Policy Issues in Electricity Demand Response: The Weather Connection

Demand for electricity in the U.S. is ever-increasing, due to population growth, lifestyle choices and economic expansion. The U.S. Energy Information Administration predicts total electricity demand will soar by 22% from 2010 to 2035. The choices we make as a nation will contribute significantly to how well we match power supply and demand to maintain a stable and reliable grid. Weather fluctuations, on daily and annual cycles, make the demand for electricity volatile. Heat and humidity, triggers to turn on electric-powered air conditioners, are highest in the afternoon, during the summer (except cold climates) and on weekdays when businesses are open. Moreover, many fluctuations are not predictable. One technique to balance load on the electric grid involves reducing the height of maximum electricity demand. This approach helps avoid outages in the short term and reduces the need to build new power plants in the long term. Demand response programs, often run by utilities, allow enrolled customers to receive an incentive for reducing their energy use during peak demand times. Customers are encouraged to shift electricity use to off-peak hours, such as late evening. Therefore, managing the end-use of electricity is highly weather dependent. The 10 independent system operators (ISO) in the U.S., regional organizations responsible for reliable transmission of power in their territory, may call demand response events on hot weather days in the summer when air conditioners run full blast. The summer of 2012, for example, has seen numerous event days across the country, due to record high temperatures and extended heat waves. This presentation will attempt to answer: 1) What is the process flow of weather forecast information for a demand response event from collecting Earth observations to consumers acting to curtail their consumption? 2) What are the current and future weather forecast needs of ISOs? 3) What can governments at the local, state and federal levels do to optimize the use of demand response programs, with respect to weather data and other factors? The following illustrates the types of policy issues related to demand response that will be discussed: 1) Privacy issues -- Many utilities ask customers to opt-in to air conditioning cycling programs, in which the utility directly shuts off AC units in 15-minutes increments, on days when the regional grid is under great strain. Emerging smart grid technologies will offer the ability to cut power to specific appliances in the home for the benefit of grid stability. Some consumers object to utilities wielding such power and gathering data about their behavior. 2) Texas case study -- By Texas state law, only large commercial customers with loads 100 kW or greater are eligible to participate in demand response programs. This hampers the ability of ERCOT, the ISO responsible for most of the state, to reach the full potential of demand response activity. ERCOT officials claim its territory's peak could be greatly reduced if the minimum load were lower than 100 kW. 3) As intermittent renewable energy sources such and wind and solar power become more prevalent components of electricity supply, balancing supply with demand moment to moment will be increasingly difficult. Today this integration challenge is met through quick-start fossil fuel plants. Utilizing demand response could be a cleaner alternative to such plants. 4) State Regulations: PA Act 129 requires all Pennsylvania electric utilities with more than 100,000 customers to reduce peak demand for electricity by 4.5 percent by May 31, 2013. To meet this mandate, the four investor-owned utilities affected by the regulation have developed demand response programs that pay participating businesses to reduce their electricity usage during all or some of the 75 peak hours of the year. Why did PA enact this legislation and why might other states pursue similar courses?