Treating electricity supply as equivalent to demand in wholesale markets — meaning large customers would have the same rights and requirements as generators — could help lower costs, boost reliability and reduce the risk of overbuilding energy resources, according to a white paper from the Energy Systems Integration Group.
In a market where supply and demand are active participants, large customers and load-serving entities would submit price-sensitive bid curves into the day-ahead market and respond to real-time prices. The way most markets function now, demand is assumed to be price-inelastic, according to ESIG.
“Bid-in demand would create a two-sided market that allows for more efficient market operation, maximizing benefits to market participants who do participate and reducing overall system costs,” said ESIG Associate Director Debra Lew, an author of the paper.
Treating supply and demand similarly is an “elegant approach to aligning demand with grid needs,” ESIG concluded in its May 22 report. “This will become more important with the increase in variable renewables, electrification, and new large loads. ... a robust two-sided electricity market with an active demand side solves many problems faced today in extracting flexibility from demand.”
ESIG is an educational nonprofit focused on grid transformation and this is the sixth paper it has published on how to better align retail pricing with grid operations. In April the group published research on the need to align electric vehicle charging with grid needs through “locational and temporal flexibility.” ESIG said it anticipates publishing two additional white papers on similar topics.
As an example of active market participation of demand, the paper looks at the framework for controllable load resources, or CLR, used in the Electric Reliability Council of Texas market, which requires resources to respond to dispatch controls in under five minutes.
In ERCOT, Lancium has developed the first load-only CLR by helping Bitcoin miners respond to grid signals, ESIG noted.
Customers taking advantage of the CLR program may participate in the full range of ancillary services, which generate additional revenue, and customers can access more specific, granular pricing that lowers power costs, Shaun Connell, executive vice president of power for Lancium, wrote in a blog post.
Not everyone wants to see more crypto mining demand on the state’s power grid, however. A recent bill in the Texas legislature to limit bitcoin miners’ ability to participate in grid programs passed the Senate but failed in a House committee.
Hydrogen or high-throughput computing loads could also partner with Lancium, ESIG noted in its white paper.
Bid-in demand is different from demand response and provides “better risk management,” according to the paper. By allowing a grid operator’s market software to schedule demand, “bid-in demand eliminates the risk associated with large customers self-scheduling based on forecast prices.”
The approach would also allow grid operators to more accurately understand how much demand flexibility is on their system “as opposed to an open-ended call which may yield less or more flexibility than what is actually needed and potentially lead to instability on the system.”