In its final rule, FERC has allowed locational marginal price LMP to be paid to demand response DR resources in organized wholesale energy markets. This means that electricity customers can enter into a voluntary agreement to be compensated to reduce usage when a utility transmits a DR signal.
FERCs decision will unleash technologies that provide the grid with new efficient ways to manage its loads, said Kyle Pitsor, NEMA Vice President of Government Relations.
It will increase competition, allow new market entrants, and drive down costs for ratepayers. This policy is critical to the development of a smarter grid.
LMP, the same market rate paid to generation resources, will be paid to DR technologies in situations when it meets a cost-effectiveness threshold. This threshold will consider DRs impact on remaining loads to prevent ratepayers who are not engaged in DR from having to incur a greater cost per unit.
Cost-effectiveness thresholds are to be determined by regional transmission organizations and independent system operators by July 22, in a filing to FERC.
Because interaction between utilities and buildings is central to the Smart Grid, NEMAs High Performance Building Council is developing with ASHRAE American Society of Heating, Refrigerating and Air-Conditioning Engineers SPC 201, the interoperability standard that will allow all loads, generators, and meters within a high performance building to communicate in a common language with a utility.
Providing LMP in wholesale markets will encourage building owners to invest in DR to make their operations more efficient, from both energy and economic standpoints.
DR is one of the eight priority areas identified in the National Institute of Standards and Technology NIST Framework and Roadmap for Smart Grid Interoperability Standards.
We have advocated that demand-side resources like DR ought to be compensated the same as supply-side resources, said Jim Creevy, NEMA Director of Government Affairs. FERCs decision is a major step forward in that effort.