Customers participating in these demand response networks offer to reduce their usage during peak demand and are paid the market value of the electricity saved. This allows utilities to avoid using the most expensive generators, reducing demand to meet the power grid needs instead of increasing the electricity supply. Demand response benefits all customers by lowering long-term electricity prices.
PJM Interconnection, which operates the power grid in a 13-state region from Illinois to Delaware, estimated that demand response resulted in price reductions of $650 million in energy payments for one week in early August.
Publication date: 09/04/2006