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Demand-Side Management and Metering Tech

Fortnightly Magazine - September 2004

fatter and cheaper. In the telecommunications sector, cable competes with traditional phone lines, and both compete with wireless services.

Finally, price responsive load like that of Susan and John described above is "win-win." Susan and John save money by reducing load during high-priced hours. The couple's electricity supplier, whether competitive or regulated, saves money because high-priced (cost) generation does not need to be dispatched during hours of very high demand. The reduction of load by Susan and John during high-priced (cost) hours contributes to the reliability of the grid.

Wholesale Market Design: Only Part of The Equation

We currently have an electric market in which only one hand, generation, is clapping.2 The effort is under way to develop market designs for the wholesale electric market that accommodate and value demand response. More work needs to be done.

The biggest challenge in all of these efforts is to treat all resources, both generation and demand response, comparably. Comparably does not mean the same, but it does mean that the proverbial playing field for both kinds of resources must be as level as possible. Market designs, whether for energy, unforced capacity or spinning reserves, must recognize the important differences between generation and demand response without providing an unfair advantage for either resource. Participation by demand response in any wholesale electric market must be valued properly to avoid distorting the important price signals.

Moreover, as described above, efforts are under way to prove that the technology-including equipment, software, and communications-actually works. The United States Department of Energy (DOE) has awarded and is soliciting projects to prove these technologies in the field. Given the current anemic state of investment in much of the electric industry and the improving but still weak economy, DOE's projects have grown in importance. The significant power outage on Aug. 14 of last year may or may not change this environment for investment. Fortunately, the Federal Energy Regulatory Commission (FERC) and many state regulators have adopted demand-response policies including funding commitments that support the projects DOE is sponsoring and partially funding. FERC has said that "without a demand-response mechanism, the [independent system operator] is forced to work under the assumption that all customers have an inelastic demand for energy and will pay any price for power."3 Likewise, state regulators have filed comments supportive of developing demand-side response in PJM markets.4

Feasible Prices for the Technology

It also is essential for energy management systems to be priced at a level that makes end-users' investment in them feasible, given the market-measured value that these systems produce. In other words, proving that the technology works is not enough. It must enable end-users to see and respond to market prices for electricity. The price of the energy management system that optimizes the end-user's electricity purchases and load reductions must be commensurate with the value that the end-user can obtain in the electricity market by installing the system. Presumably, energy management system providers will focus first on the largest end-users.

Two load-response programs approved by FERC are currently "jump starting" demand-side response in PJM. Load currently registered