More Demand Response in Microgrids following Supreme Court Decision? Maybe, Maybe Not
With a dark legal cloud lifted from demand response, the resource is likely to find new life on the grid. But what about demand response in microgrids?
Demand response – where a utility or grid operator signals customers to reduce energy use and pays them for doing so – overcame a challenge from power generators with a favorable ruling last month by the U.S. Supreme Court. The decision keeps demand response on equal footing with generation in the market.
Demand response can add economic value to microgrids. It’s one of a stack of revenue streams that microgrid developers use to build favorable project economics. The stack also might include price arbitrage, grid ancillary services, solar incentives, use of heat waste, energy efficiency, reliability and sustainability benefits and other revenue streams or cost avoidances.
So, alone, demand response may not make-or-break a microgrid, but it can help prove a case for the capital investment.
“It is always one of the line items when you stack the business case to make a microgrid pencil out,” said Mark Feasel, vice president of Schneider Electric’s Electric Utility Segment & Smart Grid. “You’re always thinking about it.”
The Supreme Court’s decision – which upheld what’s known as the Federal Energy Regulatory Commission (FERC) Order 745 – heightened confidence about use of demand response as part of the long-term business case.
“It solidified in the minds of end users that demand response is here to stay,” Feasel said. “It is viable. I can go ahead and count it and feel pretty good about my ROI calculation.”
Ready to dance, but no partner
But that only works where utilities or grid operators offer demand response programs – or where they are not oversubscribed, according to David Chiesa, senior director of business development at S&C Electric.
“You can sign up for it, but they may not call you very often,” he said.
The kind of customers that microgrids tend to serve — commercial, industrial, institutional or municipal – make up a small portion of demand response participants in the U.S., according to a recent report by the U.S. Energy Information Administration. In fact, of the 9.3 million demand response participants, the greatest number are residential customers, EIA said.
