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Consumer Savings, Price, and Emissions Impacts of increasing Demand Response in the Midcontinent Electricity Market

Abstract:
This paper estimates consumer savings, CO2 emissions reductions, and price effects from increasing demand response (DR) dispatch in the Midcontinent Independent System Operator (MISO) electricity market. To quantify market effects, we develop a dynamic supply and demand model to explore a range of DR deployment scenarios. The study is motivated by the existence of regulatory and market rule barriers to market-based deployment of DR resources in the MISO region. We show annual consumer savings from increased market-based DR can vary from $1.3 million to $17.6 million under typical peak operating conditions, depending on the amount of DR resources available for market dispatch and the frequency of deployment. Consumer savings and other market effects increase exponentially during atypical periods with tight supply and high prices. Additionally, we find that DR deployment often reduces CO2 emissions, but the magnitude of emissions reductions varies depending on the emissions content of marginal generation at the time and location of deployment. The results of this study suggest regulators and other stakeholders should focus policy efforts to reducing regulatory barriers to DR deployment in wholesale markets, particularly in locations that experience high price spikes, to improve market efficiency and achieve cost savings for consumers.

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Keywords: Demand response, Electricity markets, Demand side management, Load management, Midcontinent ISO

DOI: 10.5547/01956574.40.3.sdah

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Published in Volume 40, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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