Demand Response as a Power System Resource: EBRD Workshop
In a workshop hosted by the European Bank for Reconstruction and Development, Mike Hogan provided an in-depth look at demand response (DR) and its role in power systems. As the share of variable resources grows and DR enjoys increasing recognition as a reliable, low-cost alternative to generation, its definition is evolving as well. RAP defines DR in the paper “Beyond Capacity Markets” as “Customer loads that can be modulated up or down in real time in response to wholesale market conditions, expressed either in wholesale prices, via frequency or voltage fluctuations, or through arrangements allowing direct control by the system operator or third party aggregator.” In examining experiences with DR as a system resource in the United States, Mr. Hogan illustrates the cost benefits and reliability—DR provides 50 percent of the daily operating reserves in the Electric Reliability Council of Texas (ERCOT) market. New York’s Con Edison used DR to avoid transmission and distribution system upgrades, reporting savings of more than $1 billion. Other regions recognize the value of DR as a flexible resource and are leveraging this strategy to lower the cost of integrating larger shares of variable renewable resources. As Europe embraces a steadily increasing portion of renewable energy, it also faces with new challenges, such as market designs that struggle to integrate a large number of small sources and resistance from utilities faced with eroding revenues. Successful markets are updating system operations to unlock flexibility in the short term and create investment incentives to ensure flexibility in the long term.