Demand Response - Policy

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Since its inception, the Office of Electricity Delivery and Energy Reliability (OE) has been committed to modernizing the nation's electricity delivery infrastructure to assure consumers a robust, reliable electric power system that meets their increasing demand for energy. OE's mission includes assisting states and regions in developing policies that decrease demand on existing energy infrastructure. Appropriate cost-effective demand response programs can be one part of achieving that goal. OE has been at the forefront of assisting states and regions to develop guidelines for demand response programs, particularly over the last 11 years when interest in demand response increased.

Demand response is an electricity tariff or program established to motivate changes in electric use by end-use customers, designed to induce lower electricity use typically at times of high market prices or when grid reliability is jeopardized. In regions with centrally organized wholesale electricity markets, demand response can help stabilize volatile electricity prices and help mitigate generator market power. Demand response can include consumer actions that can change any part of the load profile of a utility or region. Common methods of engaging customers in demand response efforts include offering a retail electricity rate that reflects the time-varying nature of electricity costs or programs that provide incentives to reduce load at critical times. Radio or internet-controlled switches on residential air conditioners or electric water heaters is but one of many methods used.

More demand response is not always a good thing; instead it is situational, where it sometimes may not make economic or environmental sense to use. Whether a utility and its regulator encourages demand response is an economic decision they make relative to the local specific electricity supply mix and market conditions. In addition, sometimes demand response is not an environmental positive, such as when it shifts usage from one time period that has generation with lower emissions behind it to another time period whose replacement generation has higher emissions.

OE provides technical assistance, when requested, in a number of ways to independent system grid operators and state and regional policymakers to help them determine policies for appropriate levels and types of demand response programs, enabling technologies, dynamic pricing tariffs, and other aspects of demand response.

The Federal Energy Regulatory Commission (FERC) is quite active on demand response, such as its March 2011 market-based demand response compensation rule for centrally organized electricity markets, as well as its series of demand response assessment reports.

In July 2011, FERC and DOE jointly submitted to Congress a required “Implementation Proposal for The National Action Plan on Demand Response.”  The Implementation Proposal is for FERC’s June 2010 National Action Plan for Demand Response. Part of the July 2011 Implementation Proposal called for a “National Forum” on demand response to be conducted by DOE and FERC. 

As noted in the July 2011 FERC-DOE Implementation Proposal, DOE provided a large boost to demand response through the American Recovery and Reinvestment Act’s $4 billion of federal funds from DOE in the Smart Grid Investment Grant and Smart Grid Demonstration programs. Aspects of the retail side of smart grid can better enable many aspects of demand response, though smart grid is not required to implement demand response programs. Many of the Recovery Act projects involve deployment of enabling technologies and customer information/feedback systems to facilitate demand response. These include both information and control technologies such as in-home displays and programmable and communicating thermostats with corresponding demand response programs. A number of consumer behavior studies will be performed use of the installed equipment in order to examine factors that influence the participation of consumers in dynamic pricing programs, as well as the influence of these programs and enabling technologies on customer response.

OE continues to support the development of demand response by providing technical assistance to independent system operators and state and regional policymakers to enhance the development of their demand response programs, technologies, services infrastructure, dynamic pricing tariffs, and other related activities. This assistance takes many forms, including providing access to experts and offering webinars and workshops.

The FERC-NARUC Collaborative on Smart Response is a forum for the Federal Energy Regulatory Commission (FERC) and NARUC leaders to discuss forward-looking issues concerning smart grid and demand response. The collaborative particularly focuses on issues which require attention from both state and federal regulators, but also serves to inform on trends and new ideas. The collaborative meets three times each year in conjunction with major NARUC meetings. OE provides technical assistance for the collaborative.

Another key activity is the ongoing support of regional demand response efforts. More Information



Larry Mansueti
Director, State & Regional Assistance
National Electricity Delivery Division
Office of Electricity Delivery and Energy Reliability
U.S. Department of Energy
Washington, D.C. 20585
Phone: 202-586-2588