The 2016 PJM summer compliance season which runs from June through September has come to an end without a PJM-initiated emergency demand response (DR) event. The first six months of the year were already one of the warmest on record. So, for many of us sweating it out across the northeast, it was no surprise that this summer produced several heat waves that pushed system peaks to their highest levels in recent years. PJM’s top 5 system peaks (see table), reflect the summer’s weather and should be the Five Coincidental Peaks (5CP) that drive customers’ capacity charges through their Peak Load Contribution (PLC). It is important to note that any load reductions during these hours may reduce your capacity charges for next summer.
When it came to actual demand response events, however, a different picture unfolded compared to prior years. For instance, the 2013 summer saw system peaks at similar levels and was one of the most active summers for demand response customers ever. So you may ask: Why were no Emergency DR events called this summer, despite the heat and high system peaks? A few reasons come to mind:
- Some of it may be attributed to PJM’s new reliability product, Capacity Performance (CP), which debuted this delivery year and imposes greater availability requirements on generation;
- Some of it may be attributed to increased transmission efficiency;
- Also, flat or declining system peaks are starting to reflect the impact of energy efficiency regulations (the last system peak demand record was set in 2007); and finally
- Pure Luck? After all, the timing of several heat waves passing through the PJM territory coincided during weekends.
Whatever the primary reason(s), PJM Emergency DR customers should take pride in their commitment to be on standby to reduce load when called upon. Your ability to curtail electricity consumption when needed by the grid is a tremendous asset to maintaining system reliability and preventing potential blackouts/brownouts.
This doesn’t mean that PJM may not have a reliability issue beyond the summer as the program year does run through May 2017. Also, while the summer period yields the greatest risk of an emergency event, demand response customers that have committed to curtailments all year should continue to be prepared to perform and reduce load if/when needed to support grid reliability.
Moreover, with the transition to the new CP product, demand response is morphing into a year-round program. Customers can start participating in CP now to get themselves prepared for the coming changes and earn additional capacity revenue in the process. Many forward-thinking facility managers are already thinking about how they may be able to participate beyond the summer and are reviewing effective winter curtailment strategies.
CPower would like to take this time to thank all demand response customers for their commitment to PJM reliability this summer. CPower customers can always review their load drop test and event performance in the CPower App and should be expecting summer performance reports and payments starting early November.
Last but not least, we always encourage all participants to stay tuned for earnings opportunities in other DR programs available. Many participants augment their demand response earnings from the capacity program via active participation in PJM’s voluntary programs such as (price based) economic demand response and (faster response) ancillary services such as synchronized reserves.
Please feel free to contact Dann or the CPower team if you have any questions. Our engineering team is happy to help you understand the nuances of participating in these programs and assist in optimizing your overall energy savings and earnings year round.
El Nino, La Nina, and Capacity Performance could have an impact on demand response in PJM this summer. Let’s take a look at a few reasons why.
PJM is prepared to meet summer demand. Weather conditions are forecast to be mild, but don’t rule out emergency events.
In a May press release, PJM stated the RTO is prepared to meet the expected power demand of its more than 61 million customers this summer. The early patterns of the El Nino and La Nina cycles indicate we are expected to see milder temperatures early in the summer and hotter conditions in the late summer and early fall.
That’s not to say demand response participants shouldn’t expect an emergency event this season. PJM can still call events for smaller localized disturbances or if generation units in the region trip offline. That said, heat related calls should be minimal.
The addition of Capacity Performance (CP) on the system should help hold off PJM event calls as the Capacity Performance program requires resources to be available more often.
As usual, CPower tends to schedule the PJM mandatory test event early in the summer to ensure customers will have time to be retested in the event they under-perform. CPower customers should be on the lookout for our test event messaging.
Capacity charges on your supply bill will be higher than expected due to the Capacity Performance and the Transitional Auction.
The Base Residual Auction (BRA) set the capacity charge for customers. However, when PJM introduced Capacity Performance (CP) and adjusted their peak load by procuring 60% CP, they purchased the CP at a higher cost than the annual capacity. This will raise the total cost of capacity being allocated back to Load Serving Entities, who will in turn pass those costs along to the end user.
As always, demand response is a great way to offset increasing costs. However, the addition of Capacity Performance should result in less need for demand response resources to ensure grid reliability.
