Water Heaters to teh Rescue: Demand Bidding in Electric Reserve Markets

Deck: 
With just a few changes in reliability rules, regulators could call on consumer loads to boost power reserves for outages and contingencies.
Fortnightly Magazine - September 1 2003
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With just a few changes in reliability rules, regulators could call on consumer loads to boost power reserves for outages and contingencies.

 

In proposing a standard market design (SMD), the Federal Energy Regulatory Commission (FERC) makes clear that it wants customers to participate in wholesale power markets, such as by bidding an offer to curtail consumption, increase supply, and reduce upward pressure on prices.

"We believe in the direct approach of letting demand bid in the market," says FERC.

In fact, FERC much prefers this demand-response strategy to the more traditional special programs for load reduction, whereby regulators typically promise an incentive or subsidy to customers in return for cutbacks in usage.

According to the commission, letting customers bid their own demand directly in the market as a system resource "will be less costly than a program where an end-user receives payments greater than the market-clearing price to reduce its demand."1

To try out FERC's idea, consider the issues and opportunities in getting retail loads to provide some of the real-power ancillary services that are required to comply with reliability rules imposed on the nation's grid system. In particular, consider the three services known as contingency reserves that are commonly deployed throughout the Northeast:
(1) 10-minute spinning reserve;
(2) 10-minute nonspinning (supplemental) reserve; and
(3) 30-minute (replacement) reserve.

These three ancillary services provide insurance against outages and other contingencies that might threaten the reliability of local or regional power grids through an interruption in service or by disrupting grid operations.

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