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Group Calls For Demand-Side Management in PJM

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 by 28%."

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 million."

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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ISSN © 2577-9877 | ISSN © 1532-1266
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