Economists take sides in the battle for DR’s soul.
Bruce W. Radford is publisher of Public Utilities Fortnightly.
Back when the U.S. economy and power consumption still were bubbling, PJM reported in August 2006 that customer curtailments during a week-long August heat wave had generated more than $650 million in market-wide energy savings—all at a mere $5 million cost, as measured in direct payments made to the demand response (DR) providers, set according to wholesale power prices prevailing at the time.
Where else but the lottery can you get an instant payoff of 130-1?
Yet, it wasn’t long after that gain that FERC allowed PJM’s economic load response program (ELRP) to expire, explaining that paying the full spot market price to customers for voluntary curtailments undertaken for their own economic benefit amounted to an unwarranted subsidy, thereby denying a complaint by the PJM Industrial Customer Coalition (ICC) that had sought to extend the life of the program. (See, Order Denying Complaint, Docket EL08-12, Dec. 31, 2007, 121 FERC ¶61,315.)
Ever since, a debate has raged in policy circles about how much compensation grid operators ought to pay to customers who volunteer to curtail demand strictly on the basis of price under so-called “economic” DR programs—as distinguished from DR programs designed to preserve reliability, or to ease temporary supply shortages.