Washington, D.C. - March 27, 2009
A federal agency Thursday ordered the operator of the nation's largest
marketplace for electric power to allow energy efficiency projects to
compete directly with electric power plants. The new head-to-head
competition was ordered to begin with an auction this May to purchase the
resources needed to meet peak power demands during the summer of 2012. The
auction will be run by PJM Interconnection, Inc. (http://www.pjm.org/about-pjm/how-we-operate/~/media/about-pjm/pjm-zones.ashx),
which coordinates electric grid operations serving 51 million people in 13
states and the District of Columbia, and operates the nation's largest
competitive wholesale electricity market.
“This is a major breakthrough for consumers,” said Steven Nadel, Executive
Director of the American Council for an Energy-Efficient Economy (ACEEE).
“New investments in energy efficiency should help lower the cost of meeting
the peak demand for power on hot summer days. The PJM auction will provide a
new source of funding for efficiency projects, allowing the savings to
consumers to grow.”
The Federal Energy Regulatory Commission (FERC), which oversees wholesale
electricity markets throughout the U.S., had ordered PJM in 2007 to consider
ways in which energy efficiency projects could participate in future
auctions. Following many months of discussions with stakeholders, and over
the objections of power generators and traders, PJM submitted in December
its eligibility rules for energy efficiency that were largely approved
Thursday. ACEEE and other public interest organizations participated in
these stakeholder discussions.
Terry Black, Director of the Project for Sustainable FERC Energy Policy,
commended the Commission for its leadership in assuring the integration of
clean, low-cost energy efficiency resources into PJM's capacity market, and
he praised PJM for developing a proposal that could be approved by the
Commission. Black, who represented 15 public interest organizations in the
proceeding, said "We believe the Commission's action in this case provides
an important signal to all electric industry stakeholders that federal
energy regulators have determined that energy efficiency resources, along
with renewables and other demand-side energy resources, must be fully
integrated into our electric power system and must be comparably compensated
for the services they provide."
The PJM market constitutes approximately 20% of the electric power market in
the United States. Last May, PJM sought bids for power to be available in
the summer of 2011 totaling 133,000 megawatts, a staggering amount of
electric generating capacity. If even a small percentage of such future
demand can be avoided with new energy efficiency projects, consumers will
benefit from reduced costs and energy efficiency programs will grow
significantly, according to ACEEE.
Under PJM’s rules, the minimum amount of energy savings that will be
eligible to bid in the auction will be 100 kilowatts, far larger than the
peak demand reduction that might result from efficiency improvements in an
individual appliance or home. However, electric utilities and independent
contractors are expected to bundle up the peak demand savings from groups of
residential and small commercial customers to provide an increment of demand
reduction that can qualify for auction. Additionally, bidders of energy
efficiency resources will be required to submit plans to measure and verify
their projected savings, subject to PJM approval. Under PJM’s plan, energy
efficiency resources are eligible to bid, and be paid, for four consecutive
years, and FERC has now ordered PJM to consider even longer periods of
eligibility.
“This ruling will change the way we think about energy efficiency,”
predicted Ed Osann, Senior Associate for ACEEE. “Until now, most energy
efficiency programs have been evaluated on the basis of energy savings,
while ignoring their valuable contribution toward reducing the peak demand
on the electric system. The opportunity to monetize the value of these
demand reductions through participation in future PJM capacity auctions will
give a major boost to energy efficiency investment throughout the entire
region.”
The PJM plan greatly expands the geographic scope of a program initiated in
New England in 2006.
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About ACEEE: The American Council for an Energy-Efficient Economy is an
independent, nonprofit organization dedicated to advancing energy efficiency
as a means of promoting economic prosperity, energy security, and
environmental protection. For information about ACEEE and its programs,
publications, and conferences, contact ACEEE, 529 14th Street N.W., Suite
600, Washington, D.C. 20045 or visit
http://www.aceee.org.
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