Slideshow: Demand Response at the Grid Edge

Our latest report describes the importance of demand response in U.S. wholesale DER aggregation. The slideshow below highlights a few slides from the full report.

&amp;amp;amp;amp;amp;lt;div style="display:none"&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;h2&amp;amp;amp;amp;amp;gt;Demand Response U.S. Wholesale DER Aggregation&amp;amp;amp;amp;amp;lt;/h2&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;Q1 2016&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;h3&amp;amp;amp;amp;amp;gt;Demand response at the grid edge&amp;amp;amp;amp;amp;lt;/h3&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;br&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;The current electricity system landscape is in the midst of a physical and economic transformation as a result of deeper penetration levels of distributed energy resources (DERs) across the country. Although DERs pose great commercial opportunity, they are also changing the practice of system dispatch in such a way that requires shorter response times and the optimization of integrated resources. &amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;br&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;Transitioning to a next-generation energy system with increased penetration of DERs requires market evolution that follows technology at the grid edge. Demand response (DR) programs provide an avenue for end users to become involved in the electricity value chain. These market services have long incorporated behind-the-meter resources (controllable load, thermal storage, and on-site generators). Opportunities for DERs have historically been integrated into DR programs. The provision of aggregation services is quickly extending beyond load reduction and backup generators, and toward the optimization of various resources unlocking the value of DERs and the consumerization of energy delivery. &amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;br&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;Over the years, market models have evolved toward integrating DR into long-term capacity planning, as well as for short-term reliability at all network levels. DR adoption and implementation does not discriminate based on the customer segment (industrial, commercial, residential). Recent policy and utility interest is demonstrated by the DER aggregation of small commercial and residential customers.&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;br&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;Different evolutionary paths have created subtle but important differences between the approaches ISOs and RTOs adopt in incorporating DR resource services for various system needs. &amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;h3&amp;amp;amp;amp;amp;gt;U.S. Demand Response Sector Overview&amp;amp;amp;amp;amp;lt;/h3&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;DR is procured year-round across the country in various forms of load reduction and shifting services from behind-the-meter resources. Price-based and volume-based DR is employed by all consumers of all segments (industrial, commercial, residential) from utilities, or in combination with third-party service providers. Some large customers participate directly without support from utilities or service providers. DR is activated by ISOs/RTOs at times when generation is insufficient to meet demand, in addition to instances where the physical network is congested and/or reaching its capacity limits. Such events may cause reliability issues and temporary spikes in wholesale electricity prices. Activating DR resources mitigates real-time constraints, lowering wholesale prices, and with them, end-customer costs. &amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;h3&amp;amp;amp;amp;amp;gt;Primary U.S. Electricity Market Structure&amp;amp;amp;amp;amp;lt;/h3&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;Incorporation of DERs is transforming the physical system and in turn opening up opportunities for new markets and services. Further integration of DERs serves multiple purposes, providing greater customer choice and control, in addition to grid services which serve ISOs/RTOS, utilities and end customers. Regulatory frameworks and electricity market designs are rapidly adapting across the country in order to align with this emerging paradigm.&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;h3&amp;amp;amp;amp;amp;gt;Select National Aggregators&amp;amp;amp;amp;amp;lt;/h3&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;In order to facilitate optimal system management with increasing activity behind the meter, ISOs/RTOs need to work together with transmission and distribution utilities in order to mitigate power flow challenges. DER aggregators need to enter this conversation to facilitate the design of demand-response programs that will foster a hospitable market environment for aggregated DERs to achieve the most value for meeting system needs.&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;h3&amp;amp;amp;amp;amp;gt;PJM Demand Response Market Activity&amp;amp;amp;amp;amp;lt;/h3&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;The PJM capacity market is called the Reliability Pricing Model (RPM). In operation since 2007, the RPM capacity market ensures long-term grid reliability by securing appropriate generating capacity and other resources. The demand response revenue stream in PJM is mostly driven by the capacity market.&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;h3&amp;amp;amp;amp;amp;gt;PJM Monthly Economic Demand Response Activity&amp;amp;amp;amp;amp;lt;/h3&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;i&amp;amp;amp;amp;amp;gt;Demand response volumes and credits awarded to participating entities vary by market and load resource. From 2013 to 2015 Day-Ahead, Real-Time and Synchronous-Reserves markets experienced steady, and at times declining volumes. The Regulation&amp;amp;amp;amp;amp;amp;nbsp;market has nearly doubled since 2013 which may be due to a changing resource mix.&amp;amp;amp;amp;amp;amp;nbsp;Note, as a result of the polar vortex, winter 2014 proved to be a profitable year for demand response providers in all markets.&amp;amp;amp;amp;amp;amp;nbsp;&amp;amp;amp;amp;amp;lt;/i&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;br&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;br&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/section&amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;lt;/div&amp;amp;amp;amp;amp;gt;