Demand Response in the Recent East Coast Heat Wave

Lynne Kiesling

It was pretty hot on the East Coast a couple of weeks ago, wasn’t it? The kind of heat that drives up the use of air conditioning and creates electricity demand spikes near system capacity, threatening service reliability. But there were no blackouts, no brownouts … what gives?

Price signals and demand response, that’s what gives. Price signals give incentives to reduce use at precisely the times when the system is the most stressed. As reported in the Philadelphia Enquirer on 11 August:

PJM Interconnection said yesterday that, as electricity use soared Wednesday, the region’s power grid set a record in the amount of peak need that was met by so-called demand response, in which power customers are paid market rates to curtail consumption. …

PJM said demand-response providers, typically businesses or institutions that offer to cut their consumption as needed, provided nearly twice that much, 1,945 megawatts of power, to meet the system’s peak requirements Wednesday afternoon.

The volume of demand response was “similar to the amount of power used by a mid-size city,” PJM said.

“This was the largest amount of demand response we’ve ever had on one day, and it’s an encouraging milestone,” PJM vice president Andrew L. Ott said in a statement. “Participating consumers responded to price signals in the wholesale electricity market and to system needs.”

See also Patrick Mazza’s comments over at Grist about his time in sticky Pennsylvania in August.

Price signals just keep giving and giving … when our regulatory institutions let them.

Back in July, Mazza also had a nice post about demand response, in which he went through a lot of the economic logic familiar to you KP readers. He also talked with the ever-insightful Rob Pratt at Pacific Northwest National Laboratory about the system-wide benefits that smart-grid-enabled, widespread demand response would provide:

On the old “dumb” grid, information flow from power users to suppliers consists almost entirely of 12 meter readings a year; from suppliers to users, it is 12 power bills. One of the most profound changes introduced by the smart grid — indeed, what makes it smart — is a communications backbone that allows massive two-way information flows. An information network is overlaid on top of the power network. Demand response (DR) employs these information/communications capabilities to engage power users directly in managing the grid. In essence, information becomes a new power resource. …

DR provides some clear environmental benefits. It can serve as a substitute for spinning reserve — power plants that run ready to supply power on short notice, typically around 10-15 percent of overall power generation. The less spinning reserve, the fewer emissions. And DR could sharply reduce the need for peaker power plants and infrastructure, with all their embedded energy and land-use impacts. Pacific Northwest National Laboratory (PNNL) calculates that moving to smart-grid technology will eliminate the need for between $46 and $117 billion in conventional utility infrastructure. That does not count investments in new smart grid technology. But one PNNL calculation gives an indication of comparative costs: smart appliances that can adjust their demand to grid conditions could, for $600 million, provide reserve capacity equal to power plants costing $6 billion, proving that “bytes are cheaper than iron.”


6 thoughts on “Demand Response in the Recent East Coast Heat Wave

  1. Don’t forget the impact of LMP on the supply side. In 2003 there were problems among generators that LMP might well have prevented. The LMP footprint in 2003 did not include MISO; and AEP, ComEd, and Dayton had not yet been integrated into PJM’s operations. Today we can observe in those regions interesting LMP patterns that tend to mitigate those problems, resulting in a more stable and economic dispatch of generation over wide areas. At the same time, the price patterns that result interact with demand in specific high-priced areas. So, it’s not *just* demand response that’s changed in recent years. Many things are better integrated, including the coordination of locationally meaningful demand response.

  2. Don’t forget the impact of LMP on the supply side. In 2003 there were problems among generators that LMP might well have prevented. The LMP footprint in 2003 did not include MISO; and AEP, ComEd, and Dayton had not yet been integrated into PJM’s operations. Today we can observe in those regions interesting LMP patterns that tend to mitigate those problems, resulting in a more stable and economic dispatch of generation over wide areas. At the same time, the price patterns that result interact with demand in specific high-priced areas. So, it’s not *just* demand response that’s changed in recent years. Many things are better integrated, including the coordination of locationally meaningful demand response.

  3. Has there been a significant blackout that originated in a LMP-based transmission market? (Sure, the 2003 blackout hit New York, but it started in the Midwest ISO region in its pre-LMP days.)

    Do we now have enough experience under LMP to begin to conclude that the data supports the LMP theorists/”ideologues” on the reliability benefits of better prices (as well as the more obvious efficiency benefits)?

  4. Has there been a significant blackout that originated in a LMP-based transmission market? (Sure, the 2003 blackout hit New York, but it started in the Midwest ISO region in its pre-LMP days.)

    Do we now have enough experience under LMP to begin to conclude that the data supports the LMP theorists/”ideologues” on the reliability benefits of better prices (as well as the more obvious efficiency benefits)?

  5. LMP markets have been in operation internationally since late 1992 (Argentina). There have been notorious blackouts in New Zealand, but I don’t think they were caused by dispatch issues. LMP helps reliability a lot, because in its most advanced form, it *is* bid-based, security-constrained economic dispatch, including marginal losses. Under that kind of LMP it is difficult to imagine how the situation that preceded the blackout in 2003 could have occurred, given what would have been happening with prices in the Pittsburg-Cleveland corridor and in southern Illinois and Indiana earlier in the day. Of course, in reality there’s that “big’ole” MISO-PJM seam running through Ohio. MISO and PJM exchange a tremendous amount of information every few seconds to minimize those seams issues.

  6. LMP markets have been in operation internationally since late 1992 (Argentina). There have been notorious blackouts in New Zealand, but I don’t think they were caused by dispatch issues. LMP helps reliability a lot, because in its most advanced form, it *is* bid-based, security-constrained economic dispatch, including marginal losses. Under that kind of LMP it is difficult to imagine how the situation that preceded the blackout in 2003 could have occurred, given what would have been happening with prices in the Pittsburg-Cleveland corridor and in southern Illinois and Indiana earlier in the day. Of course, in reality there’s that “big’ole” MISO-PJM seam running through Ohio. MISO and PJM exchange a tremendous amount of information every few seconds to minimize those seams issues.

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