A Guide to Inform Institutions about Participation in PJM’s Demand Response Programs

Abstract

Increasing reliability concerns over the last decade have led stakeholders within the Energy Industry to place a great deal of attention on the management of electricity load. Traditionally, consumers have been shielded from the price signals that indicated high stress on the electricity grid, but through a process known as Demand Response (DR), customers are now being offered incentives to actively manage their load for increased reliability. Attention on DR has grown with its profusion into electricity markets; at both the wholesale and retail levels. Focusing on institutional customers and DR programs within the PJM wholesale electricity market, this study provides a comprehensive resource to answer questions associated with (1) the regulatory structure of PJM’s markets for DR and (2) the possible benefits that can result from market participation. As a first step in addressing these objectives, this report first provides an analysis of the current publically available information, and establishes that there is no single resource that provides sufficient information to resolve all the questions an institution may have. This report then offers clear and concise content by which institutional customers can assess the framework of PJM’s DR programs. Further, a tool for estimating the potential revenue available from participation in the capacity auction was created to help institutions understand the profitability of engaging in the capacity market. Finally, this report concludes that while participation in PJM’s demand response programs is a complicated undertaking, there are a wide variety of options available to meet the unique needs of individual customers, as well as significant financial incentives.