Revolutionize electricity
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Not long ago, engineers figured out how to place a telephone call over the Internet and, in that moment, changed the industry. Traditional telecom firms fought this new technology, but the Federal Communications Commission ultimately decided that Internet-based calling would benefit consumers so innovation carried the day.
A similar battle is now under way in the energy industry. With the emergence of the smart grid, we must decide whether to stimulate more efficient energy use to drive down costs or continue to allow large generators to hold the power on the grid.
Smart grid energy-efficiency technologies present a fundamental challenge to large generators of electricity because they depend on consumers using more energy, not less. Nowhere is this conflict more pronounced than in the mid-Atlantic's PJM Interconnection, one of the nation's largest regional electricity markets.
A rules dispute in the PJM is pitting companies focused on managing energy demand against power generators. Though the subject matter may be specialized, the results of this debate will be far-reaching. If large generators have their way, ratepayers from Philadelphia to Chicago could see hundreds of millions of dollars in increased costs.
The argument centers around a technology called "demand response," which compensates energy users to use less electricity during peak times when energy is most expensive. In the past, grid operators like the PJM relied on building additional power plants to avoid blackouts or brownouts during these peak periods, but demand response offers a new approach: By harnessing the power of thousands of individual energy reductions, demand response creates a "virtual power plant" that keeps supply and demand in balance.
Since demand response competes directly with large generators of electricity, the threatened incumbents are seeking to limit its role through a rule change in the PJM. The Federal Energy Regulatory Commission is expected to take up the question within days.
By limiting demand response participation, generators can maintain favorable market conditions. In fact, Baltimore-based Constellation Energy recently cited demand response and specifically the current debate in the PJM as some of biggest unknown factors that could affect its financial results this year.
Though demand response providers are notably smaller than firms like Constellation, they provide significant value for the small businesses, schools and Fortune 500 firms that participate in demand response programs. As the PJM's largest demand response provider, EnerNOC has put hundreds of millions of dollars back into our customers' hands through demand response and other energy management services. That's hundreds of millions of dollars that otherwise would have gone to generators, and hundreds of millions of reasons why the incumbents are restless.
Web-based technologies are changing dozens of industries, and energy is no exception. Generators' proposals to change PJM's market rules are clearly attempting to limit the value that demand response can provide. If they have their way, ratepayers like you and me will ultimately pick up the bill.
First Published May 24, 2011 12:00 am
