Demand Response News Hits the Great Lakes This Summer

I spent my childhood summers on the shores of Lake Michigan. While those summers were usually quiet and sleepy, summer 2018 is heating up with demand response (DR) news in the Wolverine state and across the border in Ontario.

Incentives Run High in Evolving DR Market

First, CPower announced that it plans to enter the Ontario DR market starting in 2019. I remember leading Constellation’s foray into the initial Ontario DR program 10 years ago. It has undergone multiple changes since then, such as transferring from the Ontario Power Authority to the Independent Energy System Operator (IESO) and transitioning from a fixed-price offering to a competitive auction. Annual auctions are held for both summer and winter DR capacity, and the results show competition increasing each year as vendors and customers get more comfortable with the construct.

In addition to the IESO DR auction, Ontario charges a global adjustment charge (GAC) to customers, which is based on average demand levels over the five peak system hours each year. This is similar to the peakload contribution in the PJM Interconnection and the four critical peaks in the Electric Reliability Council of Texas. The most recently announced values for the GAC are over $500,000/MW/year, providing a high incentive for customers to try to manage their demand, which aggregators can help optimize.

Voltus Makes a Splash, Expanding into Michigan’s DR Market

Back in Michigan, Voltus just announced its expansion into the state’s DR market, becoming the first aggregator of retail customers to bring Michigan-based customers into the Midcontinent Independent System Operator (MISO) DR market through alternative electric suppliers. The investor-owned utilities in Michigan (DTE and Consumers Energy) run DR programs using aggregators, but this is the first non-utility case in the state.

Voltus was involved in the regulatory process with the Michigan Public Service Commission to open this opportunity for customers on competitive choice. Competitive choice is capped at 10% of the system load, currently about 400 MW according to Gregg Dixon, CEO of Voltus. There is also ongoing consideration of opening DR for bundled utility customers, the other 90%.

While the MISO value of capacity is relatively low, the attractiveness of the opportunity is to avoid capacity rates from utilities which range from $95,000 to $250,000/MW/year across Michigan utilities, said Dixon. Then Voltus can qualify customers’ capacity in the MISO market and either meet the MISO DR requirements or trade the capacity if beneficial.

While summer in the Great Lakes region may be tranquil, DR is not in a vacation state-of-mind.