Demand Response program changes are coming to SPP, MISO and PJM.
Tiered approach at SPP, Notification times at MISO and potential for lack of performance payments for DR at PJM.
Changes are coming to Demand Response Resources at the Independent System Operators1 under the Federal Energy Regulatory Commission jurisdiction2. Some of these changes are driven by DR’s under-performance claims3 at PJM during Winter Storm Elliott. Changes at MISO are related to the seasonal capacity market and some stakeholders’ concerns that MISO was providing support to its neighbors during WSE. With very little demand response participating in its markets and lack of a capacity market, demand response changes at SPP seem to be “Fear Of Missing Out” related.
PJM intends to reduce performance payments to DR participating in the capacity market.
After Winter Storm Elliott, the PJM Board directed PJM to revamp its capacity markets. One of the changes proposed by PJM, which FERC has not decided yet, is related to how demand response is paid for performance. Under current capacity construct rules, DR is paid for overperformance if the curtailment MWs are beyond the Firm Service Levels. But in the future, if FERC approves, PJM won’t pay DR for any curtailment beyond FSLs. SPP seems to have “borrowed” this FSL concept in its proposed changes. FERC is expected to decide on PJM’s capacity market filing in early January. Otherwise, PJM risks missing the timeline for its June 2024 auction for the 2025/2026 Delivery Year.
Source - PJM
Please note - FERC approved on December 20 a settlement related to the performance penalties during Winter Storm Elliott. As a result, some of the above # could be decreased. See “Overwhelmingly supported by all parties, the settlement results in a market-wide reduction of non-performance charge assessments from an estimated $1.8 billion to an estimated $1.25 billion, which in turn trim performance payments.” https://insidelines.pjm.com/ferc-approves-winter-storm-elliott-settlement-agreement/
Before moving away from PJM, I wish to note that Demand Response is stagnating in PJM’s capacity market as seen below -
Source - PJM.
MISO is proposing changes to Load Modifying Resource capacity accreditation.
As part of the seasonal capacity market changes, MISO is moving to a new Direct Loss of Load (D-LOL) method to credit capacity. But MISO has run into opposition from renewable developers and, as a result, has yet to file this change at FERC. Included in this D-LOL method are changes to the Load Modifying Resources (LMRs). At the November 2023 Resource Adequacy Sub Committee (RASC), MISO divided the LMR changes into near-term and long-term.
Source - Potomac Economics.
MISO said it needs more time to discuss long-term changes such as moving long-lead time LMRs into the market (because LMRs are primarily a planning resource), reducing the LMR notification times to 30 minutes and requiring control room communications for LMRs.
Source - MISO RASC January 2023.
However, MISO is moving ahead with short-term changes to LMR accreditation, such as giving 100% capacity for LMRs with less than 2 hours of notification time. Two hours to 4 hours of notification time results in 70% credit, and between 4 and 6 hours is 50% capacity credit. This sliding scale for LMRs capacity based on notification times will impact how much capacity LSEs need to procure to meet their planning reserve margin obligations. MISO plans to file these changes with FERC sometime in the second quarter of 2024.
Even though SPP does not have a capacity market, SPP asserts that the current DR policy is not suited for future grid challenges.
Compared to its neighbors, MISO and PJM, SPP does not have a capacity market. So, there are no capacity market performance issues to be worried about. A lack of capacity market is not stopping SPP from proposing changes to demand response similar to MISO and PJM.
Source - SPP
Additionally, according to the “State of the Market 2022” report published by the Market Monitoring Unit (MMU), SPP has 140 demand response resources representing 362 MW of nameplate capacity. In contrast, MISO has more than 12,000 MW of demand response resources, according to Potomac Economics, MISO’s Independent Market Monitor. Even though SPP has barely scratched the surface of DR potential, it is changing the rules for DR.
At the October 2023 Markets & Operations Policy Committee (MOPC) meeting, SPP asserted that the current DR policy works for limited penetrations of DR because current DR programs are triggered only during peak demand times during the year. In the future, DR programs could be triggered during off-peak demand hours during the year, even beyond the firm capacity. As a result, it will be tough to determine the reliability contribution of DR. Additionally, when SPP modeled the limitations of DR programs in the Loss of Load Expectation (LOLE) model, it resulted in higher reserve margins. Without changes to the current DR policy, SPP states that a higher reserve margin increases the burden on Load Resource Entities (LRE, similar to MISO’s Load Serving Entities). Hence, SPP states that changes to DR are warranted.
Source - SPP October 2023 MOPC meeting.
Operational Tests are coming to SPP.
Currently, there is no operational testing requirement for a Demand Response Program that an LRE actively manages to reduce its peak demand when the level of demand reduction is reflected in the LRE’s Net Peak Demand at SPP, according to the SPP Open Access Transmission Tariff (OATT) Business Practices document updated on November 30, 2023.
But that is changing soon.
Demand Resources must have a summer and winter season operational test completed during the peak demand in that season. SPP states that the operational test must be completed for a minimum of one hour at a minimum of 50% of claimed capability. If a Load Modifier (resources that reduce the LRE peak demand) is deployed during the summer or winter peak load period then this operational test is waived. Additionally, SPP has Capability Tests for Demand Response in the future.
Tiered Demand Response Resource Type Designation is coming to SPP.
Source - SPP October 2023 MOPC meeting.
Bottomline - SPP changes need to be approved by FERC. I have not seen an SPP schedule on when it intends to file these DR changes. The MISO Load Modifying Resources change is scheduled to be filed in the 2nd Qtr of 2024. FERC’s approval for PJM’s capacity market construct is imminent in the New Year.
Not all ISOs are mentioned because I chose to focus on SPP, MISO, and PJM. CAISO, NYISO, and ISO-NE will be discussed later.
ERCOT does not come under FERC jurisdiction.
See this report from PJM, https://www.pjm.com/-/media/library/reports-notices/special-reports/2023/20230717-winter-storm-elliott-event-analysis-and-recommendation-report.ashx - Page 42, “CSPs estimated, and therefore PJM expected, that approximately 7,400 MW of load would be reduced. Based on after-the-fact customer load data, PJM estimates that actual load reductions from PJM dispatch was approximately 2,400 MW. This corresponds to approximately 68% of the Demand Response PJM operators dispatched and expected to reduce load not performing.”