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Load as a Resource

Integrating controllable demand into real-time, security constrained economic dispatch.

Fortnightly Magazine - August 2012

payment of LMP to these resources will result in just and reasonable rates for ratepayers. As stated in the NOPR, we believe paying demand response resources the LMP will compensate those resources in a manner that reflects the marginal value of the resource to each RTO and ISO.”

In its Strategic Plan issued in May 2011, the Department of Energy announced a new focus on several aspects of the emerging electric grid of the future. The plan highlights the need to integrate significant amounts of renewable generation in the next few years; develop well-instrumented micro-grids; and develop storage technologies.

All three of these imperatives support a fundamental move to ensure that the U.S. electric grid can meet the needs of the 21st-century marketplace. In the 20th century, economies of scale, regulatory structures, and technical limitations related to data management resulted in a power grid that was characterized by centrally dispatched large scale generation and a relatively passive and uninformed consumer base. Now the demands for energy security, reliability, price competitiveness, environmental protection, and technological change require and allow for a much more decentralized power grid. Moving forward we can expect to have the advantage of an integrated system, in which advancements in load control technologies, distributed renewable and non-renewable generation, and storage all combine to enable power customers to aggressively manage their energy costs and simultaneously support the development of a secure and cleaner grid.

Order 745 reflects the physical reality that the ability of customers to use their own energy resources to curtail and shift energy use on the grid provides a service to the grid operators and markets that must be fairly and equitably compensated at the real-time clearing price of power. The DOE’s announcement reflects a commitment that moving forward there will be increased investment in the assets that provide this essential load flexibility.

In a sense the FERC’s rule and the DOE’s policy initiatives are two legs of a three-legged stool. DOE’s focus will help ensure that the grid is planned and developed on a truly integrated and least-cost basis. The FERC’s rulemaking provides assurance that the markets are operated on a non-discriminatory, economically efficient basis. The third leg of the stool—the physical dispatch of the grid—now can be improved.

Security constrained economic dispatch is the universal approach used by utilities and grid operators to ensure that the dispatch of the integrated power system adheres to sound economic and reliability principles. Historically, this form of dispatch treated voluntary load reduction as one of the last resources used to maintain a reliable grid. Expanding dispatch to include dynamically dispatchable load adheres to traditional dispatch principles and provides significant benefit to utilities and their customers. A change in the basic balance between load and supply is occurring as load becomes a resource.

Integrating Controllable Demand

The basic assumption underlying dispatch in the grid is that load is generally inelastic and the viability of the power system therefore depends on the ability of the grid operator to increase or decrease the output of generators to maintain system balance. Under this paradigm,