California’s load-management experience argues for formal DR standards
Jackalyne Pfannenstiel is chairman of the California Energy Commission and Ahmad Faruqui is principal at The Brattle Group. This paper is based on two white papers written for the commission last year. The authors would like to acknowledge conversations with John Geesman, Ryan Hledik and David Hungerford in the preparation of this article. Contact Faruqui at ahmad.faruqui@brattle.com.
Despite a plethora of studies and experiments showing the benefits of demand response, it remains a novelty product both in restructured and regulated markets. For example, the state of California set a goal of reducing its peak demand by 5 percent this summer through price-responsive demand response (DR) programs. The actual result came in at 2.2 percent. The state now is considering mandatory DR standards based on its early trials with load-management standards in the late 1970s and its long-standing success with codes and standards for promoting energy efficiency.
DR can play a vital role in the nation’s mix of electricity resources. It can allow utilities to reduce power consumption during high-cost peak-demand times, and defer building expensive new peaking capacity that would be used for a couple of hundred hours a year. In addition, DR can prevent brownouts and blackouts during emergency situations. It promotes system reliability by providing the grid operator with tools to manage demand during critical days. Coupled with advanced metering infrastructure (AMI), it can improve the level of service provided to electricity customers.
DR comes in two types: Price-responsive DR uses price to address an imbalance between the demand and supply of electricity caused by conditions in the power market, and reliability-responsive DR can be dispatched directly to meet system-reliability problems.