Full Title: The Debate About Demand Response and Wholesale Electricity Markets
Author(s): Robert King, Jaden Crawford, Barry Huddleston, and Steve Isser
Publisher(s): The South-Central Partnership for Energy Efficiency as a Resource (SPEER)
Publication Date: October 1, 2015
Full Text: Download Resource
Description (excerpt):
Demand response (DR) is the relatively recent term for the reduction or curtailment of a customer’s electric consumption (demand) in response to market or utility signals of one form or another. Early market opportunities for customer participation allowed loads to respond to emergency conditions, to avoid potential outages. More recently this new resource has become viewed as a form of planned or operating reserve capacity to help increase reliability, reduce outages, avoid unnecessary capital investments, integrate intermittent resources, or even balance the frequency of the power on the grid.
Still more recently, demand response has been allowed to participate directly in energy markets, competing directly with generation to satisfy market demand, and contributing to price formation. This increasing competition from inclusion of demand resources is the next logical step for some more sophisticated customers and service providers as they and markets co-evolve. Allowing and incenting customers to help meet market-wide demand for power through strategic load reductions can help reduce short-term costs, avoid unnecessary capital investments in generation as well as transmission and distribution, and help mitigate price distortions associated with market power.