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Load as a Resource

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

Fortnightly Magazine - August 2012

eliminate costly capital expenditures associated with substation expansion and stressed distribution feeders. And the integration of predictable, reliable CD into the utility dispatch queue reduces fuel costs and opens up new revenue opportunities for customers and utilities.

Such program can be administered as a utility program under PUC approved tariffs, or it can be delivered via an unregulated subsidiary. The choice is, of course, heavily dependent upon the regulatory environment in a particular jurisdiction. In either scenario, there are benefits to the utility, its general body of ratepayers, and customers provide the CD.

An active load management program provides many distinct advantages to regulated utilities. It leads to better regulatory relationships as more utility regulatory commissions embrace customer load control and efficiency initiatives. It assists in meeting various regulatory mandates, and it can ease utility capital expenditure constraints by providing an operating margin with little or no capital requirements. Finally, as electric vehicles and microgrids are deployed, experience in managing controlled load will be quite valuable to utilities.

Controllable demand is directly analogous to an energy and ancillary resource on the utility’s system. Rather than increase generation, the utility can use predicted and controlled demand reductions to meet other load requirements on the system and redirect traditional resources to the wholesale market. In addition, forms of CD can be used to provide operating reserves, regulation services, and even reactive power on the grid. CD by definition is price responsive and is predicated on the customer’s desire to change consumption on the grid based on its individual economics, energy requirements and control capability.

As in the case of other forms of energy, CD is an offset to fuel and operating costs the utility would otherwise incur to meet retail customer demand. CD also can be used to offset transmission operating expenses, such as line losses, reactive power requirements, and wheeling charges where relevant.

Several approaches are available to utilities to partner with customers in providing these services in ways that benefit the utility, as well as the CD customers and other retail customers. In all of these approaches, the utility’s demand charges and any interruptible rate programs can be treated separately in retail rates. The payments made to customers will be recovered in the utility’s fuel charges and allocated to other customers. Since this is based on hourly energy costs or wholesale prices, real time retail pricing isn’t necessary. In addition, participating customers must be able to schedule demand reductions on a day-ahead and real time basis so that it can be used as virtual power in the utility’s generator dispatch program, and they also must be able to demonstrate that the load was price responsive— i.e., not a permanent reduction.

Policy makers can choose from among three primary approaches to implementing controllable demand in wholesale markets.

Direct Market Access: Under this approach, the utility offers customers direct access to the wholesale market.Customers get the benefit of the prevailing wholesale prices and also avoid the fuel and energy charges associated with reduced consumption from the utility. The utility and its other customers