Early August Demand Response Produces $650 Million Savings in PJM
Reducing Electricity Use Stretches Power Supplies, Lowers Wholesale
VALLEY FORGE, Pa., Aug. 17 /PRNewswire/ -- Conservation during heat waves not only stretches power supplies, it saves money. Reductions in electricity use during the early August heat wave produced price reductions estimated to be equivalent to more than $650 million in payments for energy for the week, according to PJM Interconnection, which operates the regional power grid. Customers in the 13-state PJM region set a new record for power consumption of 144,796 megawatts on Aug. 2. On that day alone, voluntary reductions in electricity use, known as demand response, resulted in price reductions estimated to be equivalent to more than $230 million in payments for energy. "These voluntary curtailments reduced wholesale energy prices by more than $300 per megawatt-hour during the highest usage hours," said Andrew L. Ott, PJM vice president - Markets. "While many wholesale customers, such as utilities, were hedged against high real-time spot-market prices, all customers will benefit from the dramatic price reductions because future longer-term electricity sales are based on prices set in the real-time market, where prices were lower as a result of demand response." Demand response involves reducing the use of electricity (demand) to meet a power grid need rather than increasing generation (supply). Customers offer to reduce their usage of electricity in return for being paid the market value of the electricity saved. Demand response can lower the price of electricity by avoiding the use of the most expensive generators. Customers who curtail their usage receive payments based on the price to generate an equal amount of electricity. PJM payments to demand response providers for the heat wave during the first week in August were about $5 million. "Transmission owners, generation operators and demand response providers played critical roles in allowing PJM to provide a record amount of electricity while maintaining reliable grid operations," Ott said. The increase in peak electricity demand in PJM from the summer of 2005 to this summer was more than 10,000 megawatts, enough electricity to power a major city. PJM Interconnection ensures the reliability of the high-voltage electric power system serving 51 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the operation of the region's transmission grid, which includes 6,038 substations and 56,070 miles of transmission lines; administers the world's largest competitive wholesale electricity market; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion. Visit PJM at http://www.pjm.com.
SOURCE PJM Interconnection
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