November 22, 2002—Customers of PJM Interconnection, operator of North America’s largest electric power grid, have an option for potential electricity cost savings while helping to reduce demands on the transmission grid. Through the company’s demand response program, customers with self-generating capabilities can opt to reduce their electricity needs from the grid by supplying their own power.
Customers also can choose to reduce their use of electricity. In turn, PJM pays them for the electricity that they would have drawn from the system and the system benefits from less demand during peak use periods.
PJM customers have access to prices and other real-time data, which gives them the information that they need to determine whether using their own generators would be more cost effective than buying electricity through PJM. Typically, industrial and some large retail customers have back-up generators that can be used for demand response purposes.
According to the Electric Power Research Institute (EPRI), demand response programs could save the US economy $100 billion annually by reducing grid interruptions and reductions in power quality. The Peak Load Management Alliance states that demand response benefits, in addition to the cost savings and system reliability, include:
- Market efficiency—When customers receive price signals and incentives, usage becomes more aligned with costs.
- Risk management—Demand response provides a program through which customers can manage their electricity needs to avoid high costs and to ensure that electricity is available when needed.
- Environmental—Through demand response, production from less efficient power plants is reduced often, resulting in less of an impact on the environment. Demand response also can reduce or defer new plant requirements.
- Customer service—Customers welcome a program that allows them to be more directly involved in how and when they use electricity from the grid and at what price. In this, the age of choice, demand response provides customers with greater control over their energy bills.
- Market power mitigation—When customers have choice, they are less vulnerable to prices set by a power supplier and conditions that lead to tight supplies and/or transmission constraints.
PJM ran a well-received pilot emergency-demand response program in 2000 and began implementing a price responsive load program as a customer option in 2001. This program, plus additional generation, contributed to lower wholesale prices this past summer when the maximum average price per megawatt hour during peak demand periods was $150 versus $900 in 2001. Overall, the program reduced demand on the grid by more than 6,500 megawatt hours during the summer of 2002 and paid out more than $900,000 in incentives to program participants.
For more information visit PJM Interconnection.
