Like Supply-Side Resources, Demand Response Must be Managed through efficient processing of business transactions, including registration, bidding, scheduling, measurement, verification, settlement and dispute resolution. With an increasing number of participants, rising volume of transactions, and frequent changes in tariffs and business rules, management of demand-response (DR) programs is becoming more difficult. To meet this challenge, PJM, LLC (Valley Forge, Pennsylvania, U.S.) is implementing the next generation of DR management solutions.

A SHOCK ABSORBER

DR programs have the potential to act as shock absorbers in wholesale electricity markets, dampening price spikes during peak demand periods and significantly reducing price volatility while enhancing grid reliability. When effectively integrated in organized markets, DR programs can produce impressive benefits for grid operators and customers alike.

Recognizing the potential of DR, the Federal Energy Regulatory Commission issued an order in October 2008 that effectively puts DR on par with supply-side options. Specifically, FERC's new rules require regional transmission organizations (RTOs), including PJM, to:

• Accept bids for ancillary services from technically capable DR resources, as RTOs currently do for supply-side resources

• Eliminate certain charges to buyers in the energy market for voluntarily reducing demand during a system emergency

• Assess and report any barriers to comparable treatment of DR

• Allow the market price to more accurately reflect the value of energy during periods of operating reserve shortages.

Permit an aggregator of retail DR to bid the combined negative load directly into organized markets.

The question is: Why have DR programs not been more widely applied and routinely used to date? The simple answer is that implementing DR programs is not as simple as it may appear. And, integrating their effective operation is challenging due to the growing volume of transactions and frequent changes in market protocols, rules and tariffs.