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2005-10-18
How to succeed with demand lowering by cutting price spikes?
Restructuring Today, October 18, 2005
Even though demand response (DR) programs have proved their value in the marketplace, without more incentives they could become an "empty shell," a new report warns.
A six-month study of demand response by the Distributed Energy Financial Group (DEFG) and Center for the Advancement of Energy Markets (CAEM), found even limited DR helps regional resource adequacy and smoothes market operations.
Even small percentages of customers participating in DR programs "dramatically" cut critical peak prices and boost reliability, noted Nat Treadway, DEFG managing partner. "When a few customers change their behavior to take advantage of a price break, many customers benefit."
But a survey of customers -- part of the DEFG-CAEM project -- found many weren't aware of DR programs or found them poorly designed (RT, 9/15).
Customers want to save money, the survey found, and the most successful programs are easy to join, flexible and pay participants well.
The groups sees ways ISOs, states and federal regulators can boost DR:
- Make it easier for retail customers to participate by broadening the kinds of customers and technologies that qualify;
- Demand and supply need to be treated the same and DR accorded its full value to give DR participants consistent pricing signals;
- Support R&D on the benefits and limits of DR and market design analysis to understand how to improve participation by more customers;
- Work with states and other ISOs to adopt standard communications protocols, standard business practices and consistency in retail metering;
- Establish a double-sided market model that incorporates wholesale and retail markets with energy buyers and sellers sending price signals to each other;
- Establish clear property rights to allow DR participation in real-time and day-ahead energy markets equal to other resources;
- Allow load-serving entities to sell different levels of reliability;
- Decouple utility distribution revenues from electricity sales volumes to provide them with incentives to reduce demand;
- Link transmission costs to peak use; and
- Allocate more distribution costs to customers using peak power.
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