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Electric Demand Response
What is Electric Demand Response?
Demand response (also known as load response) is the ability for qualifying end-use commercial customers to reduce their use of electricity when wholesale prices are high or the reliability of the electric grid is threatened. In turn, customers who participate receive discounted rates.
Common examples of demand response include: slowing down or stopping production at an industrial operation or dimming/shutting off lights - basically any explicit action taken to reduce load in response to short-term high prices. Demand response does not include the reduction of electricity consumption based on normal operating practice or behavior. For example, if a company's normal schedule is to close for a holiday, the reduction of electricity due to this closure or scaled-back operation is not considered a demand response activity in most situations.
What does this mean for you?
Vectren electric commercial customers can participate in demand response through the Midwest Independent Transmission System Operator, Inc. (MISO). MISO, of which Vectren is a member company, is a Regional Transmission Organization that assures consumers of unbiased regional grid management and open access to the transmission facilities under MISO's functional supervision. MISO is an essential link in the safe, cost-effective delivery of electric power across all or parts of 12 U.S. states and the Canadian province of Manitoba.
MISO's wholesale electricity markets provide opportunities for qualifying end-use customers to realize value for reducing their demand for electricity. Demand response is an integral part of MISO's markets for energy and operating reserves. Demand response can compete equally with generation in these markets.
How can you qualify?
In order to participate in demand response, the business must consume at least 1 megawatt (MW) of power. Also, commercial customers who use 70 kilowatts (kW) can aggregate with other businesses to amass 1 MW and then participate as a group.
Is there any cost to participate?
Yes. The following includes charges that could apply: The customer/business is responsible for the cost of any necessary meter upgrades (if required)
- $1,000 annual registration fee
- Administrative costs
- Penalties can apply for non-performance
- Applicable charges are determined on a case-by- case basis
How do you participate?
In MISO's energy market, end-use customers participate in demand response by reducing their electricity use either during an emergency event or when locational marginal prices (LMPs) are high on the MISO system. End-use customers may choose to participate in demand response directly through MISO or through members called aggregators (sometimes called curtailment service providers (CSPs), who act as agents for the customers. A list of MISO members who are aggregators is not yet available.
Once aggregators are approved in the MISO market, interested parties may contact them to get a more in-depth understanding of the opportunities and determine whether you have the capability to participate. On its web site, MISO posts the training materials developed for its members who are interested in the rules and requirements for demand response activity. MISO also posts a variety of demand response information.
Why would you want to participate?
Through demand response the business/customer makes a commitment to reduce load in response to market prices or the need to maintain system reliability. As such, the business may benefit from significant bill credits (lower energy bills), especially if market prices are extremely high. In other words, the business would be compensated for reducing its electric demand, and the compensation amount would depend upon the amount of electric load reduced and the period's market price for electricity. Through demand response, it's as if the business would be selling its pre-determined amount of un-used energy back into the market.
Participation may help to ensure reliability and avoid disruption of electricity service for many customers. Additionally, participation may help to delay or avoid the building power system infrastructure that would only be utilized during the highest demand periods. Load reductions during peak demand conditions also may help to reduce emissions and the associated environmental impact on the planet.
Why does MISO need/offer demand response rates?
Demand response is important because it is another competitive resource that can be used to maintain demand and supply in balance for grid operations and the associated wholesale markets. Retail electricity consumers tend to be unresponsive to wholesale prices. Therefore, as demand goes up, less efficient generators are called on to serve this demand. By reducing demand during these periods, the system and market potentially can avoid using less efficient generation resources to meet high demand.