EDF Report: Demand Response Key to California’s Clean Energy Economy

(SAN FRANCISCO – January 26, 2015) A new report released by Environmental Defense Fund (EDF) today highlights the role demand response can and should play in California’s rapidly changing energy landscape by demonstrating what energy leaders and regulators need to do to expand demand response programs in the state. The report, Putting Demand Response to Work for California, analyzes the evolution of California’s energy mix and outlines how demand response can be properly categorized, valued, and accounted for in the state’s shift to clean-energy solutions. 

“Demand response should have a seat at the table when determining how to get to a clean, robust, low-carbon economy. This report offers recommendations that can help energy leaders in California identify the benefits of demand response and create mechanisms to both increase its use and incorporate it into energy forecasting,” says Michael Panfil, lead author of the report and attorney for EDF’s US Climate and Energy program. “This people-powered solution needs to be part of the clean energy equation not just in California, but throughout the United States.” 

Demand response is a cost-effective energy management tool that pays people and businesses to save or shift energy use when the power grid is stressed and cleaner, renewable resources are available. For example, PJM Interconnection, the power grid in thirteen states surrounding Pennsylvania, launched a demand response program which is expected to pay participants more than $300 million in 2014-15, in addition to the $1.2 billion they already received in savings. Demand response works by reducing electricity demand – rather than increasing supply – to balance the electric grid, lower costs, and improve reliability. The new report highlights the many benefits of this tool, including the potential of avoiding the need for more expensive, inefficient, and polluting energy resources like “peaker” power plants, which are generally only used a few days a year to accommodate “peak” electricity demand.

Although demand response programs elsewhere have proven valuable to the electric grid as an efficient way to synchronize supply and demand needs, California’s demand response programs are not currently up-to-date with technological advances, like smart meters, because they were initially developed to respond to energy emergencies and other events. To expand the use of demand responses programs in California, and potentially other states, the report calls for three actions:  

1.       Identify the range of benefits demand response can offer, such as helping to reduce the cost of electricity for customers, integrate renewables, and improving grid reliability; 

2.      Spur the rapid adoption of demand response programs by ensuring fair compensation for the value it provides to utilities, customers, the grid, and others; and

3.      Properly account for all types of demand response in energy forecasts so the state can rely upon this tool when assessing energy supply and demand for the future.

With the passage of S.B. 1414 last year and recent regulatory action by the California Public Utilities Commission on demand response, state government leaders and regulators have committed to accelerating its use as a resource in California – making this report and its recommendations all the more important. You can find the report here: http://www.edf.org/sites/default/files/demand-response-california.pdf.