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ERCOT To Hold Further Workshop On ERCOT-Funded Program To Provide Incentives For Residential Demand Response
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ERCOT will host a further in-person workshop on June 16, 2025 to review feedback and discuss additional design refinements and next steps for ERCOT's proposed Residential Demand Response Program, which would include an incentive paid by ERCOT (i.e. funded by the ERCOT market)
See more background on ERCOT's examination of creating residential demand response programs that include financial support from ERCOT here
ERCOT had previously outlined the concept of a residential DR program that provides an incentive payment to Retail
Electric Provider (REP) (as well as Non-Opt-In Entity (NOIE)) Qualified
Scheduling Entities (QSEs) based on Residential Demand Response
performance at times of system need, with the following provisions:
• Focus on high seasonal net load hours. ERCOT noted that net load times are likely later or earlier than "traditional" summer DR.
• Targets participation from smart/programmable devices in residential households
• Incentive payment to encourage participation and offset program development and
administration costs
Under the discussed concept, participation is voluntary and REPs/NOIEs are free to utilize the DR capacity in
the program to respond on other days and for other needs (e.g. avoided cost
during high price days)
Under the discussed concept, performance measurement uses ESIID data to determine the kWh load
reduction from a baseline during the highest net peak load hours in
each season
ERCOT had previously provided a concept of setting the incentive payments for the DR program under the following formula:
Incentive payments would be for residential baselined demand response
(KWhs not MWhs)
In characterizing stakeholder feedback at and since the initial workshop, ERCOT in a presentation posted in advance of the upcoming workshop described, "Strong stakeholder support to allow third-party QSEs to participate directly, enabling
broader and more automated participation (CPower, Leap)".
Notwithstanding such feedback, ERCOT in updating the concept in a presentation posted in advance of the workshop proposes that participation in the program, "will be at the REP/NOIE/LSE QSE."
"Third parties will have the opportunity to participate indirectly by
partnering with individual REPs and NOIEs," ERCOT said
"Direct third-party participation introduces additional complexity related
to administration, customer protection and tracking (ex. two entities
representing the same ESIID), unintended consequences ('snapback')
that is beyond the scope of the program as proposed," ERCOT says in the presentation
In refining the concept, ERCOT has, for purposes of discussion, evaluated the addition of a
MW cap on participation in the conceptual program
"Any cap should be able to support growing participation
and ensure a degree of predictability around cost," ERCOT said in a presentation posted in advance of the workshop
ERCOT is interested in stakeholder feedback around the concept of a cap
As an example, ERCOT outlined a Seasonal MW Cap design proposal as follows:
• 500 MW seasonal compensation cap –calculated load reduction
– Current number of smart devices reported at residential households in
competitive areas and enrolled in REP programs ~50 MW (50,000
households assuming 1kw of response); ~160 MW and 160,000
households in NOIE areas.
– 500 MW would allow for significant increase in participation
• If 500 MW cap is exceeded in any season, baselined DR amounts in
each REP and NOIE area would be reduced pro-rata by the fraction
exceeded
• E.g. if 500 MW cap was exceeded by 10% in a season, baselined
calculations in all participating areas would be reduced by 10%
– No change to incentive payment, only adjustments to kwh amounts
ERCOT is proposing that the costs for the residential
demand response program be uplifted on a seasonal load
ratio share basis
"ERCOT believes that costs should be recovered on the
basis of seasonal load ratio share," ERCOT said in the presentation
"While incentive payments are based on performance, the
benefits are system-wide," ERCOT said in the presentation
ERCOT illustrated the settlement/cost impact based on a
500 MW cap as follows:
ERCOT also proposes a minimum required participation level of 2,000 households
"At very low levels of participation, baseline errors
are problematic for baseline accuracy," ERCOT states
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Characterizes "Strong" Stakeholder Support To Allow Third-Party QSEs To Participate Directly
June 13, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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