Over the course of the past two years, staff at the California Public Utilities Commission (CPUC) in the U.S. have introduced novel customer engagement opportunities to participate in wholesale energy markets via the Demand Response Auction Mechanism (DRAM) program.
California is transitioning from utility-based Demand Response (DR) programs to wholesale market-based DR resources that provide capacity to the California ISO (CAISO). Traditional DR has been riskier in predictability and performance, which is why policymakers and the CAISO are interested in innovations that offer improved response rates, larger scale, and cost efficiencies. The CAISO and CPUC created the rules to allow third-party DR aggregators to participate in wholesale markets as far back as 2012, but significant participation outside of small pilots was not practical or economical until the DRAM program was launched.
Early DRAM engagement success
In late 2015, the three largest California utilities held auctions for contracts for the upcoming first year of the DRAM program, offering contracts that enabled customer-sited energy storage to provide Resource Adequacy to the wholesale market. These DRAM contracts allow Stem and other energy storage developers to facilitate residential and commercial customer participation in the wholesale markets via each storage developer’s network when there is a “call” from the CAISO. What is remarkable about the Commission’s efforts is that DRAM has proven the technical viability of the first customer-based Virtual Power Plants (VPPs) in the country and achieved a record frequency of customer participation in a wholesale market, on the order of hundreds of dispatches in 2017 as compared to the low tens of dispatches for traditional DR.
Weather-related grid stress certainly contributed to the high engagement. Heading into the summer of 2017, California’s energy markets witnessed unprecedented heat waves, resulting in a very high number of calls, which signaled a need for resources that could act quickly to increase energy supply or reduce demand in order to prevent widespread blackouts. In both the day-ahead and real-time markets, the bids of storage-based demand response providers enrolled in the utility DRAM contracts have cleared more frequently than expected throughout the year. The calls were particularly frequent in the real-time market, where traditional DR would have had a difficult time executing rapidly. For example, Stem’s network of customer-sited storage responded to 150 “real-time,” or five-minute dispatch events for San Diego Gas & Electric (SDG&E) between January to May of 2017.
In an extreme case, during a major heat wave which occurred June 20, 2017, the CAISO called on storage resources with DRAM contracts in all three utility service territories. On that day, Stem engaged over 60 customer systems to produce aggregated DR in seven VPPs to respond to calls within Pacific Gas & Electric and Southern California Edison service territories in the day-ahead market and in three additional areas with less than five minutes’ notice in SDG&E’s service territory.
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