Demand Response Income for Manufacturers, Hospitals, Schools and Communities – it’s Not Just for the Largest Electric Consumers! To the vast majority of electric suppliers and brokers Demand Response is a “value added” product. Brokers offer to help businesses get involved if it helps them hold onto the electric supply deal. “Value added” means there’s value for the customer, but very little value to the broker/supplier
Until now most of the Demand Response participation involves large electric consumers: large industry and hospitals are the high value Demand Response target prospects. The annual payment receive by the consumer is pretty attractive.The income to suppliers/brokers is extremely low, but worthwhile if it helps win or keep the customer’s electric contract.
More and more small manufacturers, hospitals, communities, cities/townships, local school systems and other small to medium size electric consumers are gaining interest in participating in Demand Response. The more they learn about the program and understand the value it brings, the more anxious they are for it.
Most businesses have never heard of Demand Response, if they have they often figure it isn’t for them or assume they are too small to qualify. After the company, community or school learns more about the facts and income potential found in Demand Response, they often call the program a “no-brainer”.
Here are some of the basics of Demand Response:
All the public electric utilities in Ohio are part of the Regional Transmission Operator named PJM. Have you ever seen the old fashioned large “erector set” looking electric units, which are sitting out in green space with high electric wires running from one unit to another? Those are Transmission lines. PJM operates all the Transmission lines in Ohio, WV, District of Columbia and 11 other states.
PJM created the Demand Response program to reduce peak electric demand on the power grid during emergencies and pay customers an annual incentive payment participate. PJM works through Curtailment service Providers (CSP) who then contacts directly with customers. The Curtailments Service Provider’s role is to pay the incentive payment, provide the notice of critical event, or in the absence of a critical event, notice of a one hour test.
Customers who participate in Demand Response agrees to reduce their usage during critical events or during the one hour test. Electric reductions are done by other switching to back up generation, shutting down production temporarily, or lowering AC or other equipment.
Historically, when critical events occur, it’s on an extremely hot day throughout the PJM13 state service area. Most often events occurs as people return home from work or school and turn the air conditioning on, creating a collective power surge on the system that can cause the critical event for a few hours. Generally, the critical event starts no earlier than 3:00 or 4:00 p.m. and can last until 7:00 or 8:00 p.m. Any event called is always during the week and never on the weekend or holidays. Potential Demand Response participants often look closer at the program when they find that the critical events are rare, and never in recent history occurred during the morning or early afternoon hours of the day. They also look closer at the program when they hear about the attractive incentive payments. This makes the Demand Response Income for Manufacturers, Hospitals, Schools and Communities an attractive option.
A customer earns an incentive payment from the Curtailment Service Provider based on the amount of electric load reduction each customer is able to do during a PJM critical event. The customer still earns the incentive payment even if there is no critical event. In this circumstance their income will be based on the results from the one hour test called by the Curtailment Service Provider that proves to PJM that the customer can in fact reduce their load if called upon to do it. There is no penalty per se, for non-performance, but the annual incentive payment will be reduced in direct proportion of the volume reduction actually achieved during the event or one hour test.
PJM has two choices to handle the electric need during critical power surges that happens on their transmission grid. They ask power generators to turn on all their generating units, and ask that they run them at full capacity if possible. They also have a Demand Response program that pays electric customers to reduce their electric use during critical events. RD Energy encourages manufacturers of all sizes, communities with water and wastewater treatment plants, hospitals, colleges and local school systems with AC to look closely at the PJM Demand Response program and the value of participation. Participating in a Demand Response program provides an annual income that can be used to fill financial budget gaps, to fund other capital projects or however the customer decides to use the income.
Manufacturers, Hospitals, Schools and Communities who choose to look at the value of Demand Response Income program should get the facts and decide if it’s right for them. The best time to review the program is the fall season and to contract with a Curtailment Service Provider by the end of the year. The PJM Demand Response year, runs from June to June. A customer needs signed up for the program several months prior to June to assure being able to participate the coming year.
Find out if the PJM Demand Response program is a good fit for your company, school or community. Contact RD Energy for more details. Find us on the web at www.rd-energy.com or on Facebook https://www.facebook.com/RDEnergyOhio .