This paper estimates consumer savings, CO 2 emissions reductions, and price effects from increasing demand response (DR) dispatch in the Midcontinent Independent System Operator (MISO) electricity market.
To quantify market effects, we develop a bottom-up, dynamic supply and demand model to explore a range of DR deployment scenarios. The study is motivated by the existence of regulatory and market rule barriers to market-based deployment of DR resources in the MISO region. We show annual consumer savings from increased market-based DR can vary from $1.5 million to $18.5 million under typical peak operating conditions, depending on the amount of DR resources available for market dispatch and the frequency of deployment. Consumer savings and other market effects increase exponentially during atypical periods with high prices. Additionally, we find that DR deployment often reduces 2 emissions. However, the magnitude of emissions reductions varies depending on the emissions content of marginal generation at the time and location of deployment as well as the magnitude of the energy shifting from DR. The results of this study suggest that regulators and other stakeholders should focus policy efforts to reducing regulatory barriers to DR deployment, particularly in locations that experience high price spikes, to improve market efficiency and achieve cost savings for consumers.
We would like to thank the following individuals for their review and feedback: Mike Gregerson from the Great Plains Institute, and Ian Lange and Ben Gilbert from the Colorado School of Mines. We would also like to thank seminar participants in the Colorado School of Mines Division of Economics and Business research seminar series for their feedback. In addition, a special thanks to the Heising-Simons Foundation for their financial support.