Are PJM’s Auction Results for Efficiency and Demand Response a Trend?

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PJM’s auction, whose results were just announced, yielded more than 3,500 MW of capacity, including 1,247 MW of energy efficiency and 11,084 MW of demand response.

PJM’s acquisition of demand response was up slightly, while its acquisition of energy efficiency was down slightly.

Does this mean that in the future, we’ll see more and more demand response acquired — and less and less energy efficiency?

No, says Jordan Grimes, senior communications analyst, power and gas, for Morningstar Commodities Research.

The decrease in energy efficiency and the increase in demand response was pretty minimal, he notes. And it was not necessarily in keeping with larger trends.

For example,  demand response is struggling under stricter auction rules that make it difficult to offer the resource.

“They changed the rules. They used to have a lead time of four hours before the resource had to come off line. Now the lead time is 30 minutes. Demand response is treated more like generation resources. It’s hard to meet those constraints,” he says.

Looking forward, the outcome of a Supreme Court case will also affect demand response. In the case, called EPSA vs. FERC, the court will decide whether FERC can regulate demand response and keep it as a supply resource.

“We still believe that the trend of DR ‘stepping out’ of the supply stack will continue into the 2018–19 auction. Stricter rules setting shorter lead times, restrictions on the hours of usage of backup diesel generators, and PJM’s phasing in of annual—not seasonal—DR as a capacity resource will lead to less participation,” he said in a report about the auction.

Energy efficiency, however, is a different story.

“Energy efficiency is a different product. It’s much easier to measure and the constraints on demand response don’t affect energy efficiency, which is a real long-term change in the load profile and is measurable,” he says.

As long as the energy efficiency industry continues to improve on technology and find news ways to reap savings, it will remain in the picture, he says.

In the auction, energy efficiency and demand response competed with each other for 20 percent of the auction. They competed for a small piece of the pie. That’s because 20 percent is subject to less stringent requirements.

“Eighty percent of the generation needs to be cleared as a capacity performance project…and the other 20 percent is base; they’re not as strict about base. A majority of what was bid in as energy efficiency and demand response was base,” he explains.

Read Morningstar’s analysis here

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