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Demand Response: Backed by the Full Faith of the US Government

demand-response-governmentA varied market of retail demand response (DR) providers has emerged to help the nation’s struggling power grid infrastructure. While the standard DR program does offer private financial incentives to clients, the impetus behind the demand response movement is not entirely a profit motive. Since 1978 the federal government has tasked the Department of Energy with helping to research and implement such programs aimed at lightening the load on our power grid.

1978

Though the term “demand response” had yet to be coined, state utilities and Independent System Operators (ISOs) already understood that the power grid might need more than just routine maintenance to continue meeting the growing demand for electricity. To achieve this, the Public Utility Regulatory Policies Act of 1978 (PURPA) directed the Department of Energy to “… [N]otify the State regulatory authorities, and electric utilities … of load management techniques and the results of studies and experiments concerning load management techniques.”

“Load management” is at the very heart of what demand response achieves. During times of high stress on the grid, DR programs offer incentives to clients who reduce power usage, or “manage” their electric demand.

At the time PURPA was passed, who knew that a small subsection of a 593 page legislative bill would spur a billion dollar industry?

Energy Policy Act of 2005

As energy demand continued to grow through the 1990’s and third party electric suppliers helped keep prices affordable many ISO groups began to implement demand response programs. Some of these groups also allowed private companies to administer DR programs (Energy Curtailment Specialists was formed in 2001 to meet such ISO needs). Almost 20 years later, Congress passed the Energy Policy Act of 2005 which directly iterated support for Demand Response programs. Among its provisions:

department-of-energy- Each state regulatory authority must study the feasibility of providing Time of Use (TOU) meters, which help determine performance during DR Events.

– The Department of Energy (DOE) must inform state authorities about the uses of metering and communications in DR programs.

– The DOE will directly educate consumers about smart metering (assumedly consumer support will spur state authorities to approve such technology).

– The DOE will work with states and utilities to identify and remove barriers to DR programs.The Federal Energy Regulatory Commission will submit to Congress a report on the national benefits of Demand Response.

– The section further summarizes, “It is the policy of the United States to encourage states to coordinate, on a regional basis, State energy policies to provide reliable and affordable demand response services to the public.”

FERC

department-of-energy-fercThe Federal Energy Regulatory Commission (FERC) was created by an Act of Congress in 1977 to replace the limited Federal Power Commission. As a result, FERC was tasked with regulating energy and electricity markets. Demand response, as a policy initiative, was brought under the direction of FERC.

In addition to the Energy Policy Act of 2005, the Energy Independence and Security Act of 2007 required FERC to perform a national assessment of demand response potential and develop and implement a national action plan for DR.

Evolving Policy

For 35 years, Congress has been directing energy policy concerning grid infrastructure and access. Through various Acts and the investment of oversight powers to federal commissions, the U.S. government has endorsed demand response as a useful, or even vital, tool in securing our electric grid.

In 2011, FERC issued its Implementation Proposal for the National Action Plan on Response, pursuant to the 2007 Act. It is currently working with the Department of Energy and ISOs to improve and move forward with the proposal.

Demand response can be a financial windfall for consumers, and it has also been recognized at the highest administrative levels as an effective tool in energy policy and management.

Scott Shugarts
ECS

Scott can be found on Twitter, Google+, and LinkedIn.

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