Demand Response Resources (DRRs) Are Not All They're Made Out To Be: The Payback Effects Severely Reduce the Reported DRR Economic and Emission Benefits
We focus on an in-depth assessment of the economic and emission impacts of demand response resource (DRR) implementation in independent system operator or ISO-run markets. The Federal Energy Regulatory Commissions forecasts achievable 2020 DRR penetration ranging from 4 - 14 % of system peak load. Our studies indicate that within this penetration range, the often-touted benefits of DRR curtailments, as reported in the literature, are not attainable when the payback effects are explicitly considered. While DRR curtailments result in reduced loads and prices at a subset of the nodes and lower emissions during the curtailment hours, as some fraction of the curtailed energy is recovered in off-peak hours, resulting in impacts of higher prices and increased emissions in those hours - the so-called payback effects. We demonstrate representative impacts of deepening DRR penetrations with the explicit consideration of DRR energy recovery on two test systems, using 2010 scaled load data from the ISO New England and the Midwest ISO networks. Our findings indicate that the explicit consideration of recovered energy and the associated payback effects results in uneconomic outcomes and emission increases since the claimed economic and emission benefits are severely reduced.