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Demand Response = Power Generation?


Josh Schellenberg Published: 01 November 2009 12:03 AM UTCPosted in: Demand ResponseTags: Demand Response

In an interesting recent podcast, Lisa Cohn from Energy Efficiency Markets interviews Audrey Zibelman, a former CEO of the regional transmission organization PJM.  She talks about the movement towards compensating generators and demand response providers equally.  Listen here for more:

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As Zibelman points out, there is substantial debate around this topic.

As a demand response program evaluator, I have seen how the reliability of load reductions varies across programs.  Even within individual programs, load reductions vary across event days depending on the conditions on that day.  Therefore, my initial gut reaction is that demand response providers should receive less compensation.

On the other hand, if a demand response program is proven to provide reliable and predictable load reductions, why shouldn’t it receive the same compensation as power generators?  The amount of load reduction may vary depending on the conditions on a given day.  But as long utilities and grid operators can reliably predict the load reduction, why shouldn’t they receive the same compensation?

After all, the number one priority for grid operators is to keep supply and demand in balance at all times.  Whether this goal is accomplished by a reduction in demand or an increase in supply does not matter.  Power generation has historically received more compensation because if a power plant has a 500 MW capacity, it will reliably provide up to 500 MW of generation.  If a demand response program can achieve the same level of reliability, it should receive the same compensation.