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Demand Response - Policy: More Information

OE's commitment to ensuring non-wires options to modernize the nation's electricity delivery system includes ongoing support of a number of national and regional activities in support of demand response.

The New England Demand Response Initiative (NEDRI), OE's initial endeavor to assist states with non-wire solutions, was created to develop a comprehensive, coordinated set of demand response programs for the New England regional power markets. NEDRI's goal was to outline workable market rules, public policies, and regulatory criteria to incorporate customer-based demand response resources into New England's electricity markets and power systems. NEDRI promoted best practices and coordinated policy initiatives, but was not intended to replace the functions that the Independent System Operator and other regulatory organizations must perform to design and implement demand-side programs. NEDRI studied a full range of demand response resource options, including short-term price-responsive load, retail pricing and metering strategies, reliability-driven demand response, and longer-term energy efficiency investments. NEDRI concluded in 2003 with a final report that included 38 recommendations for incorporating demand response in retail and wholesale markets in New England. Many of the recommendations can be seen in the demand response programs of the New England Independent System Operator.

OE has continued its commitment to demand response by supporting several initiatives, the first of which is the Mid-Atlantic Distributed Resources Initiative (MADRI) for states in the PJM Interconnection. With OE's support, MADRI was established in 2004 by the public utility commissions of Delaware, District of Columbia, Maryland, New Jersey and Pennsylvania. MADRI seeks to identify and remedy retail barriers to the deployment of distributed generation, demand response, and energy efficiency in the Mid-Atlantic region. The guiding principle for MADRI is that distributed resources should compete with generation and transmission to ensure grid reliability and a fully functioning wholesale electric market. Since institutional barriers and lack of market incentives appear to be slowing deployment of cost-effective distributed resources in the Mid-Atlantic, MADRI's work is critical in this area. The Initiatives three goals are to: 1) Educate stakeholders, especially state officials, on distributed resource opportunities, barriers, and solutions; 2) Develop alternative distributed resource solutions for states and others to implement; and 3) Pursue regional consensus on preferred solutions. Much of the work of MADRI has helped provide state policy support for aspects of demand response programs of the PJM regional transmission operator.
In collaboration with Midwest states and the Organization of Midwest Independent Transmission System Operator States, OE also supports the Midwest Demand Response Initiative (MWDRI), which was created to build upon and expand the work of the New England and Mid-Atlantic regions to create a robust demand- and price- responsive retail market in the Midwest.

OE also provides technical support to the Pacific Northwest Demand Response Project, which is a collaborative process of Pacific Northwest States to encourage the appropriate development of demand response in the region.
DOE supported and participated as the U.S. representative in the International Energy Agency (IEA) Demand Side Management Programme (IEA-DSM) Task XIII. The Federal Energy Regulatory Commission and the U.S. Demand Response Coordinating Committee (DRCC) also participated as "country experts" in the effort. The purpose of the IEA-DSM Tax XIII was to review current demand response practices in each of the project member’s countries and develop tools and recommendations for better integrating demand response into member countries’ electricity markets. Other participating countries included: Australia, Canada, Denmark, Finland, Italy, Japan, Korea, Netherlands, Norway, Spain, and Sweden.

Section 1252(d) of the Energy Policy Act of 2005 required DOE to issue a report on the benefits of demand response in electricity markets and to recommend actions for achieving successful demand response programs, which OE published in February 2006, entitled Benefits of Demand Response in Electricity Markets and Recommendations for Achieving Them. In this report, DOE recommended a series of public policy actions for consideration by state, regional and Federal agencies, electric utilities, and consumers to deploy successful demand response pricing mechanisms and programs. DOE developed these recommendations following a robust public input process in which interested parties provided suggestions for actions to encourage demand response in different wholesale and retail market structures.