Group Calls For Demand-Side Management in PJM
Power shortages and price spikes within the PJM Power Pool are
as likely this summer as barbecues and sunburns, according to a
Pennsylvania public interest group.
PennFuture, however, has a modest proposal to deal with the
problem by empowering consumers to make conservation decisions.
With virtually no new generation coming on line for this summer,
PennFuture says it's time to create a demand side market for
electricity and give consumers an incentive to conserve.
"Demand-side bidding would allow consumers to bid a maximum
price that they are willing to pay for electricity. More
importantly, it would allow consumers to be paid for reducing their
energy usage during peak periods," write PennFuture CEO John Hanger
and colleagues in a memo from the organization. Hanger is a former
member of the Pennsylvania Public Utility Commission where he was
widely considered to be an advocate for consumer interests.
Although growth in electricity demand lags gross domestic
product growth, electricity demand in PJM is five years ahead of
schedule. One tool for meeting the challenge is PJM's demand-side
bidding platform, which is slated to begin June 1. The market will
be a two-settlements market in which deviations from the scheduled
energy demand will be used to credit the load-serving entity that
serves retail customers.
PennFuture gives the example of a consumer scheduling in the
day-ahead market 40 MW at $20/MWh for one hour and paying $800. The
next day, if the consumer's real-time locational price was $45/MWh
and he only used 15 MWh, he would be paid $225 ($45/MW for 5 MW).
"By participating in the two settlements market, the consumer
reduced his/her electricity use by 25% while reducing his/her bill
The report notes demand-side approaches exist in New England and
also are planned for the New York ISO. "What if PJM residential
consumers could participate in a demand-side market? When PJM
locational prices hit 99.9 cents/kWh this summer, the value of
residential customer load for five peak summer afternoons will be
close to $100, enough to pay for 50% of that month's electric bill
in Philadelphia. If 5% of Pennsylvania's load were to participate
in this market for five hours, consumers could save as much as $4.5
Hanger and company speculate there may be "thousands of
residential customers" who would be willing to turn off all their
appliances for five afternoons in exchange for $100. Some may be
willing to turn only certain items off and save $50.
Since no current electric suppliers are proposing to serve
customers in a two-settlement framework, making a demand-side
market available to all consumers requires entry of new suppliers
and possibly the unbundling of customer account services. "However,
with demand ahead of schedule and the opportunity for savings what
they are, the time for that has come." Joe Fisher, Houston
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