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Harts Energy Markets April,
2004
by Ed Finamore, Valutech Solutions
Human nature being what it
is, it is not surprising that many so-called industry pundits are
rushing to drive the final nail in the demand response coffin. It
has even been cynically suggested in some quarters that the August
2003 Northeast blackout was a plot by demand response aspirants
to re-invigorate the industry and regain lost credibility. This
absurd suggestion is not only wrong; its timing also is a bit off.
In fact, a review of the Northeastern and mid-Atlantic
grid operators' 2003 demand response programs reveals that more
than 3,800 MW of demand was involved, which represents, a 25% increase
over 2002, says Larry Barrett, president of management consulting
firm Barrett Associates, a demand response specialist. "The
PJM ISO lead the way in 2003 with a 64% increase to nearly 1,400
MW of demand response capacity, representing about 2% of PJM's peak
load. Impressive customer participation was also seen in the New
York and New England ISOs, though the mix of programs and prices
varies."
Remaining conspiracy enthusiasts may nonetheless assert
that Comverge Inc. must have had a crystal ball when they announced
the first Virtual Peaking Capacity program in June 2003, two months
before the Northeast blackout. This program was implemented to provide
long-term peak load relief to PacifiCorp in lieu of adding additional
generation or off-system purchases. Even more significantly, the
program was crafted to provide localized load relief to specific
regions of the service area where transmission and distribution
congestion was most likely. Several months later, Comverge announced
that an agreement was signed with Sempra Energy for a similar program
for commercial customers.
Comverge is not alone. Earlier in 2003, Invensys Home
Control Systems announced it had begun testing its GoodWatts program
at PECO Energy as a prelude to plans for a broader launch in the
residential market. And Cannon Technologies, with the introduction
of its virtual energy management system, has begun offering the
utility industry web-based, real-time monitoring and control benefits
that provide flexible options for utility and customer control of
demand. Its partnerships with Honeywell and GoodCents Solutions
could pay dividends as Cannon continues to expand a technology base
that supports a range of demand response alternatives. Recently,
LG&E Energy announced an expansion of its residential load management
program that uses the Cannon/Honeywell-developed ExpressCom solution.
Problems Remain
However, despite these notable successes, proponents of demand response
programs are not out of the woods. While it is true that system
load made available for demand response programs increased in 2003,
the New York ISO also experienced a 14% drop in the number of emergency
load response participants, according to Barrett. Mild weather and
a slow economy meant that few triggering events actually occurred
in 2003, the August blackout being a notable exception. So the jury
is still out concerning the reaction and willingness of remaining
participants to stay with these programs if repeated instances of
short-notice load curtailment should ensue.
Before long, this theory could be severely tested.
With more than 2,000 MW of curtailable load currently available
in the New York ISO alone, customers are already playing a significant
and important role in the New York region. Yet by some estimates,
only half of the required near-term generating capacity could actually
be built, leaving a potentially significant gap in the state's future
power capacity requirements to be made up through other means, including
demand response initiatives.
Technology Advances Continue
Some good news is that creative load management solutions are emerging
that could provide the necessary technology platforms to support
these programs. Advances in metering and communications are beginning
to provide the necessary real-time data transmission infrastructure.
The future may lie with these types of programs that encourage voluntary
customer participation rather than the more heavy-handed mandatory
load curtailment alternatives.
Market characteristics of price response programs
will undoubtedly continue to evolve and redefine the risk-reward
formula that governs market-based energy use decision-making. And
who knows, maybe even the state utility regulators will get into
the act and start taking a more favorable view of demand side benefits
by allowing the cost of advanced metering to be included in utility
rates. Some forward looking utility regulators, such as the Idaho
Public Utilities Commission, have actually begun seriously examining
the benefits of automated meter reading to support peak demand shifting.
Some believe that deployment of AMR systems could delay the need
for additional generating facilities.
Reports of demand response's demise have been
greatly exaggerated. Advances in metering technology, energy demand
growth, environmental issues and the unsettled cost-benefit landscape
of new generation are signaling that demand response could be the
way to balance energy supply and demand for the foreseeable future.
Ed Finamore is founder and president
of ValuTech Solutions, a management consulting firm specializing
in utility automation systems and applications, including demand
response and AMR. He can be reached at (412) 299-5684.
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