Sep 21, 2022

Reliability in the Midwest: Banning Resources that Keep the Lights On

It’s time to unlock the full potential of demand response to create an affordable, sustainable, and reliable modern grid.

Reliability in the Midwest: Banning Resources that Keep the Lights On

Allison Bates Wannop, Senior Director of Legal and Regulatory Affairs at Voltus

Jon Wellinghoff, Chief Regulatory Officer at Voltus and Former FERC Chairman

Earlier this month, California escaped rolling blackouts by the skin of its teeth. Its salvation? People using less energy. About 1.5 GW less, to be exact, or enough to power about 1.5 million homes.  

California achieved this load reduction through two means: demand response (paying customers to reduce energy usage), and texting people, asking them to voluntarily use less energy. When the grid was stressed, “customers came to save the day,” Commissioner Allison Clements said at a recent  FERC Forum. Without demand response, tirelessly dispatched by aggregators, California would very likely have experienced rolling blackouts on multiple days last week. 

In light of the critical role that demand response has played in yet another grid reliability crisis, it’s worth remembering that one region with a serious reliability risk continues to ban demand response. The Midwest, whose electric supply is managed via a 15-state energy market known as “MISO”, is at a “high risk” of insufficient electric supply.  MISO states, though, are sidelining the same energy technology that just saved California: 12 of the 15 states in this at-risk Midwest region have banned non-utility/“aggregator” demand response. (Those states are Arkansas, Iowa, Indiana, Kentucky, Louisiana, Michigan, Minnesota, Missouri, Mississippi, North Dakota, South Dakota, and Wisconsin).

Regulators who could eliminate these bans are not acting urgently. Since August of 2021, the Federal Energy Regulatory Commission (FERC) has had the ability to  eliminate the state bans, if three of the five Commissioners vote to do so. Demand response, and allowing all resources to compete in the markets, should be non-partisan: both Democratic and Republican FERC Chairmans have supported integrating demand response. 

States could easily eliminate the bans themselves – Michigan, Missouri, Arkansas, and Louisiana all have open proceedings revisiting those states’ bans. The state bans are decades-old, from an era when there was little experience with wholesale demand response. The bans are often premised in a mistaken fear that allowing demand response companies would be akin to restructuring their electric supply. Utilities have played into these concerns, claiming wholesale demand response would be difficult to plan for and shift cost to other ratepayers.  Such claims ignore that wholesale demand response successfully operates in states around the country, including restructured and vertically integrated territories (see, for example, West Virginia, Kansas, and Oklahoma). Demand response’s 20-year track record proves that antiquated arguments are boogeymen. There are no unsolvable problems, and inaction is its own risk.

Regulators’ lack of urgency has forced the federal government to try to spur action. In August, the Sustainable Energy and Environment Coalition (SEEC) Power Sector Task Force, focused on decarbonizing the power sector and led by U.S. Rep. Sean Casten, introduced the Responsive Energy Demand Unlocks Clean Energy (REDUCE) Act, urging FERC to eliminate the bans. But hopefully, regulators take action on their own, to customers’ benefit.

Regulators talk about wanting to guarantee the three pillars of modern electric supply: reliability, affordability, sustainability. Yet they often fail to acknowledge that aggregator demand response is one of the few technologies that does all three, for both gray sky days and “black swan” events: 

  • Demand response is faster to build than any other resource. Standing up a (virtual) power plant can happen overnight. 
  • Demand response is an affordable reliability resource, immune to the volatile price swings that plague natural gas. 
  • Demand response balances the grid and is “dispatchable,” meaning it can be turned on when needed, just like a natural gas or coal plant (but without the emissions). This dispatchability is critical to sustainably integrating more renewables into our energy supply. 

At Voltus, we’ve seen this first hand. During a single week in May, three of our four demand response dispatches in one region happened during lulls in wind production: 

Aggregator demand response offers the most value in terms of reliability, sustainability, and cost-effectiveness. Utilities don’t develop the technologies that aggregators create, which can use smaller loads, more frequently and with better automation, as more reliable grid resources. 

Demand response has saved lives in recent grid crises in California and Texas. It’s time for regulators to finally unleash a proven, affordable, sustainable, and reliable resource, instead of being captive to boogeymen and the status quo. Nineteenth century reasoning will not create a 21st century grid.