ON SITE ENERGY – INTERPLAY WITH
PJM DEMAND RESPONSE PROGRAMS
October 17, 2013
Robert A. Weishaar, Jr.
Harrisburg, PA – Columbus, OH – State College, PA
Lancaster, PA – Washington, DC – Scranton, PA
© 2013 McNees Wallace & Nurick LLC
PJM DEMAND SIDE RESPONSE


The purpose of PJM Demand Response is to enable
Demand Resources under the direction and control of
Curtailment Service Providers to respond to economic
prices and/or emergency conditions
Demand Response can participate within the various PJM
markets:
•
Energy
•
•

Day Ahead Market

Real Time Market
Ancillary Services

Synchronized Reserve

Regulation

Day Ahead Scheduling Reserve
Capacity

Offer into auction up to 3 years in advance
© 2013 McNees Wallace & Nurick LLC
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ENERGY MARKETS - PJM ECONOMIC
LOAD RESPONSE PROGRAM ("ELRP")

All ELRP participation defined as:
•
•
Clearing in the Day-Ahead ("DA") Market
Dispatched by PJM in the Real-Time Market

ELRP participant or CSP must submit load reduction
bid offer to PJM

Curtailment must clear in the DA market or be
dispatched by PJM in real-time to be eligible for
settlement revenue

Load reductions eligible to be paid full LMP if LMP is
at or above the Net Benefits Price (a.k.a. threshold
price)

Net Benefits Price expected to correlate to energy cost of an
efficient combined cycle natural gas plant
o
Adjusts monthly
o
Price has ranged from approximately $23.00-$30.00/MWh
© 2013 McNees Wallace & Nurick LLC
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ENERGY MARKETS - PJM DEFAULT
CUSTOMER BASELINE

A Customer Baseline ("CBL") is a proxy for what the
load would have been absent the load reduction

All ELRP registrations require Customer Base Line
("CBL") certification

All customers must use a CBL with an error (relative
root mean square error – "RRMSE") no greater than
20%

CBLs for customers with on-site generation are being
determined mostly on a case-by-case basis

ELRP reduction is determined by the CBL minus the
meter readings during PJM dispatched curtailment
hours
© 2013 McNees Wallace & Nurick LLC
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ENERGY MARKETS - ELRP SUMMARY
AND CAUTION

ELRP Revenue is determined by CBL Calculation
CBL Calculation represents a moving target

•
•

Presents some risk to curtailment amount
Could be manipulated to inflate ELRP revenue
Baseline manipulation viewed by FERC as
manipulation of electric energy markets
•

Potential penalties of $1 million per day per violation
Daily decisions when/if to participate in the ELRP
program must not consider impact to future CBLs
No payment for load reduction if LMP is less than
Net Benefits Price

•
Historically, LMP has been greater than the Net Benefits
Price about 50% of the time
© 2013 McNees Wallace & Nurick LLC
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ANCILLARY SERVICES MARKETS

Synchronous Reserve Market
•
Paid for standby service

Emergency reserve that PJM can call quickly after a large
generator suddenly trips off-line

Hourly payment just for being available to respond

25 – 40 events typically occur annually

Total performance requirement of about 6 hours per year
•
Must reduce load/increase generation within 10
minutes when ordered by PJM
•
Requires 1-minute scan rate metering
•
Data submission within 24 hours
•
Consequences for non-performance
© 2013 McNees Wallace & Nurick LLC
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ANCILLARY SERVICES MARKETS

Synchronous Reserve Market
•
Hourly market participation

Hourly synchronous reserve offer must clear the market to
receive payment

Not all hours require PJM to procure Synchronous
Reserves from Demand Resources or result in a clearing
price greater than $0
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ANCILLARY SERVICES MARKETS

Regulation Market
•
Hourly market correcting for constantly occurring
small load changes
•
Requires 5-minute response time
•
Requires both load reduction and load increase
•
Sub-metering permitted

Performance not measured based on change to AEP
pull
•
Consequences for non-performance
•
Cannot simultaneously be participating in the
Synchronized Reserves Market
© 2013 McNees Wallace & Nurick LLC
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ANCILLARY SERVICES MARKETS

Day Ahead Scheduling Reserve Market ("DASR")
•
Reserves are additional capacity above the expected load
•
The purpose of the DASR market is to encourage and incent
generation and demand resources to provide the flexible capability
to provide 30-minute reserves
If a Resource is called-on in Real-Time, it must respond in 30
minutes
Reserves are scheduled on a day-ahead basis in order to ensure
that differences in forecasted loads and forced generator outages
do not negatively impact system reliability
The Day-Ahead Scheduling Reserve Requirement is calculated on
an annual basis and is set at 6.91% for 2013
The DASR market clears simultaneously with the DA Energy
Market
Limited revenue potential
•
•
•
•
•
© 2013 McNees Wallace & Nurick LLC
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INTERACTION OF RESERVE
MARKET PRODUCTS

Resources can be capable of providing all
three products:
•

Synchronized Reserve, Regulation, and DayAhead Scheduling Reserve
All three cannot be provided
simultaneously, only two products, at
most
© 2013 McNees Wallace & Nurick LLC
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DEMAND RESOURCES IN THE
CAPACITY MARKET

Demand Resources can offer curtailment capability as
a forward capacity resource three years in advance of
delivery year
•
DR providers are required to provide the cleared demand response
amount as capacity during the delivery year and will receive the
capacity resource clearing price for this service

Must reduce load when requested by PJM All Call
system within 2 hours of notification

Must provide customer-specific compliance and
verification information within 45 days after the end of
the month in which Load Management event occurred

Can participate in both ELRP and Capacity DR
Programs

Note: Many aspects of RPM rules are being proposed
to change, particularly those relating to DR
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DEMAND RESOURCES
© 2013 McNees Wallace & Nurick LLC
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DR REGISTRATIONS
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EMERGENCY DR EVENTS
Delivery Year
# of PJM Events
2005/2006
2
2006/2007
2
2007/2008
1
2008/2009
No Events
2009/2010
1
2010/2011
7
2011/2012
1
2012/2013
2
2013/2014
7
2014/2015
Est. 5 to 9
2015/2016
Est. 5 to 9
© 2013 McNees Wallace & Nurick LLC
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RPM AUCTION CLEARING PRICES (ANNUAL
PRODUCT)
© 2013 McNees Wallace & Nurick LLC
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RPM AUCTION CLEARING PRICES (ANNUAL
PRODUCT)
© 2013 McNees Wallace & Nurick LLC
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DR PERFORMANCE
ASSESSMENTS (PENALTIES)

Three penalties are applicable to customers
participating in RPM as Demand Resources
("DR")
1.
2.
3.


RPM Commitment Compliance
Load Management Event Compliance
Load Management Test Compliance
PJM penalties applied on pro-rata basis and may
result in forfeiture of expected revenue or the
forfeiture of expected revenue plus a penalty
DR performance for on-site generation typically
measured using Guaranteed Load Drop ("GLD")
method
© 2013 McNees Wallace & Nurick LLC
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RPM TIMETABLE

A complete listing of RPM activities and dates
can be found at:
http://pjm.com/~/media/markets-ops/rpm/rpm-auction-info/rpmauction-schedule.ashx
© 2013 McNees Wallace & Nurick LLC
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Any
Questions?
Robert A. Weishaar, Jr.
McNees Wallace & Nurick LLC
Suite 401
777 N. Capitol Street, NE
Washington, DC 20002-4292
202-898-5700
717-260-1765 (fax)
[email protected]
© 2013 McNees Wallace & Nurick LLC
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