PJM Implements Changes In Compensation For Demand Response
April 4, 2012
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PJM Interconnection recently implemented changes in the way
demand response (DR) resources are paid in PJM's Energy Market. The changes mean that PJM is
the first grid operator to comply with the Federal Energy Regulatory Commission's (FERC) Order
745 on demand response compensation, which was issued in March 2011.
Under the new PJM rules:
"Demand response plays an important and growing role in PJM's markets," said Andrew Ott, PJM's
senior vice president - Markets. "Treating DR more like generation in terms of scheduling and
dispatching enhances grid operators' ability to use demand resources effectively to maintain the
reliability of the system."
- Demand response resources dispatched by PJM will be paid the full locational marginal price
(LMP) when it is cost effective, based on a net-benefits test.
- The net-benefits test determines the point at which the savings to the system from dispatching
demand resources are greater than the cost of paying those resources the full LMP.
- All demand response participation in the Energy Market will be cleared in the Day-Ahead
Market or through real-time dispatch by PJM to enable PJM to effectively maintain power
- Demand resources must submit offers for a price and time in the way a generator does and
must follow the price signal to be paid.
PJM also has proposed price responsive demand, which would enable retail consumers to respond
directly to wholesale electricity prices through state rate options and advanced meters.
Source: PJM Interconnection
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