Can Smart Buildings Boost Demand Response In An Era Of Capacity Performance?
Early January 2014, during the heart of the Polar Vortex, grid operator PJM had its finger on the switch ready to start rolling blackouts across 13 states and Washington, D.C. As temperatures plunged to 20- and 30-below zero, coal piles froze and conveyors broke down at coal plants, gas plants without firm delivery contracts sat idle without fuel, and PJM officials were sending out pleas for help for large electricity consumers to cut their use. Twenty-two percent of power generators failed to show up as expected that day, and PJM officials vowed not to let that happen again.
Likely not able to prevent future extreme weather events, PJM is looking at a major restructuring of its own market design to change how and when it pays for power to ensure the lights (and heat) stay on. But some believe those market changes come with some significant risks – particularly to the role of demand response, or emergency events during which buildings, homes, and industrial facilities are rewarded for reducing their electricity use.
Over the past several months, Environmental Defense Fund (EDF) and The Accelerate Group have been working closely with PJM, Illinois consumer advocacy group Citizens Utility Board, and a number of building owners in Chicago to develop the Combined Capacity Asset Performance Project (C-CAP), an innovative pilot program to demonstrate how demand response can continue to play a strong and vital role in PJM’s electricity market.
Demand response provides cost-effective grid reliability
PJM’s primary tool for meeting power needs at peak hours is its Capacity Market, which provides payments to power plants and other energy sources to ensure the grid has enough generation to meet demand when it is most stressed. For years, those same payments have also been made to demand response participants, or customers willing and able to reduce their electricity use in an emergency.
In Northern Illinois, nearly two coal power plants-worth of demand response participated this past summer. Participants included efforts by homeowners to adjust their thermostat a few degrees during the day, commercial office buildings adjusting the office temperature for a couple hours and discharging a battery system, and manufacturing facilities staggering their work schedules so all their machines weren’t running at the same time.
Summer markets are not enough
During the Polar Vortex, the Capacity Market as a whole was deemed by PJM to be ineffective and inefficient for meeting its purpose. Their reasons were simple, they said. The market, as designed, only required participants to be available for summer peak hours, and that meant PJM had one less tool at its disposal to make sure power needs were met year-round. In response, PJM proposed and received approval this June to create a new Capacity Performance market, phased in over the next few years, to help meet peak needs year-round, for extended hours, and with a new incentive structure.