A PJM Market Implementation Committee discussion on expanding the demand response (DR) winter availability window to include a wider range of hours branched off into a broader conversation on how the resource class participates in the RTO’s capacity market.

Presenting on behalf of a coalition of demand response providers during the Sept. 11 meeting, Bruce Campbell, principal of Campbell Energy Advisors, said there is excess curtailment capability in the winter that is not being captured in the revised risk modeling and accreditation methodology implemented this year. The coalition includes the Advanced Energy Management Alliance (AEMA), the PJM Industrial Customer Coalition (PJM ICC), CPower, Enel and NRG Curtailment Solutions. (See FERC Approves 1st PJM Proposal out of CIFP.)

Drafted through the Critical Issue Fast Path (CIFP) stakeholder process conducted last year and approved by FERC in January, the changes shifted the bulk of reliability risk from summer to winter. The summer risk also was concentrated in a few mid-day hours, whereas the risk PJM has identified in the winter is more evenly spread across the day. Campbell said about 20% of the winter reliability risk is in hours not captured in the DR availability window, which is 6 a.m. to 9 p.m.

Paired with the “legacy” availability window, Campbell said the changes led to a significant derate in the amount of capacity DR resources can offer. The amount of DR offered into the 2025/26 Base Residual Auction (BRA), while unchanged in ICAP terms, was around 1,300 MW UCAP lower due to the changes, an amount he estimated could have pushed the auction clearing price down to $210/MW-day, rather than the $269.92/MW-day price posted on July 30. (See PJM Capacity Prices Spike 10-fold in 2025/26 Auction.)

In previous MIC discussions, Kerinia Cusick, president of the Center for Renewables Integration, representing Voltus, said PJM also is hampering the potential of load that can offer higher curtailment in the winter by capping capability at the lesser of winter peak load (WPL) or peak load contribution (PLC). She said that effectively limits winter curtailment by the lesser of the estimated potential in winter and summer.

Cusick argued PJM’s effective load carrying capability (ELCC) methodology further limits DR accreditation by assuming the resource class’s available curtailment is proportional to the system load being simulated against the peak load forecast. She said that approach reduces the incentive for consumers with load that is steady year-round to participate in DR programs and results in “double capping” in the winter when capability is limited to WPL and PLC.

Monitor Argues for New Definition of DR Performance Before Changes

Independent Market Monitor Joe Bowring said PJM must make changes to how performance is defined for DR before the resource’s availability window should be expanded. He said the current market design is flawed by not requiring DR resources to reduce their consumption during an emergency, instead mandating they maintain their load at or below their firm service level (FSL).

“While DR providers argue for a higher ELCC value, they ignore the fact that DR’s ELCC is based on assumed perfect performance, unlike thermal resources whose ELCC is based on actual performance during identified winter peak hours. DR ELCC should be based on performance data during the same winter peak hours, like other resources. If that were done, it is likely that the ELCC for DR would be much lower than it is, rather than the increase proposed by the DR providers,” Bowring said.

Presenting data from the December 2022 Winter Storm Elliott, he said many industrial DR participants already were offline or had reduced their consumption ahead of the Christmas holiday. When called upon during the performance assessment intervals (PAIs) seen on Dec. 23, he said 83% of resources already were at or below their WPL, a figure that increased to 90% when additional PAIs were declared the following day.

The low starting point for DR load during Elliott was a key factor in the low reduction in load provided by DR resources compared to their expected reduction, which is based on the energy load reductions estimates that DR providers submit to PJM in real-time. Those estimates are derived from a baseline set by recent load on similar hours and days.

Bowring said that while those reduction estimates are used by PJM to get a sense of the amount of DR that could be available ahead of potential PAIs, they do not factor into capacity performance (CP) penalties assessed against resources that fail to deliver load reductions. Instead, CP penalties are assessed against DR resources that maintain a load above their FSL.

Campbell said the sector has made improvements to the load reduction estimates provided to PJM over the past year.

In an interview, Bowring told RTO Insider he thinks PJM should redefine what a DR resource is providing to require an explicit reduction in load, rather than an expectation a resource will be below its FSL. He called for the RTO to open a separate stakeholder process to reevaluate how DR participates in the capacity market.

Bowring drew a distinction between the redesign he is seeking for DR participation versus the stakeholder adoption of a Monitor proposal to eliminate energy efficiency (EE) from the capacity construct. While the latter also was initiated by PJM as a broad reconsideration of the role EE should play, Bowring argued EE does not provide a reliability benefit for consumers and has no place in the Reliability Pricing Model. With the right market design, he said, DR could provide dependable reductions in load when called upon.

“It’s not like EE — DR is a resource,” Bowring said. “And while it should be on the demand side, if everyone insists on keeping some of it on the supply side it should be demonstrated that it’s providing an incremental benefit to PJM.”

Energy efficiency providers disputed Bowring’s characterization of the resource’s value, arguing that capacity market revenues are used to incentivize the purchasing of more efficient devices, pushing the need for capacity lower. PJM filed governing document revisions with FERC that would eliminate EE on Sept. 6. (See PJM Asks FERC to Eliminate Energy Efficiency from Capacity Market.)

Bowring said his preference is for the DR to be shifted to the demand side of the market, to be compensated for a year-round reduction in peak loads with a corresponding diminished capacity bill. If stakeholders prefer for DR to remain on the supply side, he said it should be accredited through the same marginal ELCC approach applied to generators, evaluation of performance during emergencies should be based on metered reductions in electric consumption and precise participant locations should be known to PJM for nodal deployment.

“The DR approach in PJM is badly flawed. We believe that DR is an important resource, but to capture its potential, it has to be dealt with in a way that’s consistent with how PJM markets work. It has to be nodal, it has to be metered, it has to be verifiable … based on metered reductions, not on artificially made-up assumptions,” Bowring said.

Calpine’s David “Scarp” Scarpignato said metering the reduction a DR resource provides runs into challenges for longer deployments, where determining the reduction provided requires determining what the load would have been if the resource was not called on. He said if a resource was committed at 10 a.m., the reduction would be apparent for the initial intervals, but assessing performance at noon or 4 p.m. would rely on counterfactuals.

Cusick said DR is designed to be a planning product that provides a capacity reduction that can avoid the need for construction of new generation resources just to serve a few hours annually. She said Bowring’s vision would treat DR as both a capacity resource and energy product at once.

“That is precisely the point. All capacity resources have a must-offer obligation in the energy market,” Bowring said. “Capacity by itself is not an actual product. Capacity resources are paid in order to provide a reliable source of energy. The suggestion that DR should be exempt from the obligations of a capacity resource mean that, in that view, DR should not be a capacity resource.”