Meeting #34: Costs and Benefits of Demand Response Programs

Tuesday, June 17, 2014
10:00am – 3:15pm
Energy Hall
2301 Market Street
Philadelphia, PA


Demand response (DR) programs currently play an important role in PJM energy and capacity markets, yet there is still a sense that the full value of this distributed resource is not universally appreciated and its full potential has not yet been tapped. This begs the question, how should its value be determined? How do we acknowledge the public good aspect of DR in terms of reducing overall system prices? What kinds of cost effectiveness tests should be employed to ensure that DR program costs and benefits are properly valued and that the most cost-effective DR options are being implemented? What are the impacts of DR on energy and capacity market prices? And how might the benefits vary based on program type and program provider? All of these topics were explored at this meeting. The backdrop for this discussion came from a generalized cost-effectiveness assessment framework developed as part of the National Forum on the National Action Plan for DR (NAPDR), sponsored by FERC and DOE.


9:30 – 10:00am
Networking with attendees

10:00 – 10:15am
The Honorable Lawrence Brenner, Maryland Public Service Commission
Janine Migden-Ostrander, Regulatory Assistance Project

10:15 – 11:15am
Determining Whether DR Programs Are Cost-Effective
Tim Woolf, Synapse Energy Economics: Cost Effectiveness of Demand Response
Dan Hurley, Maryland Public Service Commission: Determining Whether DR Programs are Cost Effective
Ken Shutika, GSA: Demand Response at GSA—Costs/Benefits of Participation

This panel offered different perspectives on how to determine whether DR programs are cost effective. We heard about different cost-effectiveness screening tests as applied to DR, and how they differ from standard cost-effectiveness tests for energy efficiency programs. First, we heard about the generalized cost-effectiveness assessment framework developed as part of the National Forum on the NAPDR. Next, we heard an example of how regulators assess DR cost-effectiveness from a state PUC expert. Finally, we got a large customer’s perspective on how customers assess the merits of participating in DR programs.

11:30am - 12:45pm
Differences in Costs and Benefits Based on DR Program Type or Provider

Tim Woolf, Synapse Energy Economics
Greg Wikler, Navigant: The Changing Role of Utility-Based DR Programs
Jed Trott, Customized Energy Solutions: CES Overview
In recent years state and federal policymakers have encouraged the development of DR, but they have mostly allowed markets and stakeholders to define how DR should be developed. The result has been the development of a secondary market of entrepreneurs who have aggregated customer demand as well as individual large customers who have undertaken to sell their demand reductions directly in the market. At the same time, utilities have developed load control programs that have reduced demand overall on the system. This panel explored how the types of DR programs implemented by utilities, aggregators, and large customers may vary not just in how they function, but also in terms of the benefits they provide to the grid system for both participating and non-participating customers. We heard from a panelist that worked on the NAPDR generalized cost-effectiveness framework, then from an expert on utility DR programs, and finally from an expert on third party DR programs.

12:45 - 1:45pm

1:45 – 3:00pm
Impacts of DR on Energy and Capacity Market Prices
Stu Bresler, PJM: Impacts of DR on Energy and Capacity Market Prices
Jake Thomas, GDS Associates: Demand Response and LMP
Dan Griffiths, Consumer Advocates of the PJM States, Inc.

With the latest PJM Base Residual Auction having been recently completed, this panel invited PJM to discuss the results of the auction, the role of DR in that auction and trends and thoughts with regard to DR participation in future auctions. The second panelist discussed whether there is a possibility that future PJM DR capacity resources may set Locational Marginal Prices (LMP) and if, in so doing, there is concern that high "strike prices" for PJM capacity DR resources may be contrary to DR goals of reducing hourly energy demand and consequently hourly prices. The third panelist provided a consumer advocate perspective on the role of DR in setting market prices. This speaker also addressed viewpoints on the best mechanism for achieving consumer participation.


3:00 – 3:15pm
Wrap-Up, Adjournment
The Honorable Lawrence Brenner, Maryland Public Service Commission
John Shenot, Regulatory Assistance Project