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The grid operator, state energy regulators and utilities largely abandoned demand response that would have provided enough electricity to avert outages during the recent heat wave, advocates of the policy say. And the numbers back them up.

Rather than strengthen demand response, in which energy users cut back to leave more electricity on the grid or sent power to it during the 2000-01 energy crisis, state officials have reduced funding for the programs, and raised compliance hurdles. That has caused them to whither.

Twenty years ago, demand response programs—from industrial to residential—provided at least twice as much electricity than the 800 MW provided 10 days ago when extreme heat caused peak demand to soar. Back then, demand response helped avert several rolling blackouts because merchant generators and utilities gamed wholesale power prices in a newly deregulated California Independent System Operator market.

Since then, demand response rather than growing, has been in decline.

It is available, but the grid operator and utility regulators has largely ignored it, leaving it unused. “Outside emergencies, it is not thought of as an energy resource,” Mona Tierney Lloyd, U. S. State Public Policy and Institutional Affairs for Enel North America, complained. Enel is one of the biggest demand response providers in the country. It bought EnerNOC in 2017.

In the Midwest ISO, not exactly a bastion of innovation, demand response is far larger, about 10% of the wholesale market. In California, it currently can contribute only 1,200-1,300 MW in a market with a peak demand of 50,000 MW, which is less than 3%, Gregg Dixon with Voltus noted.

Demand response also plays a far larger role in the PJM, the New England ISO, and European markets. That is because the demand response producers there are better paid for their services and burdened with fewer rules. For example, demand response and distributed energy resources in PJM are paid for frequency response and synchronous reserves services, not just relieving load during times of constrained supply.

Demand response covers a range of resources including aggregated behind-the-meter solar and/ or battery systems, other distributed resources, curtailment of load at large business—from data centers to food processors—and households during emergencies. It also can include microgrids and electric vehicles supplying the grid when supply is seriously constrained.

Demand response advocates say California could easily access 5,000 MW of demand reduction with increased incentives and unbiased market rules.

CPUC and CAISO squeeze demand response

The CPUC specifically has reduced and even shut out demand response procurement, Jennifer Chamberlin, CPower executive director of market development, asserted. It canceled one program and shrunk the budget of another.

CAISO also makes it challenging to integrate DR into its market, she added. CPower was acquired by LS Power in 2017.

There also have been complaints about the remaining demand response program at the CPUC—known as the Demand Response Auction Mechanism, a five year pilot program. The 2015-16 pilots succeeded in bringing in new players as hoped, with 67%, or 10 of the 15 bidders new participants. But only 43% of these new sellers fulfilled their contracts, according to a CPUC July 26, 2018 briefing.

The cause, according to demand response providers, was that the agency drove down price so far it was unattractive or impossible for providers to sell.

Tierney Lloyd said California makes changes every year to the program, creating instability for existing and would-be market entrants.

In addition, the California grid operator turned away 5,000 MW of load reduction it was offered by a demand response provider from running diesel or gasoline backup generators to replace grid supplies at peak times. The offer, by Voltus, also was made to the California Public Utilities Commission, and to the private utilities during the recent grid emergency. Although power prices spiked above $1,000 MW, none of them would pay for the load reduction, Dixon told Current .

Fossil fueled backup was disqualified from demand response payments three years ago because it is inconsistent with the state’s clean energy goals. However, Gov. Gavin Newsom ended up issuing an emergency order that waived air quality limits on backup generation to help protect the grid.

Neither CPUC nor CAISO responded to queries before press time.

DR misses the 5% mark

Back in 2003, in the aftermath of the energy crisis, the state developed an Energy Action Plan that gave top billing to demand response in the list of preferred resources. It also set a 5% load reduction goal for demand response. That benchmark still stands as California’s goal.

Yet modest as it is, a recent joint filing from investor-owned utilities show they are not coming close to meeting it. The combined peak demand for Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric for this year is 43,021 MW. Five percent of that would be 2,151 MW. But the trio managed a total of only 373 MW of demand response, well short of even 1% of peak demand, according to the filing to the CPUC on interim demand response levels.

During the recent mid-August heat-driven spikes in daily electricity use, some old demand response programs on the industry side provided a portion of the 800 MW of relief that registered on the California grid. Some heavy industrial electricity users, like food processors, get cheaper everyday electricity in return for agreeing to cut their power use when the grid is seriously stressed. Peak demand also was reduced by aggregated commercial and residential programs that pay customers to drop their energy consumption. For households, that included raising their thermostats, which dialed back their air conditioners.

A key role for demand response is beefing up California’s resource adequacy market.

The CPUC’s resource adequacy mandate of 3,300 MW has been called inadequate, with CAISO blaming it for the recent rolling blackouts.

Meanwhile, technological innovations make it much easier to organize people or businesses and combine load reductions.

Robust demand response benefits virtually everyone. “It lowers costs for consumers and gets us out of the problem we are in,” noted Jon Wellinghoff, Grid Policy CEO, and former Federal Energy Regulatory Commission chair.