Costs of Demand Response Programs: Advising the Eastern Interconnection Planning Collaborative

Energy efficiency has long been a subject of advocacy and scrutiny for energy policy leaders, and recent technological advances have enabled a new forms of peak-demand-reducing energy efficiency programs, also known as “demand response” programs (DR). The Climate & Energy Policy Lab (“CEPL”) collaborated with the US Department of Energy’s Oak Ridge National Laboratory (ORNL) to examine the economic potential for DR programs during the summer of 2011, through the newly-created “Grid Innovation Leaders Fellowship” program funded by the US Department of Energy’s Office of Electricity Reliability.

Working with Stanton W. Hadley, a senior researcher in ORNL's Energy and Environmental Systems Directorate, CEPL member Alexander Smith constructed a spreadsheet model to calculate the total capital cost related to achieving annual increments of demand response potential peak demand reductions. Hadley and Smith used this model to advise the Eastern Interconnection Planning Collaborative (EIPC), a delphi gathering of stakeholders and policy-makers from the electricity industry, state governments, and environmental and consumer advocacy groups; EIPC’s responsibility to collectively plan the future of the eastern half of the national grid (the Eastern Interconnection) necessitated forecasts of demand response program implementation across several states, and Hadley and Smith’s model provided social costs through which EIPC could compare demand response to electricity generation technologies used to meet peak load reductions.