For most of the last two decades, demand response in California has been largely procured and operated by the state’s electric utilities.
That trend is changing.
Demand response in California is currently experiencing significant changes as regulators implement measures to expand the state’s pool of energy resources and assimilate these resources with the California Independent System Operator’s (CAISO) markets.
This regulatory reform has created new opportunities in California for demand response programs, which pay businesses for using less energy when the grid is stressed or electricity prices are high.
The Demand Response Auction Mechanism
The Demand Response Auction Mechanism (DRAM) was developed in 2014 under the guidance of the California Public Utility Commission (CPUC) in an effort to harmonize utility-based reliability demand response with CAISO, the state’s grid operator.
In December 2014, the Commission issued D. 14-12-024 which requires the state’s IOUs: Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E) and Pacific Gas and Electric Company (PG&E) to design and implement Demand Response Auction Mechanism (DRAM) pilot programs in 2015 for 2016 capacity (DRAM I or 2015 DRAM) and in 2016 for 2017 capacity (DRAM II or 2017 DRAM). The three utilities recently completed a solicitation for 2018/2019 capacity (DRAM III) procuring over 200 MW of DR resources across the state.
Now in its third year, the program seeks to allow CAISO to add reliable demand response resources to areas of California where electric reliability may be at risk.
DRAM is a pay-as-bid program with three goals:
1)Fully integrate DR resources with the CAISO energy market
2) Test whether third parties can bring these resources to the table without structured utility programs
3) Allow residential resources to participate directly in the CAISO markets
The DRAM program also provides market participation testing from a broader base of distributed energy resources, including behind-the-meter storage. Under DRAM, these resources have the opportunity to behave not just as system capacity, but also as local and flexible resources.
California’s recent actions aim to revise the market’s existing demand response program structure and are an indication that DR has an important role to play in the state’s future.
The best way for an organization to take advantage of the DRAM program and the opportunities available in the California Market is to consult a trusted demand-side energy management company.
Such a company can evaluate an organization’s facilities and determine its curtailment capabilities. Next, they can explain in full the many demand response and demand management programs that are available in the California Market and help determine which offer the particular organization the best chance for curtailment success.
To learn more about how CPower can help your organization earn with the Demand Response Auction Mechanism program, please visit CPowerEnergyManagement.com/dram-california.
To continue learning about how the California grid is changing to meet the needs of the future, read: The Evolution of The California Energy Market: How Demand Response and Demand Management will Play Integral Roles in The Golden State’s Energy Future