PEER perspective: The Supreme Court ruling and demand response

Published on: 
23 Mar 2016
Courtney Yan

In 2010, USGBC posted the first draft of the LEED pilot credit for demand response. To further promote participation in demand response, we formed the Demand Response Partnership Program in 2013. With the launch of LEED v4, the Energy and Atmosphere (EA) credit for demand response became a newly added credit to the new construction (NC) and existing building (EB) rating systems. Demand response, therefore, has been an element of LEED for years. It has also been an element of PEER—GBCI’s answer for sustainable power system performance through electricity generation, transmission and distribution—from its inception.

Legal suit brings uncertainty

Given our support of demand response in general, we watched with interest when Federal Energy Regulatory Commission (FERC) v. Electric Power Supply Association was brought before the Supreme Court. For background: FERC issued a rule in 2011 that demand response resources in wholesale energy markets should receive market prices for, essentially, power not used during periods of high demand. In other words, FERC stipulated that demand response (avoided use) and electricity generation were of equal value to the grid and should be compensated accordingly. The question before the Supreme Court was whether FERC overstepped its authority with the rule. Under the Federal Power Act, FERC oversees the wholesale market, but the argument was that FERC’s actions impacted retail markets, which are regulated by the states. Earlier this year, the Supreme Court ruled that FERC acted within its authority, causing demand response proponents to breathe a sigh of relief. 

A bright future for demand response

The Supreme Court ruling marks a return to a demand response-friendly regulatory environment at the federal level. The decision removes any uncertainty raised by the suit, reaffirms the status of demand response as a valuable resource, and perhaps even opens doors for FERC to empower other distributed energy resources. USGBC has been a proponent of demand response and other strategies that reduce energy use, particularly during times of high demand and system stress. Time of use is an important consideration as we explore ways to reduce greenhouse gas emissions, increase renewable and distributed generation resources, and ensure system reliability and efficiency. We at USGBC hope to see the continued proliferation of additional demand response products and services in both wholesale and retail markets. For our part, we will continue to promote demand response and similar products and services through LEED as well as PEER. 

Demand response in LEED and PEER

Demand response is at the nexus of LEED and PEER. On the LEED side, EA credit for demand response drives the conversation among building operators and occupants to consider both how much energy they are using and when the energy is being used. For projects in areas where no demand response program is available, partial points may be earned for ensuring that the project is demand response-ready. On the other side of the meter, PEER encourages grid operators to not only develop their own capacity and receive compensation for demand response, but also to have programs and policies in place to empower customers to participate. PEER further encourages grid operators to examine and maximize savings from reduced demand charges and revenue for providing ancillary services.  

Learn more about PEER