How Demand Response Can Increase Electric Reliability

demand response

Whether we are talking about demand response, storm hardening, cybersecurity, or something else, as an emergency preparedness professional, I am all for anything that can boost electric grid reliability, a sentiment that most people in my shoes would agree with.  And I am very happy to report that many states are also onboard with the importance of improving reliability.  Four states in particular are leading the way with innovative regulatory mechanisms designed to encourage a greater focus on reliability.

Innovative Demand Response Mechanisms

According to this article, there are 4 states that are leading the charge in this regard: Illinois, Michigan, Maryland and Utah.  This is not to say that other states are not making progress, but these 4 states standout from the crowd.

  • Illinois: The Future Energy Jobs Act, passed in 2016, changed the treatment of energy efficiency spending from an operating expense to a framework that would enable the state’s utility companies to earn a return on equity for energy efficiency spending.  This increases the appetite for spending on these initiatives, which in theory will accelerate innovation and development.
  • Michigan: Provides a framework that allows utilities in the state to earn financial incentives for decreasing retail electric sales, and one way to do this is to increase the focus on demand response initiatives.
  • Maryland: Developed a cost-recovery mechanism for energy efficiency spending that treats this spending like a capital expense that can be amortized over a 5-year period, dramatically improving the short-term ROI of such spending.
  • Utah: Similar to Maryland’s framework, in 2016 Utah passed the Sustainable Transportation and Energy Plan Act, allowing state utilities to amortize demand side management costs over 10 years, which again boosts the short-term ROI by spreading the cost over a number of years.

The bottom line is that our country needs better electric reliability, and one way to help accomplish this goal is to ease the burden – and increase the attractiveness – of demand response spending for utilities.

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