9. ELECTRICITY

RTO/ISOs. In view of this record, some observers have suggested that FERC should consider whether modifications to Order No 1000 are merited, but the commission has not indicated its intentions.

Demand response

Demand response (DR) entails the shifting of energy consumption from periods of peak demand to periods of low demand (compared with energy efficiency measures that result in total energy consumption reductions).

In the United States, electricity demand usually peaks in the summer and natural gas demand peaks during winter months. In the past decade, DR has proliferated in the United States, playing an increasingly important role in electricity markets, where it is now valued as an integral resource in managing power markets. DR measures are rooted in providing incentives for consumers to postpone their energy consumption, either in the form of retail price reductions or direct payments, during periods of high demand.

According to the Energy Information Administration (EIA), in 2017, 9.4 million customers across the United States participated in DR programmes, the vast majority of which (88%) came from the residential sector, resulting in around 1.3 million MWh of total energy savings (EIA, 2019). The commercial sector accounted for 11% of DR participation and the industrial sector just 1%. In terms of energy demand shifting, residential efforts accounted for 72%, commercial 19% and industrial 9% of efforts. DR can take the form of wholesale DR, which is overseen by grid balancing authorities in wholesale power markets, or retail DR, which is managed by utilities directly with their customers.

As part of this effort, utilities continue to deploy advanced meters to their customers. In 2017, the EIA estimated a total number of 79 million advanced meters operating nationwide out of a total of 152 million meters, accounting for 52% of all meters (a number that has been steadily rising in the past decade). The large-scale deployment of smart meters is part of ongoing efforts by utilities to undertake grid modernisation strategies, which have been supported by state regulators, albeit at varying paces. There continue to be some concerns regarding data privacy that have led to a more cautious approach in some states, along with concerns about deployment costs.

A number of state regulators have also approved, or are considering, time-based electricity rate setting, in an effort to galvanise DR. Time-based rates allow electricity prices to vary based on the time of day, which provide more accurate signals to consumers on when to adjust demand to lower their bills. One of the main drivers of time-based rates is the growth of distributed energy resources, notably rooftop solar, as time-based rates can help shift demand patterns towards peak solar supply hours. Timebased rates can also improve the effectiveness of advanced metering investments to further support DR. Almost all states now offer some type of time-based rates, though uptake has been relatively weak.

The Energy Independence and Security Act of 2007 directed FERC to conduct a national assessment of DR potential and create a national action plan for DR. As part of that effort, FERC – along with the DOE – released a national assessment in 2009, crafted a national action plan in 2010 and issued an implementation proposal in 2011, which included the creation of a National Forum on DR to be led by the DOE and FERC. In

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