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Demand & Price Response

Demand & Price Response

Demand response programs are more prevalent and accessible to businesses than ever before. Regional ISOs, local utilities, Curtailment Service Providers (CSPs) and retail suppliers are providing an increasing number of opportunities for businesses to reduce their consumption in exchange for some form of compensation, however, this has created a complexity of options for businesses to navigate. Power Connection helps businesses determine their eligibility, obligations within the programs, potential providers, favorable revenue allocations as well as identify impacts from participation in retail supply contracts.

Some demand response programs are event driven, while others are voluntary. Some provide ample notice to respond to alerts while others provide little or no notice. Some open the business up to the potential of economic penalties, while others have none. A business may be eligible for one program but not others. Additionally, revenues shared with the business from the programs can vary considerably depending on the provider or the consultant involved. Many demand response programs do not require an all or none approach. In many programs, if a client can reduce some consumption, there is benefit to be gained.

While many businesses may only be aware of traditional demand response programs, there are other options available. Load management programs are run by a number of local utilities and are similar to ISO demand response programs. Peak response programs generally involve notices during expected peak demand periods and offer businesses a voluntary means of reducing consumption to reduce peak demand-based obligations. In the ERCOT market, this is typically done via 4CP management to reduce transmission and distribution (TDSP) charges, while in PJM, it is done to reduce capacity and network integrated transmission (NITS) obligations.

A more recent program available from some retail suppliers involves price response. These programs involve curtailing consumption during periods of high LMP prices on the grid. If a client reduces consumption during such periods, it may reduce the retail supplier’s risk by reducing their exposure to high prices when their portfolio of customer loads exceeds forecasted and hedged estimates. The retailer may offer to share those avoided costs with the client via a reduced price or bill credits.