FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
Demand Response: The Green Effect
How demand response programs contribute to energy efficiency and environmental quality.
group during the 2 p.m. to 7 p.m. peak period: 47 percent cuts during super-peak-event days, and 30 percent cuts on non-event days. However, a share of those savings rebounded during the post-7 p.m. period. In the aggregate, during the summer months the homes with ADRS used more than 6 percent less electricity than those without ADRS.
While energy efficiency and DR alone very often are cost-effective in their own right, neither may be seen as adequately valuable to get the attention of consumers—even sophisticated ones—because of time and transaction barriers. But if the addition of DR’s value stream gets a consumer to participate in energy-efficiency programs that they otherwise would not have, energy efficiency from that customer will be greater.
It is important to recognize that in some circumstances DR can increase electricity usage. For example, a common DR strategy is to shift the timing of thermally related equipment, such as air conditioning or water heating, which can lead to energy losses since thermal energy dissipates over time. (Fortunately, several factors can mitigate this, including increased insulation and taking advantage of the inherent Carnot efficiency of cooling at night rather than during daytime.)
Finally, the competitive aspect of the efficiency vs. DR relationship must be noted. Many view the two as engaged in a zero-sum situation where money (or personnel or corporate or political will) can result in support for DR not being available for energy efficiency. This is, of course, an issue between many other energy areas as well. It should also be noted that in many cases, such as with many state-system benefit funds, that DR currently is unfunded or precluded from being funded. But this is mitigated when a holistic approach is taken at the demand-side management (DSM) level, such that demand-side projects and program portfolios that address both efficiency and DR are pursued. Additionally, the zero-sum argument assumes that available funding remains capped, and does not grow thanks to the success or popularity of these activities. Instead, all resources—demand- and supply side alike—should compete, as is already the case in some ISOs and in the California resource loading order. To put it in a different perspective, if and when efficiency and DR are treated as utility resources, not just as programs, they will be acquired whenever they are cost-effective based on total need, not based on pre-determined budgets.
Does DR Lessen Environmental Impacts?
One of the most important yet inadequately investigated elements of DR is its impact on the environment. There are numerous reasons to expect a positive environmental impact (and others that lead one to expect the opposite), but the results always will be very system- and generation-fleet specific. For example, DR in a diesel-peaking, gas-baseload system that is facing supply constraints will affect the environment differently (and positively) than it will in a hydro-peaking, coal-baseload system with large power reserves.
As described earlier, in most cases DR modestly reduces total electricity consumption, which subsequently diminishes the range of environmental impact associated with electricity generation, from CO 2 and other pollutants.
It is also important