How Indiana Michigan Power helps C&I customers bring their flexibility to market
This is a challenging time for demand response programs operating in PJM Interconnection: The grid operator is poised to integrate new capacity performance rules that will complicate market participation, cleared DR resource volumes are down and revenues have been declining.
In the residential demand management space, utilities are increasingly seeking to bolster offerings and customer service as a way to ensure the resource remains robust. Now, AEP Indiana Michigan Power is demonstrating that some of the same concepts can be transferred to the more staid industrial and commercial market, where even sophisticated buyers still need assistance.
The utility’s Demand Response Service Emergency Program was recently recognized by the Peak Load Management Association as a “Program Pacesetter” in the group’s annual awards. By directly contracting with customers, as well as leaning on aggregators to expand the program’s reach, I&M has about 110 customers which combine to provide 55 MW of load curtailment capabilities.
According to PLMA, there are three primary reasons for the program’s success: customer performance obligations are simple, based on requirements developed by PJM, and the use of load management aggregators has helped expand the scope. But I&M’s ongoing efforts to work with customers and curtailment service providers (CSPs) to aggregate resources “is the key piece in all of this,” the association said in highlighting the program.
“We’ve been doing interruptible programs for decades, even before we joined PJM,” said Michael Weinstein, a principal customer program support analyst at American Electric Power. “We see value in interruptible programs–especially emergency interruptible programs.”
When I&M joined the PJM marketplace, the utility was vertically integrated and wanted to continue using interruptible resources for planning. That request led the Indiana Utility Regulatory Commission to open a docket and ultimately determine the utility’s demand management programs would need to align with PJM requirements to take advantage of capacity resources for planning purposes.
The emergency demand response program, which operates in PJM as a “pre-emergency” resource, “really took off when we started working with [curtailment service providers] to get program off the ground,” said Weinstein.
Aggregators expand program reach
Industrial or commercial customers can sign up for the program either directly with I&M or with a curtailment aggregator: The back-end functions the same either way, utility officials say, sometimes causing confusion with customers who don’t realize they will ultimately have to sign contracts with I&M as well as the CSP.
“We do allow customers to sgn up directly with us, or they can use a CSP — we have no preference,” said Scott Shudick, a customer services account manager principal for Indiana Michigan Power. Among his responsibilities is to help implement the utility’s demand response rider for Indiana Michigan Power. Ultimately, I&M is responsible for bidding the capacity into PJM’s market. By leaning on aggregators to expand the program, and the two officials said they are creating multiple value streams and grid benefits.
The CSPs may offer other energy management services to customers as well, though Weinstein stressed the utility is “wholly agnostic” as to which route they ultimately choose.
Shudick and Weinstein participated in a demand response dialogue hosted by PLMA earlier this month.
“If a customer in another territory signs up directly with PJM, they sell their capacity resource, the DR resource, into the market. There are market benefits as well as bulk electric system benefits, but the incumbent utility doesn’t really get much benefit—at least not directly,” said Weinstein. “So when we sign them up through AEP’s account, what we can do is then claim that as a capacity resource.”
I&M uses a four-year average clearing price to determine the value of load reduction, which Weinstein said takes some of the volatility out, and also puts a floor price in place to help recognize resource values even outside PJM marketplace.
“It’s win-win,” he said. “We can continue to use that capacity resource in our planning and it also helps our customers as they’re not having to build or buy capacity elsewhere … we’re all sharing the value of the resource.”
Changes on the horizon
Among the biggest challenges to managing the program, said Weinstein, is “keeping abreast of all the changes in PJM.”
Years after the polar vortex paralyzed PJM Interconnection’s grid, when bitter cold temperatures forced about 20% of generation offline and left the operator scrambling to meet demand, new rules are about to be fully implemented that place stricter requirements on capacity resources in exchange for more generous rewards.