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PJM Posts "Demand Response Strategy" Whitepaper, Addresses Compensation, Retail Contracts

July 05,2017



PJM has issued a whitepaper entitled Demand Response Strategy (click here), outlining various issues with DR compensation in PJM's markets.

In discussing DR in the wholesale energy market, PJM's whitepaper states, "Retail customers should not necessarily receive compensation through the wholesale energy market, as it may result in a subsidy when they are already on a dynamic retail rate."

Long-term, the whitepaper states, "PJM will focus on working with LSEs to determine what PJM can do to enable more dynamic retail contracts. While PJM understands customers may not want the risk of real-time prices, there may be other things PJM can do to help align wholesale market prices with retail market prices or incentives. This will help to make the transition from wholesale energy market revenue on the supply side to retail energy cost savings on the demand side. PJM will continue to refine participation in the capacity and ancillary service markets based on the value to stakeholders."

Another long-term focus will be: "Explore and develop opportunities to move DR in the energy market to demand side (cost savings) by modifying or eliminating energy compensation. This approach will help to avoid existing market distortions created through the payment of full LMP, which leads to uneconomic dispatch and the potential for inaccurate price formation."

Also in the long-term, PJM will: "Evaluate transitioning energy efficiency to the demand side (retail electricity cost savings) by eliminating capacity compensation."

Tags:
PJM   Demand Response   Pricing  

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