Full Title: Treating Demand Equivalent to Supply in Wholesale Markets: An Opportunity for Customer, Market, and Social Benefits
Author(s): Richard O’Neill, Debra Lew, and Erik Ela
Publisher(s): Energy Systems Integration Group
Publication Date: May 15, 2023
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An elegant approach to aligning demand with grid needs is demand participation in wholesale markets equivalent to supply participation today. This will become more important with the increase in variable renewables, electrification, and new large loads. The transformation of today’s one-sided markets into two-sided markets presents an opportunity to benefit customers, electricity markets, and the overall grid.
In full, active demand participation (bid-in demand), customers have the same rights, requirements, penalties, and privileges as generators. For example, large industrial customers or load-serving entities bid in prices they are willing to pay for quantities of electricity along with their load resources’ operating constraints, participate in the day-ahead and real-time electricity markets, are able to set the price, and are exposed to and hedged by wholesale market prices. These customers can operate according to their day-ahead schedule or can participate in the real-time market and be dispatched based on realtime prices. Not only are these customers incentivized to reduce demand when prices are high and increase demand when prices are low—naturally supporting the grid—but they are precisely dispatched, giving the grid operator more control to balance the system. Large customers already seeking to align demand with certain grid conditions may be the best place to start.