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)
rweishaa@mwn.com
© 2013 McNees Wallace & Nurick LLC
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