tag:blogger.com,1999:blog-9121836870164599938.post5642260792263966959..comments2024-03-28T00:02:59.655-04:00Comments on Energy Policy Update: March 18, 2011 - FERC's ruling on demand response compensationTodd Grisethttp://www.blogger.com/profile/13493808805105483563noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-9121836870164599938.post-37373592512695922992011-03-18T20:16:11.865-04:002011-03-18T20:16:11.865-04:00Interesting perspective Chuck. DR aggregators wil...Interesting perspective Chuck. DR aggregators will benefit from this ruling, but consumers as a whole should too. FERC has a congressional mandate to promote competitive wholesale markets. Whether a given utility investment in generation gets idled depends on the cost-effectiveness prong of FERC's test; under Order No. 745, demand resources aren't entitled to be paid at the locational marginal price (LMP) unless the overall benefit of the reduced energy price resulting from dispatching DR exceeds the cost of dispatching and paying LMP to the displaced generation resources. Also, in restructured competitive markets, it may not be utility ratepayers who feel the impact of idled generation, but rather the pressure will be on all market participants to bid in prices as low as they can -- a competitive market. If marginal merchant units are displaced by cheaper alternatives -- either generation or DR -- consumers as a whole can save.<br /><br />What that means for end-use consumers will depend on the rate structure for those consumers, and (for those participating in DR) their deals with their aggregators. Any consumers on real-time pricing, even those who aren't doing DR themselves, will see the benefit in the form of reduced LMP. While real-time pricing may currently be the exception, one of the possible avenues of the "smart grid" may be increased implementation of real-time pricing -- adding to the value this order could create for consumers. Other consumers may see value in the form of lower overall energy pricing through a more competitive market.<br /><br />If you were in the regulators' seat, what would you recommend to bring end-use consumers greater value?Todd Grisethttps://www.blogger.com/profile/13493808805105483563noreply@blogger.comtag:blogger.com,1999:blog-9121836870164599938.post-1038737310660303622011-03-18T17:24:36.324-04:002011-03-18T17:24:36.324-04:00This ruling seems to be a boon for the DR Aggregat...This ruling seems to be a boon for the DR Aggregator and a bad deal for the rest of us. The DR Aggregator seems to have a well defined and well compensated revenue stream for the DR the Aggregator. The compenstaion is considerably larger than the implementation and operating costs of the aggregation program. For the utility, the program means that the Aggregator is going to be paid for energy the utility never generated. The effect is that some of the utility's existing generation investment will be idle and revenues will be reduced. Further the utility's customers will pay a higher rate (somebody has to pay the Aggregator) and the rate increase will not flow to the utility. For the general consumer the rates will increase and the energy bills will be higher.<br />You say "Those consumers who do enroll in demand response programs will now know that they will be compensated fairly for their negawatts, a strong incentive to help the grid by curtailing their load during peak demand." I beg to differ with you. The consumer involved in a DR Aggregator's program will be compensated based on the agreement between the consumer and the Aggregator. In these programs so far the compensation is a small percentage of the revenue the Aggregator gets. Fair compensation for these participants is not part of this ruling.Chuckhttps://www.blogger.com/profile/00523480007102274070noreply@blogger.com