Demand response programs, offered throughout the U.S. and Canada, provide businesses an easy way to earn money for their facilities while protecting the local energy grid from disruptions. In Texas’s energy-only market, businesses have many options for participating in demand response, but ERCOT – the Texas energy grid operator – offers two primary programs for commercial and industrial customers:
- The Emergency Response Service (ERS) program provides grid relief in 10- or 30-minutes, and
- Load Resource (LR) Ancillary Services programs, which provide immediate support to the ERCOT grid.
While earnings in ERS are determined by a tri-annual auction, LR earnings are determined by Day-Ahead Ancillary Services prices. Year-to-year LR earnings vary but are consistently around $100,000/MW-year. Most LRs in ERCOT participate in the Responsive Reserves (RRS) market.
LR participants maximize earnings while protecting on-site equipment
A healthy grid in the United States operates at 60 Hz. When frequency drops below 60Hz, facilities are exposed to a frequency imbalance that could potentially damage valuable equipment and could cause sudden grid blackouts.
LRs on the ERCOT system are calibrated to automatically respond if the ERCOT system reaches 59.7 Hz. Enel X provides LR customers with under-frequency relays (UFRs) that protect and insulate facilities from dangerous drops in frequency on the grid. By enrolling as a Load Resource, participants are paid not only to help support the grid by resolving local frequency imbalances, but to protect their own facility.
LR events happen at most a few times a year, but because LR is a localized resource – ERCOT may dispatch only a small number of localized facilities to alleviate grid imbalances in a specific area – many participants experience no events. Even without an LR event, participants earn payments as a standby resource.
Load Resources are an important tool in Texas’s changing energy landscape
LR programs provide critical and fast-acting energy reductions in the face of extreme grid instability, and as a result are often the most lucrative demand response programs for Texas businesses. LR payments in Texas increased 172% between 2017 and 2019, driven in part by extreme heat waves in the summer of 2019. And although payments increased, no LR event actually occurred.
To understand why LR is so valuable, it’s important to understand the unique energy landscape in Texas. Unlike other regional grids, Texas’s grid is essentially an island—energy is rarely imported from or exported to other grids. That structure, coupled with two key energy trends below, make fast-response resources like LR more important than ever:
Growing Peak Demand: Peak demand levels are growing in Texas, and while many other states rely on energy imports at times of peak demand, ERCOT meets peak demand with local generation and demand response resources. In August 2019, a severe heat wave caused peak demand to spike to a record 74,153 MW, driving real-time energy prices above $9,000/MWh.
Growth in Renewable Energy: Another feature of the ERCOT system is the growing penetration of renewable energy, especially wind power, as a generation source in Texas. Wind power’s intermittent generation compounds the challenges of meeting record high peak demand, and reinforces the importance of local demand response resources. The two ERS 30 demand response dispatch events that occurred in 2019 coincided with a drop-off in wind generation, which caused a large volume of supply to become suddenly unavailable.