For the first time, demand response can fully compete with generation to provide ancillary services in an organized wholesale electricity market. On Monday, PJM Interconnection opened its synchronized reserves and regulation markets to demand response providers.

PJM requested and received Federal Energy Regulatory Commission approval to allow demand response to participate in ancillary service markets. Demand response involves reducing the use of electricity (demand) to meet a system need rather than increasing generation (supply).

"This is a landmark development that will increase efficiency and could lead to cost reductions for these services by increasing competition to provide them. The potential additional revenue for the services also enhances opportunities for investment in demand response resources," said Andrew L. Ott, PJM's vice president of markets. "PJM is neutral as to how grid services are provided, whether by generation or demand reduction. We foster the broadest possible participation in the opportunities created by wholesale electricity markets."

Synchronized reserve (formerly spinning reserves) is capacity (generation or usage reduction) that is available in 10 minutes. It can be called upon virtually instantly to replace a power plant or transmission line that unexpectedly trips out of service. Regulation service responds instantly to small, minute-to-minute changes in electricity use in order to keep the supply and demand for electricity in balance.