Be sure to read this article about capacity challenges in Texas. The background here is that on July 9, the U.S. Energy Information Administration (EIA) reported that ERCOT is not expected to have sufficient supply capacity to meet its reserve margin requirements this summer. While most businesses and residences may not see any supply impact from this imbalance, the concern is that falling below reserve margin requirements could impact system reliability. As defined by EIA, reserve margins:

Reserve margins serve as an indicator of supply adequacy in an electric system. In 2011, due to a combination of the hottest summer on record and some unplanned outages, the Electricity Reliability Council of Texas (ERCOT), the system operator for most of Texas, fell below its target reserve margin. Based on forecasts of supply and demand, this system is also not expected to meet its 2012 target.

Two major thoughts from reading this post in Greentech Media:
1) ERCOT has major capacity challenges in the summer. The grid in Texas has already set a new record in the month of June. Capacity constraints could be a real problem. It is also a big opportunity for businesses. ERCOT should be ready to spend real dollars for businesses that can shed load during key summer hours. Make sure you receive as much of the benefit as possible (>70%)– Demand Response providers have tried to negotiate to retain >50% of Demand Response (DR) dollars. Without you, the curtailing business, Demand Response doesn’t work– don’t give away the value that you provide.

2) This is even more relevant given the service that most DR providers offer. Greentech Media reports that there is no standardized or even fully automated demand response at an extensive, regional (grid) level anywhere in the US, including ERCOT/Texas. That’s a big deficiency in the rather crowded Demand Response industry. Manual DR has been around since the late 90s. You would think the industry would have innovated to an automated response system by now.

DR would have to be fully automated, rather than relying on messages to building operators to manually turn down systems. For now, that’s futuristic stuff that hasn’t quite been worked out in Texas, or on an extensive scale in any region of the grid. There is automated demand response happening, but it is not standardized, and it is not the norm.

The bottom line: If you are a business that has agreed to reduce your demand during key, constrained periods, make sure you negotiate to get the majority of any payments that the system operator/grid manager provides. If you are working with a DR company, make sure they are really adding value… beyond calculating benefits in spreadsheets.