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Webinar Highlights The Effects of 111(d) and Order 745 on DR & Smart Grid

3 min. read

This afternoon, the Association for Demand Response & Smart Grid (ADS) held a webinar covering a number of important topics:

  • The recent court ruling on FERC Order 745 and what it means for the Demand Response (DR) industry if it stands.
  • "An explanation of the EPA’s draft regulations (111d) and how DR and smart grid will or will not factor into planning done to comply with the regulations once final. "
  • "What the timelines and next steps are for each of those developments and what you can do participate in those steps"

Speakers on the webinar included Dan Delurey of ADS, Chris King of Siemens Smart Grid, Aaron Breidenbaugh of EnerNOC, and Allison Clements of NRDC's "Sustainable FERC Project."  Here are a few highlights.

  • According to Aaron Breidenbaugh, FERC Order 745 was one of the most controversial rulings ever by FERC on Demand Response (DR), with the main debate over what the appropriate level of compensation should be. Ultimately, FERC approved full "Locational Marginal Price" (LMP) compensation, but this has been challenged by the Electric Power Supply Association on two grounds: 1) the compensation level; and 2) FERC's jurisdiction to issue any order whatsoever pertaining to DR on the grounds that it is a retail service.
  • To date, only PJM has fully implemented Order 745, and it's had a significant effect, with DR increasing eightfold following order 745.
  • The May 23 DC Circuit Court decision was that DR is fundamentally a retail activity over which Congress has determined that FERC has no jurisdiction. The Court therefore vacated FERC Order 745 on this basis, in a 2-1 decision.  The Court also said that FERC hadn't supported its compensation levels as fair and reasonable. For now, the Court decision is effectively stayed, so it's not a case of "stop the presses" when it comes to wholesale DR.
  • Also, it's important to note that the DC Circuit Court decision affects economic DR only, and that capacity DR payments were around 50 times higher than economic DR payments in 2013. So, this won't upset the industry, but "clearly a shot has been fired across the bow."
  • FERC has petitioned for en banc review of the DC Circuit Court decision and is being supported by PJM, a number of PUCs and ISOs, consumer advocates, environmental groups, and industrial customers.
  • According to Allison Clements of NRDC, the goal of the Sustainable FERC program is to break down federal regulatory barriers to the increased deployment of renewable energy resources and demand-side resources.
  • Tools for achieving EPA's carbon emission targets are based on four "building blocks": a) making existing coal plants more efficient; b) using natural gas plants more effectively; c) increasing renewable and nuclear power; and d) increasing end-use energy efficiency.
  • In Clements' view, EPA has provided an opening for DR and other smart grid resources, but they will have to clearly demonstrate long-term carbon reduction potential using "really good data," measurement and verification.
  • Dan Delurey argued that EPA's regulations don't acknowledge the tremendous changes the utility system is undergoing right before our eyes. In its final regulations, Delurey believes that EPA needs to acknowledge this fact, as we don't want states ignoring DR and smart grid simply because it's not in the EPA regs.  In additoin, Delurey believes that energy efficiency should not be defined as only including end-use efficiency.
  • Chris King made the case that the smart grid can result in "intelligent efficiency," saving 5%-9% of energy as a result of consumers being better informed as to where their energy dollars are going.
  • King also argued that the smart grid allows for more renewable resources on the grid, through such things as voltage regulation, power fluctuation and frequency regulation, time-varying pricing, and controllable inverters. Overall, the potential benefit could be up to 60% more solar power on the grid.