By: Suzanne L. Bertin, Director of Regulatory Affairs at EnerNOC
With the blooming Texas bluebonnets signalling the end of winter and at least a few weeks before the blazing heat begins, spring might not seem the ideal time for the Texas Legislature to debate laws about keeping the lights on or electric grid reliability.
But with a history of extreme temperatures, a booming population and economy, and new federal clean air rules coming into effect, now is the time for the Texas Legislature to take a strong policy stance in favor of demand response, an energy management program too long neglected as part of Texas’ comprehensive energy portfolio. Simply put, demand response is an innovative tool that rewards people who use less electricity during times of peak, or high, energy demand. In effect, demand response relies on people and technology, not power plants, to meet the need for electricity. But energy market rules prevent demand response from reaching its potential in Texas, because they fail to fully recognize its value and pose barriers to its providing energy and reliability services.
Advanced Energy Management Alliance (AEMA) – a coalition which includes demand response providers, end-user customers, suppliers, and affiliated businesses operating in Texas – is joining with the Environmental Defense Fund to support bills that would expand the deployment of demand response in Texas and eliminate constraints that impede its growth.
Senate Bill 1284 by Senator Kirk Watson (D-Austin) and House Bill 3343 by Representative Sylvester Turner (D-Houston) would make the Electric Reliability Council of Texas (ERCOT) energy market more competitive and efficient, and allow demand response to play a greater role in helping ERCOT maintain reliability on the power grid.
Barriers to a competitive market
Development of demand response in Texas has been hampered in several ways, including caps on how much demand response ERCOT may procure, technical requirements that favor power plants, and limitations on who can participate in the market.
The time is right for the Texas Legislature to remove these constraints and encourage both ERCOT and the Public Utility Commission of Texas, the state’s electricity regulators, to place more emphasis on demand response. Technological advancements and an evolving energy market provide more opportunities for demand response to meet grid reliability challenges.
There’s no question demand response is the lower-cost and more environmentally-friendly way to keep the lights on in Texas. Its effectiveness has already been proven – in recent years demand response helped avoid rolling blackouts in the state during both winter and summer weather extremes.
Greater electric reliability
Demand response now shaves about four percent of electricity use during peak times in Texas, but that number could reach as high as 15 percent if barriers were removed, according to a 2012 report by the Brattle Group, consultants to ERCOT. Moreover, Brattle concluded Texas’ electricity market design cannot support ERCOT’s reliability target, until the state fully adopts demand response.
In the three years since the Brattle Group’s report, however, little progress has been made to achieve the significantly greater amount of demand response needed to ensure the lights stay on during cold snaps and scorching summer days.
Need for legislative change
If legislative changes opened the door to demand response, Texas could financially benefit, as has been proven elsewhere. For example, on a single hot day in 2006, demand response in the PJM Interconnection (the electricity market in the Mid-Atlantic region) saved the system $230 million in energy costs by avoiding the need to dispatch high-cost power plants.
More demand response also would provide greater electric reliability to Texas homes and businesses, but to achieve this result, Legislators must break down the barriers standing in the way of demand response.
We urge the Texas Legislature to take a serious look at demand response as a way to manage our energy use and develop a more economically efficient, reliable, and competitive electricity market, while also promoting a strong state economy and lower electricity bills for individuals and businesses.
To read more about demand response in Texas, visit the Texas section of AEMA’s website.