Differences in Demand Repsonse Markets

Author(s):

The fourth fact sheet in GPI's series about demand response (DR) in the Midwest is titled Differences in Demand Response Markets.

The previous blog posts and fact sheets in this series have demonstrated a variety of environmental and efficiency benefits that can be provided by demand response (DR). As discussed in the first post, however, DR is not always used to its full potential in the Midwest. In order to be fully utilized by grid operators, demand response must be treated as a generation resource and put on a capacity market with other resources like power plants. Depending on how this market is structured, DR resources may have a better or worse likelihood of being deployed during times when it could prove beneficial.

In the eastern United States, the regional transmission operator PJM administers a three-year forward capacity market to ensure that its territory has sufficient resources to meet demand. This region-wide capacity market allows DR resources to be purchased and planned into electric supply portfolios. In contrast, resource planning in the Midwest, in grid operator MISO's territory, is done differently in each state and is conducted by electric utilities. Additionally, MISO generally only utilizes demand response in times of emergency. As a result, DR utilization in the Midwest falls well below its potential when compared to other regions.

As outlined in the fact sheet below, there are a number of changes that could be made to accelerate the development of demand response in the Midwest. These are:

  1. 1. Remove the emergency-only designation for DR in the MISO territory.
  2. 2. Lower MISO's minimum megawatt limit for participation in resource markets.
  3. 3. Include other seasonal resources, such as winter DR soruces, in resource planning.
  4. 4. Increase real-time visibility for DR with grid operators.

These points are explained in more detailed in the fact sheet, which you can download here. You can also see the fact sheet embedded below:

 

Stay tuned for more posts in the Demand Response blog series!

 

Past DR blog posts:

1. New Fact Sheet Series on Demand Reponse

2. The Environmental Benefits of Demand Response

3. Demand Response in a Resource Constrained World