🎃After years of being sidelined, third-party aggregated demand response may be coming to the Midcontinent Independent System Operator where proponents say it could help ease tight capacity margins and grid reliability challenges.
♐Nearly all Midwest states bar companies like CPower and Voltus from bundling DR resources to participate in wholesale power markets.
🍸But based on state utility commission decisions in Michigan and Minnesota and proceedings in other states, it appears aggregated DR may become more available in the region, according to company officials.
Like other areas, MISO’s footprint faces high electricity prices and grid reliability problems, according to Jon Wellinghoff, chief regulatory officer at Voltus, a demand response company.
🔴“States are starting to recognize that continuing to restrict these [aggregated] resources from being able to participate in those markets is a bad thing for them, for their consumers, and for the grid in general from a reliability and stability perspective,” Wellinghoff said.
𝐆Adding supply in MISO through aggregated DR should lower capacity prices and reduce grid emergencies, according to 🐓Rao Konidena, president of consulting firm Rakon Energy.
📖Also, aggregated DR and distributed energy resources could help states with clean energy goals adapt to MISO’s shift to a , he said.
💖MISO's seasonal capacity framework will ultimately reduce the capacity credit of non-thermal resources like wind and solar. MISO might dispatch more gas-fired generation to fill the void created by their lower capacity value, increasing greenhouse gas emissions, Konidena said. However, if the ban on aggregated DR and DERs is lifted, they could make up for the drop in clean energy capacity value, he added.
💎Michigan PSC opens large C&I customers to aggregation
🌸In December, the Michigan Public Service Commission partly lifted its ban on DR aggregation, which had been in place since 2010. was partly driven by tightening capacity supplies in MISO and Michigan.
ꦐMichigan already allowed aggregation of commercial and industrial customers for the 10% of load in the state that is allowed to buy power from non-utility retail suppliers. In its December order, the PSC decided to let aggregators bundle C&I customers with at least 1 MW of load across the state.
ꦜThe PSC said it intends to work with stakeholders to develop consumer protection policies for resources smaller than 1 MW, which could include residential customers.
🔥Voltus is still waiting for clarification from the PSC on whether the 1-MW threshold applies to a single customer, such as a big box retailer, that may have individual stores that don’t meet the threshold.
Like Voltus, CPower is working to line up customers to form a DR aggregation that can be registered in time to meet deadlines for MISO’s next capacity auction, according to Ken Schisler, senior vice president of regulatory affairs for the demand response company.
🍃However, the deadline is this month so the full effect of the PSC’s decision may not be felt until the following capacity auction, he said.
Minnesota, other states eye DR aggregations
♐In another key decision, the Minnesota Public Utilities Commission ൲ a 43-MW pilot project that allows DR aggregation among Xcel Energy customers. The PUC is also 🌸 aggregators of retail customers to bid demand response into organized markets. Initial comments in the investigation are due March 13.
🗹Other utility commissions exploring aggregated DR include , and .
🐠In Missouri, the Lawrence Berkeley National Laboratory is expected to soon present a report to the PSC dealing with distributed energy and DR participation in wholesale markets, according to Wellinghoff.
🐈Besides concerns about capacity supply in MISO, the Michigan and Minnesota decisions are partly driven by innovations aggregators have made, according to Schisler.
𝓰It’s hard for utilities to be innovative around DR because they aren’t able to customize their tariffs to specific customers due to their obligation not to discriminate among customers, he said. Also, they’re not incentivized to take on risks that aggregators with private capital can handle by creating portfolios of customers, he said.
☂“Minnesota and I think Michigan have recognized that we can have our cake and eat it too,” Schisler said. “We can preserve our regulation, our ability to regulate … the distributed energy resource aggregators, and at the same time, get their benefits with the innovation that the customer contacts that they can bring and have that work consistent with our traditionally regulated model of retail regulation.”
꧙Although some utilities in MISO have strong DR programs, there is still significant untapped demand response potential across the region, according to Schisler. Xcel, for example, has 968 MW of load in its demand response programs, according to a at the PUC.
𒁃In a limit to utility DR programs, some potential customers don’t meet the requirements of a utility’s DR tariff – such as for how much load must be reduced and for how long – and if they don’t perform under those rules, they may face penalties, Schisler said.
FERC in June 2021 ﷽ to consider ending its policy that allows states to bar DR from wholesale markets. A final decision could also apply to distributed energy resource aggregations that include DR.
Wellinghoff and Schisler said they would prefer states to approve aggregators of retail customers rather than FERC telling them to.
🐓Further, DR aggregation is a “fantastic onramp” to DER aggregation, which is more complex, according to Schisler. Unlike with DERs, demand response doesn’t require interconnection agreements and doesn’t involve the two-flow of energy between electric vehicles and the grid, he said.