Energy Efficiency, Demand Response Surge in PJM Interconnection

Clean energy resources, including demand response and energy efficiency, made up nearly three-fourths of new capacity additions in PJM Interconnection’s recently completed Reliability Pricing Model (RPM) auction. This new announcement continues the phenomenal growth of clean energy and demand response technology in the nation’s largest competitive wholesale electric market.
 
PJM’s analysis shows the RPM has attracted 33,090 megawatts (MW) of capacity resources since the first auction in 2007. This year’s auction yielded 9,282 MW of demand response (a 32 percent increase over last year), 679 MW of energy efficiency, 590 MW of wind power and 10.6 MW of solar power. In addition, PJM officials said the RPM auction is attracting resources and investment where they are most needed – areas of high demand constrained by congested transmission resources.
 
The RPM auction is a market-based approach to pricing generation capacity to attract investments required to meet consumer demand and ensure reliability. It also includes incentives to stimulate investment and encourage development of new, nontraditional capacity sources like demand response and energy efficiency.
 
A key innovation enabled by the RPM auction is the ability of demand response and energy efficiency to compete with, and to be paid for providing capacity, the same as generation. As we’ve noted before, demand response is a voluntary, temporary reduction in the use of electricity, while energy efficiency represents conservation and other means to permanently reduce electricity usage by large industrial or commercial customers. Placing value on these technologies means those who invest in the technology can bid their ability to lower demand into the market as a resource, just like any generation unit.
 
PJM’s market-based approach to create accurate price signals for capacity, demand response and energy efficiency technologies is another example of how competition in organized markets fosters innovation and clean energy solutions. Not only can consumers rely on an adequate supply of electricity at competitive prices, but they also derive the important environmental benefits of a diverse and clean energy mix.

Joel Malina | June 10, 2010