ORIGINAL REPORTING: What California’s 2017 Heat Wave Revealed About Demand Response
What California's heat wave revealed about demand response; Demand response delivered for the state but did compensation compensate?
Herman K. Trabish, Sept. 20, 2017 (Utility Dive)
Editor’s note: Private sector providers continue to wrestle with system operators across the U.S. over the best ways to compensate demand response.
In California’s record-breaking 2017 heat, a major provider of demand response to the state’s wholesale market learned why the system operator is about to change the compensation rules. The tricky thing about demand response (DR) compensation is what policymakers call “the counterfactual.” To know how much the DR reduced load, the system operator estimates what the load would have been without the DR. If that estimate is not accurate, the DR value proposition, and therefore its competitiveness, is compromised.
North American (primarily U.S.) DR adoption is projected to be 49.3 GW by 2025, according to Navigant Research. A recent GTM Research survey of operational DR found 9.1 GW of the surveyed 17 GW in service were monetized in wholesale markets. With almost 2,500 MW, the California Independent System Operator (CAISO) had the third biggest share. Remuneration to DR provided by leading CAISO provider Advanced Microgrid Solutions (AMS) during California’s recent record-breaking heat wave revealed the failure of the grid operator’s settlement mechanism. “AMS delivered 100% of what it was asked to deliver and they’re only going to recognize 53% of what we delivered because the baseline was so much lower,” AMS CEO Susan Kennedy told Utility Dive… click here for more