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...
Prime Time for Efficiency
forthcoming ancillary service market will provide a platform for demand response to participate. Other demand resources, such as energy efficiency or behind-the-meter generation, are not specifically incorporated. They are considered in retail load planning but aren’t treated as a biddable resource in the MISO market.
Like demand response, many energy efficiency resources provide reliable capacity at costs lower than new generation, and markets that include these resources will become more efficient. Many details still must be ironed out through the stakeholder process, but already in its nascent stages, the FCM has shown that demand resources can, and will, compete with generation— and that a significant amount of those resources will enter service if the markets provide a fair price signal.
If the cheapest kilowatt is the one that isn’t used, then those unused kilowatts deserve a chance to compete in organized markets, as they do in New England. The challenge is to ensure the nation’s energy future includes meaningful and robust opportunities that increase reliance on demand resources—and allow ratepayers and society to capture the real value of efficiency and conservation.
1. Massachusetts Saving Electricity: A Summary of the Performance of Electric Efficiency Programs Funded by Ratepayers Between 2003 and 2005 , Massachusetts Division of Energy Resources, Apr. 2007, available at www.mass.gov/Eoca/docs/doer/pub_info/ee03-05.pdf .
2. Maine Public Utilities Commission v. FERC , No. 06-1403 (D.C. Cir. 2008): On March 28, 2008, the D.C. Circuit, deciding an appeal of a settlement brought by the Maine PUC, the Attorneys General of Massachusetts and Connecticut and a group of industrial customers, affirmed the substance of the settlement and the FERC decision approving it. The Court did, however, find for petitioners on the procedural question of what standard of review applied to decisions implementing the settlement, refusing to apply the “ Mobile-Sierra” standard to challenges brought by non-settling parties.
3. Devon Power, LLC , 115 FERC ¶61,340 (2006) Settlement Agreement at 14, §11.I I.e.2.b.
4. Wholesale Marketplace Helping to Achieve Long-term Power System Reliability Goals , ISO-NE report on FCM results, available at www.iso-ne.com/nwsiss/pr/2008/press_release_fcm_auction_results_02_13_08...
6. “Demand Resource Show of Interest (SOI) for the 2nd Forward Capacity Auction (FCA#2) ISO-NE,” Demand Resources Working Group, Jan. 21, 2008, available at www.iso-ne.com/committees/comm_wkgrps/mrkts_comm/dr_wkgrp/mtrls/2008/jan....
7. Commissioner Jon Wellinghoff, Presentation, Northeast Power Markets Forum, March 29, 2007, Washington, D.C.
8. PJM Interconnection, L.L.C. , 117 FERC ¶61,331 (2006), December 22 order; and June 25 order on rehearing, 119 FERC ¶ 61,318.