With all the talk in the industry about wind, solar, and fuel cell storage to help businesses manage their energy costs, another resource businesses have turned to is “Demand Response”.
Demand Response is a voluntary program that compensates customers for reducing their electric consumption, in an event where the reliability of the electric grid is threatened, or when wholesale prices are high.
During these critical times referred to as “Events”, businesses agree to reduce their electric usage in exchange for financial compensation “incentive payments”. By reducing energy consumption during hours of peak demand, you relieve stress on the grid, the environment, and your bottom line. Two ways consumers can reduce electricity is:
• Self-Generation – backup generators
• Usage Reduction – turning off equipment, large HP motors, slowing down or stopping production at an industrial operation, dimming or shutting off lights, raising A/C set points, etc.
In other words the customer earns revenue for reducing their electric consumption during peak demand periods.
Currently within the PJM footprint, there are Limited, Extended Summer and Annual program options. The most common is “Limited”. Under this program potential events are limited to the summer months of June thru Sept. The maximum number of events that can be called is 10, with a maximum of 6 hours of duration for an event.
Under “Extended Summer” the months are expanded to May thru October and I don’t think “Annual” needs to be explained. Under this program the number of potential events are unlimited and the maximum duration of an event becomes 10 hours.
Effective June 2018 the above mentioned programs will be eliminated and replaced by Base Capacity and Capacity Performance Products. The table below summarizes the various program and their requirements:
Looking back, there have been very few actual curtailment events here in Ohio. Since deregulation started in Ohio in 2009, there have been 5 events totaling 16 hours within the First Energy markets. They occurred all in 2013 as a result of equipment constraints; issues that have since been resolved. For the rest of Ohio there have only been 2 events, 1 in 2012 and 1 in 2013, each 4 hours in duration.
To enroll into a demand response program you will need to select a PJM Curtailment Service Provider. They will monitor your performance to maximize your annual DR payments for the projected load drop, keeping you informed and notifying you of potential events.
If no actual events are called, PJM requires each participant perform a one hour test to confirm their ability to shed their committed load. This test must be completed by September 30 and will be coordinated by your PJM Curtailment Service Provider.
There is no penalty for non-performance. If a customer fails to shed the committed load during their test or during any called events, the only result is a reduced payment or no payment. The total amount of the reduction assessed in any program year is capped at the total contracted DR payment for that year.
If you have back-up generation or have the ability to modify your operation you need to consider a demand response program. We have worked with a number of companies that initially said nope we can’t shed, but after thinking outside the box are now benefiting from demand response.
If you don’t enroll into a DR program you will never receive an incentive payment. Remember you are always in control of your operation and the load you shed. If you don’t perform to your committed load, there is no out of pocket penalty.
Demand Response values for the June 2016/17 year are around $20,000-25,000 (per megawatt reduction). If you feel you could possibly shed some load, now is a great time to review your business. If you already have an interval meter, the cutoff for enrollment for this coming year is May 15th.