Photo by pittaya. Some rights reserved.
Early last week, FERC published the Implementation Proposal for The National Action Plan on Demand Response, the combined efforts of the staff of FERC and the DOE to “study and develop a process to achieve the Nation’s demand response potential.”
This implementation proposal comprises the third and final action mandated by section 529 of the Energy Independence and Security Act of 2007 (EISA). FERC’s first step, the National Assessment of Demand Response Potential, was released in 2009, and was quickly followed by the 2010 National Action Plan.
EISA authorized “to be appropriated to the Commission to carry out this section not more than $10,000,000 for each of the fiscal years 2008, 2009, and 2010.”
According to FERC, “effective demand response can help reduce electric price volatility, mitigate generation market power, and enhance reliability,” so I’ll just assume that those 30 million dollars were worth it.
Photo by woody1778a. Some rights reserved
Two days ago, FERC issued the final version of a rule that establishes “a specific compensation approach for demand response resources participating in the organized wholesale energy markets administered by RTOs and ISOs.”
The rule is guided by the notion that a wholesale energy market is only as effective and competitive as the active participation of its customers in the form of “demand response.” (Demand response means a reduction in the consumption of electric energy by customers in response to an increase in the price of electric energy or to incentive payments designed to induce lower consumption of electric energy.) Because demand response can help improve the function of these markets, some demand response resources are also compensated for their participation.
To date, compensation schemes have widely varied across Regional Transmission Organization (RTO) and Independent System Operator (ISO) organized wholesale energy markets. FERC’s final rule creates a uniform system for compensating demand response resources. The organized wholesale market operators will be required to make compliance filings by July 22, 2011.
You can see the rule in its originally proposed form here.