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.
early evening when smog and ozone are less likely to form. 8 This has begun to be investigated in the northeast United States, where the Ozone Transport Commission and individual state environmental agencies are looking at DR as a new tool to use in non-attainment areas. DR may one day be seen as a potential dynamic emissions tool. 9
Because DR trims load at peak times it leads to the more efficient utilization of existing supply-side resources and potentially defers or decreases the need to develop additional generation, transmission and/or distribution. These facilities —particularly transmission lines—can face significant environmental, land use and aesthetic challenges.
Importantly, DR’s contribution to renewable energy is now beginning to be explored and recognized because DR is well suited to facilitate higher utilization of intermittent power generation, especially wind, as it can readily be used for load balancing as the intermittent source ramps up or down. This will be valuable in systems where the additional utilization of renewables already is constrained by their intermittency, thereby allowing additional use of renewables and the attendant reduction of emissions. This is an issue that is only beginning to be explored, but one where it may be that DR becomes an important part of the support infrastructure for renewable energy development.
Looking Forward: Improving the Family Business
Siblings though they may be, DR and energy efficiency have been raised in separate households. Until recently, efficiency and DR programs rarely were developed with regard to the other, and unfortunately, respective opportunities to save energy and to reduce peak demands (nevermind lessening environmental impacts) have been missed. We are not suggesting that all efficiency efforts should maximize peak reductions, nor that all DR should focus on overall energy savings. Rather, utilities and government should consider the implication of these efforts on the other—and, ideally, strive to optimize reductions in energy consumption, peak demand and environmental degradation.
Specifically we recommend that the following be considered:
• Conduct system and time-specific analyses including the time-of-use of efficiency savings from DR to calculate accurately the financial value of the savings (both short and long-run) and the environmental effects. For starters, building codes should be based upon the time that savings will occur. California’s Title 24 recently was updated to reflect time-differentiated value of electricity savings from required efficiency measures: Other jurisdictions also can update their building codes based upon time-of-savings valuations and even the local geography of transmission constraints.
• Maximize approaches that do “double duty” of both efficiency and peak reduction, such as advanced meters and advanced lighting controls. Doing so not only enhances the cost-effectiveness of demand-side resources, but can be thought of as a “No Regrets” approach if the value from one side of the equation is large enough to justify the activity even without the other side. Smart appliances that recognize and act upon DR rates or signals will make growing contributions to peak management if their deployment is accelerated by market-transformation programs that recognize the combined value of DR and efficiency.
• Recognize the contribution to electric reliability that can be made