SmartGrid Seminar: Key Issues and Challenges in the Deepening Penetration of Demand Response Resources
We focus on the key developments in the implementation of demand response resources or DRRs, with special attention on their economics and policy aspects. The Federal Energy Regulatory Commission (FERC) forecasts an achievable 2019 DRR penetration range of 4 – 14 % of system peak load in the various ISO/RTOs under its jurisdiction. We discuss the three key factors driving the rapid growth in the DRR implementation: the rollout of the smart grid, the emergence of curtailment service providers or aggregators, and the developments on the demand response policy front. The large-scale implementation of advanced metering solutions to replace the legacy metering infrastructure and the deployment of appropriate technologies, devices, and services to access and leverage energy usage information are direct outcomes of the smart grid advancements. The creation of an important new class of market participants – the load aggregators – makes possible the deeper penetration of DRRs as viable competitors to supply-side resources. Recent policies, starting with the Energy Policy Act of 2005 and followed by FERC Order Nos. 719 and 745, and the various state-level initiatives have been instrumental in the removal of barriers to DRR participation and in bringing about the persistent deepening of DRR penetrations. We highlight some of the unintended consequences of FERC Order No. 745 and the challenges that deepening DRR penetrations present. While DRR curtailments result in lower loads, which reduce prices and emissions at specific nodes in the system during the curtailment hours, some portion of the curtailed energy is recovered in subsequent hours, resulting in impacts on prices and emissions in those hours — the so-called DRR payback effects. The recovery severely affects the economic benefits and emission reductions. Such outcomes underline the importance of the formulation and implementation of effective DRR policies.