Results from the 2019/20 Base Residual Auction indicate a changing landscape and market dynamic for demand response resources in PJM.
This year’s BRA was the last that will include a seasonal or summer capacity product. Next year’s BRA for the 2020/21 delivery year will only contain the Capacity Performance product. For the 2019/20 BRA, PJM had adjusted their load forecast down to compensate for a few changes, most notably existing Energy Efficiency projects as their impact reduces the need for additional capacity.
This summer is the first to include capacity that will follow PJM’s Capacity Performance standards. Capacity Performance resources must produce electricity when called on regardless of weather conditions or extreme system conditions. Committed resources that do not perform when called upon will face significant non-performances charges. These resources were committed in a transitional capacity auction in August 2015.
To learn more about PJM’s changing market or about how to be better prepared for potential grid instability this summer, contact Dann or any member of the CPower’s PJM Team.
AMP Member passes ordinance, increases revenues through energy reduction
Hardworking businesses form the backbone of the City of Danville, Virginia. When it comes to overseeing the energy needed to run the city’s economic engine, Danville Utilities—the City of Danville’s electrical department—understands the need to maintain balance between consumption and conservation.
“As a municipal utility, we are always encouraging our customers to find ways to save energy,” says Meagan Baker, Danville Utilities’ Key Accounts Manager. The City of Danville — an AMP member municipality — perpetually seeks ways that not only allow their customers to conserve energy, but also allow the utility to save on congestion and transmission charges during the most critical peak times of the year.
Enter demand response and, what the City of Danville calls, “a win-win situation for the utility and the customer.”
In early 2014, the City of Danville adopted a resolution authoring their participation in the PJM demand response program for retail customers. The resolution allowed Danville’s city manager to execute an agreement with American Municipal Power approving the city’s participation in PJM’s demand response programs, which pay businesses for reducing their energy use during the few times each year when the PJM grid is stressed.
The agreement also named CPower as the City of Danville’s exclusive PJM curtailment service provider in charge of implementing and facilitating the city’s demand response. Danville Utilities believes their customers couldn’t be in more capable hands.
“CPower has been a great source for implementing our demand response program. Bill Oosterom, our account manager, has been our go-to person from start to finish. From educating customers about the program, getting them enrolled and assisting with any questions and/or concerns they have along the way, the process has been very transparent and straightforward. This streamlined approach makes it easier on our customers as well.” – Meagan Baker Key Accounts Manager, City of Danville
The City of Danville Finds Success with Demand Response and CPower
CPower’s hands-on style of energy management includes the kind of customer-focused touch the business owners of Danville appreciate. CPower’s Bill Oosterom believes that being personally involved in his customers’ demand response participation is a key reason the City of Danville has enjoyed energy management success.
“No two businesses are alike,” says Mr. Oosterom, who has more than 33 years of experience as an energy consultant. “Demand response shouldn’t be a set-it-and-forget-it process. At CPower, we work closely with all our customers to fine tune their demand response participation over time and ensure they get the maximized results and revenue they deserve.”
So far, the results from the City of Danville’s demand response participation have proven to be substantial. Participating customers have earned significant revenue through demand response (more than $97,000 in aggregate for the 2015-2016 program years), with many businesses choosing to put their earnings toward energy efficient upgrades or other capital improvement projects.
Even the City of Danville, itself, has participated in demand response with great success. Facing a need to offset operational costs, the City of Danville enrolled its municipal owned water and wastewater treatment plants in the program and have now earned valuable revenue (more than $30,000 for the 2015/2016 program) to help budgets of future projects. Civic leaders feel the City of Danville’s involvement in demand response provides a lead-by-example model of energy management. “We are always asking our customers to conserve,” says Meagan Baker, “so we must practice what we preach.”
For the City of Danville, the future looks bright as the number of businesses in their municipality participating in demand response is on the rise. With CPower and demand response on their side, the City of Danville is poised to do their part to keep the grid in balance, the environment in good health, and their hardworking customers in expert hands when it comes to energy management.
“The program has been very beneficial in educating our customer base on the importance of energy efficiency and demand response. As our customers continue to succeed, I believe the word will spread, positively influencing other customers to also become involved. We are excited to grow the program.” — Meagan Baker
AMP urges you to pass your local demand response ordinance as quickly as possible, to ensure that there is ample time for program participants to be registered for the 2017-2018 program year.