US agency sets demand response payment rules
The US Federal Energy Regulatory Commission has established a new rule regarding compensation for demand response resources in organised wholesale energy markets.
The rule requires organised wholesale energy market operators to pay demand response resources the market price for energy, known as the locational marginal price (LMP), when those resources have the capability to balance supply and demand as an alternative to a generation resource and when dispatch of those resources is cost-effective.
The order finds it will be cost-effective to pay that market price for energy to demand response resources when a net benefits test shows that the benefits to load from the reduced LMP that result from dispatching demand response resources exceed the costs of paying LMP to those resources. The rule requires regional transmission organisations and independent system operators to meet specific requirements for the establishment of the net benefits test to determine when demand response resources are cost-effective.
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