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 Missing Link
Everyone is in favor of more demand response, but little gets delivered when system operators need it the most.
from the ISO to several utilities that pass it on to participating customers using multiple channels. The process is notoriously cumbersome and time consuming. The ISO, faced with an emergency in real-time may resort to involuntary but certain load shedding.
The problem becomes even more intractable if the system operator is engaged in real-time bidding, as happens at the airport boarding gate, referring to the airline analogy. For such an interactive scheme to work, an even higher level of sophistication, automation, aggregation, and confirmation is needed. We are not aware of too many working examples of such schemes with multiple parties and large numbers of consumers successfully operating in real-time.
The second problem is principally one of handling multiple business transactions including accounting, billing, and settlement protocols. Since many customers and intermediaries are likely to participate in DR programs, keeping track of who did what and when and how much they are owed as a result of their contribution to a DR emergency currently is a back-office nightmare. In most cases, utilities offer multiple programs to different customers with widely varied incentives, terms and conditions. 16 Record keeping, invoicing, collecting, and settlement processes become intractable with thousands or millions of customers.
Both problems are going to grow in complexity as more interval meters are installed and more customers participate in time-variable pricing programs. As already mentioned, California is about to convert virtually all electrical meters in the state to the smart variety. 17 Other jurisdictions, including the province of Ontario in Canada, 18 are moving in the same direction. In the absence of standardized protocols, the problem of managing multiple signals and commands, receiving confirmations, recording the response, and settling accounts to millions of customers simply will become unmanageable.
Participation of vast numbers of small commercial and residential users is considered critical if DR programs are to reach their full potential. Yet simple tasks such as attracting and enrollment of residential users currently is a labor-intensive and largely manual process. Each program offered by each utility to a segment of the market uses a unique set of forms and protocols for customer registration. Likewise, the process of enabling vast numbers of consumers to engage in DR in real-time during an emergency is time-consuming and haphazard.
The Way Forward?
Lack of enabling technology is widely recognized and is gradually being addressed through efforts to convert more consumers to interval meters as well as increasing the penetration of time-based rates. These efforts will take time and billions of dollars of investment to bear fruit. In the case of Pacific Gas & Electric Co., among the nation’s largest privately held utilities, the cost of a complete rollover of 5.1 million electric and 4.2 million gas meters over a six-year time frame is estimated around $1.74 billion. Given the large number of meters and customers in the country, the size of the task is easy to grasp.
There are efforts now underway to tackle DR’s key interface and logistical issues. 19 Among the promising solutions is Demand Response Business Network (DRBizNet), offering a cost-effective approach to