2 – Demand Side Management

Demand Side Management (or DSM in power business jargon) prevents the need for more generating capacity by lowering the peaks in peak demand, as well as other techniques that reduce overall demand.  Instead of having relatively low base load levels of power with just a few high peaks, DSM programs are designed to “shape” energy use to reduce the need to maintain a lot of unused capacity needed to meet peak load situations.

The obsolete centralized power system that FERC and PJM are pushing with PATH promotes huge investment in both generating plants and power lines that are needed to meet peak demand.  This system is very expensive for rate payers, because they must pay for all this extra investment that is only rarely used.

DSM is a simple way of reducing the need for over-building by reducing the peaks on demand.  There are lots of different ways to do DSM to reduce peak load.  One of them is the smart grid technology that everyone talks about these days.  You don’t really need fancy computer controls to do DSM.  My brother’s central air conditioning unit in Silver Spring, MD had a power company controlled switching mechanism installed in the 1970s that allowed the local power company to turn off the air conditioning for 10 minutes or so every hour on hot summer days.  That system didn’t need fancy computer controls.

DSM can also be done with pricing mechanisms.  A simple system involves giving big discounts on electric rates during nighttime hours.  With cheaper nighttime power, residential users will begin to install timers on washing machines so they run at night and businesses begin to shift their electricity use to night shift work.

It is amazing that PJM, with its blind faith in electricity markets, just started a market in electrical efficiency only last year.  More on that in a later segment of the primer.

PJM noted a dramatic increase in trading in DSM resources in its major wholesale power auction in early May 2009:

The increase in demand resources (DR), or 5,682 megawatts (MW), over the last auction a year ago is enough capacity that would be equivalent to the power needs of about five million households. A total of 67 percent of the DR cleared in constrained regions, reflecting its value in helping to reduce congestion. The increase was driven by the market and the elimination of a special interruptible load provision whereby suppliers received payments for curtailing usage. Suppliers in this program are now required to bid as DR.
For the first time, energy efficiency (EE) participated in the sixth Reliability Pricing Model auction bringing 569 MW of new EE resources to PJM.

Here’s the link to the full PJM press release.

Note the underlined sentence in the quote above.  The most dramatic increases in DSM and EE trading occurred in just the areas that PJM has decided are most in need of congestion and reliability relief.  If PATH and TrAIL are built, the momentum that is developing for inexpensive and immediately available solutions to these problems will be eliminated, because “cheap” coal-fired power will flood into the region.  Instead of people and utilities solving their own problems by their own efforts, PJM will pump more “cheap” energy from OH and WV into NJ and eastern PA.

Which is a better long term solution?  Huge investment in new power lines that will be obsolete before they are built? Or DSM and EE which cost very little and eliminate the long term need for any new electrical generation or transmission?

The best thing about DSM solutions is that they are far cheaper than the obsolete solutions that involved building new power plants and transmission lines.  And DSM programs can be implemented immediately, if government regulators require them.

Don’t think DSM works?  Here’s a statistic that says otherwise.  California, which put in place state mandated DSM and energy efficiency standards in the 1970s, has seen per capita electricity use remain constant since the late 1970s.  In the US as a whole, over that same time period, per capita electricity use increased 9% each decade.