Negawatt Providers Seek a Mandate

21 Nov 2017

California regulators and policymakers say they want to see increases in demand response to reduce peak load and help balance out intermittent renewable resources. Despite the lip service, the amount of negawatt capacity reaped from the residential and commercial/industrial sectors has fallen since 2011, particularly from third-party aggregators working with the investor-owned utilities.

“There is a downward trajectory, except in the area of utility baseload interruptibles,” said Mona Tierney-Lloyd, EnerNoc’s senior director of western regulatory affairs.

Participation in Pacific Gas & Electric’s demand response program dropped 212 MW, or 30 percent, between 2011 and 2016. The decrease was more significant when excluding the utility’s base load interruptibles, dropping 63 percent, or by 315 MW, according to a joint filing by CPower Energy Markets, EnerNOC, and Energy Hub submitted o the California Energy Commission on demand response barriers in August.

At Southern California Edison, the coalition found that during the same five-year period, demand response participation dropped by 226 MW, or 25 percent, when factoring out the interruptibles.

A way out of the continued downward trajectory, according to the trio of demand response aggregators, is to set a state negawatt mandate on par with successful ones set for renewable energy and energy storage.

California’s renewable energy mandate, which initially was set at 20 percent and today stands at 50 percent by 2030, has helped propel the alternative energy market. The 1,325 MW energy storage mandate is projected to bolster this market as well.

Setting a state negawatt mandate would “ensure DR does not dwindle further at a time when California is focused so strongly on greenhouse reductions,” according to the demand response aggregators.

Last month, a report by the Smart Electric Power Alliance concluded that although California has the largest population in the nation, its enrolled demand response is anemic, with only 815 MW of capacity. That compares, for example, to New York, with about half the population, at 2,032 MW.

Just after the report’s release, the CPUC voted unanimously to approve spending $13.5 million to continue the utility pilot demand response auction next year.

The Energy Commission continues to grapple with how to raise the amount of demand response, both demand and supply side, from residential, commercial and industrial customers.  It held a workshop just last August on advancing the negawatt market, highlighting a Lawrence Berkeley Laboratory assessment showing there is more than 10 GW of demand response potential that utilities and the grid operator could rely on by 2025.

The grid operator also is said to be working to help expand the demand response role in the wholesale market.

But myriad challenges remain and there is no single cause of blame.

Problems range from perception, to nearly constant rule changes, incompatibility between CPUC and the California Independent System Operator’s market programs and rules, market complexity, burdens and rigid payment schemes that don’t account for the variety of services negawatts can provide.

In addition, breaking off the third-party aggregators from the utility programs creates competition challenges, including because the companies don’t have access to utility ratepayer databases.

Specific hurdles include CAISO shrinking the region that demand aggregators can tap into.

“Further and further disaggregation of resources reduces the value of the resource and increases the risk of non-performance,” said the trio of demand response aggregators. “Smaller means less diversity,” added Tierney-Lloyd. Reducing the notification to demand response customers to 30 minutes further limits the pool of customer, she pointed out.

Other complaints from demand response aggregators include the lack of a hard mandate. Since 2003, the demand response “soft target” has been 5 percent of system peak.

“DR is co-equal to [energy efficiency] at the top of the loading order, yet there is little in place to encourage DR procurement over other resource types,” the coalition complains.

They worry the treatment of demand response in the CPUC’s integrated resource plan may further hamstring the resource if they remain mandate-less.

Elizabeth McCarthy

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