emissions from fossil fuel power plants by 20% from 2012 levels by 2030. Perhaps the EPA will have heeded this input and will include DR more explicitly in its final rule expected in June. I am presenting these results at the Peak Load Management Alliance (PLMA) Spring Conference in Tucson on April 28, so we will continue to spread the message.