PJM©2010 www.pjm.com

Demand Response Opportunities in PJM’s Markets EPA Tech Forum Webinar

April 28, 2011

Paul M. Sotkiewicz, Ph.D.

Chief Economist, Markets

PJM Interconnection, LLC

PJM©2010 2

PJM Overview

KEY STATISTICS

PJM member companies 600+

Millions of people served 51

Peak load in megawatts 144,644

MWs of generating capacity 167,367 KMs

of Transmission lines 90,520

GWh of annual energy 729,000

Generation sources 1,310

Square miles of territory 164,260

Area served 13 states + DC

Internal/external tie lines 250

26% of generation in Eastern Interconnection

23% of load in Eastern Interconnection

19% of transmission assets in Eastern Interconnection

19% of U.S. GDP produced in PJM

6,038

substations

PJM©2010 3

What is Demand Response?

• Customer ability to manage

total electricity bill

– Reducing or shifting consumption

away from high price periods to

low price periods

• In a manner similar to the

gasoline example

– Committing to reductions during

peak to maintain reliability in

exchange for a payment that

reduces the total electricity bill

• Similar to reducing recurring

expenses for “infrastructure needs”

such as with homes and cars

www.pjm.com

PJM©2010 4

From a PJM operational perspective it is:

• End-use customer ability to change consumption

in response to wholesale energy market prices

• End-use customer ability to reduce consumption

to meet system generation capacity adequacy

needs during an emergency

What is Demand Response?

www.pjm.com

For utilities or load serving entities it is:

• End-use customer’s ability to shift consumption to

lower priced periods to reduce high price purchases

or peaking generation

• End-use customer’s ability to reduce consumption at

peak to reduce the need for new generating capacity

• other end-use customers can also benefit from these

actions

PJM©2010 5

Demand Response Opportunities in PJM

• PJM RPM Capacity Market

– End-use customers commit to reduce

consumption during emergencies at

extreme system peaks to maintain

reliability

– End-use customers receive payment

for making this commitment

– When called, reductions are

mandatory

www.pjm.com

• PJM Energy Market

– End-use customers reduce

consumption in response to wholesale

market prices

– Reductions are compensated at the

prevailing wholesale market price less

the retail rate

– Participation is voluntary in that there

is no requirement that reductions in

consumption take place

PJM©2010 6

$0

$50

$100

$150

$200

$250

$300

$350

HR1HR2

HR3HR4

HR5HR6

HR7HR8

HR9HR10

HR11HR12

HR13HR14

HR15HR16

HR17HR18

HR19HR20

HR21HR22

HR23HR24

Wholesale Price (Hourly LMP)

Incentives to Respond to Wholesale Prices

in the Energy Market

www.pjm.com

G&T part

of Retail

Rate

An End-Use-Customer

reduce consumption when

wholesale prices are high

PJM©2010 7

PJM DSR Registrations

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Mar

-06

Apr

-06

May

-06

Jun-

06Ju

l-06

Aug

-06

Sep-

06O

ct-0

6N

ov-0

6D

ec-0

6Ja

n-07

Feb-

07M

ar-0

7A

pr-0

7M

ay-0

7Ju

n-07

Jul-0

7A

ug-0

7Se

p-07

Oct

-07

Nov

-07

Dec

-07

Jan-

08Fe

b-08

Mar

-08

Apr

-08

May

-08

Jun-

08Ju

l-08

Aug

-08

Sep-

08O

ct-0

8N

ov-0

8D

ec-0

8Ja

n-09

Feb-

09M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9Se

p-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10Fe

b-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep-

10O

ct-1

0N

ov-1

0D

ec-1

0Ja

n-11

Feb-

11M

ar-1

1

MW

Total Registered MWs in PJM's Economic Demand Response

*Data as of the first day of each month.

PJM©2010 8

PJM DSR Activity

www.pjm.com

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000Jan-0

6F

eb

-06

Mar-

06

Ap

r-06

May-0

6Jun-0

6Jul-06

Aug

-06

Sep

-06

Oct-

06

No

v-0

6D

ec-0

6Jan-0

7F

eb

-07

Mar-

07

Ap

r-07

May-0

7Jun-0

7Jul-07

Aug

-07

Sep

-07

Oct-

07

No

v-0

7D

ec-0

7Jan-0

8F

eb

-08

Mar-

08

Ap

r-08

May-0

8Jun-0

8Jul-08

Aug

-08

Sep

-08

Oct-

08

No

v-0

8D

ec-0

8Jan-0

9F

eb

-09

Mar-

09

Ap

r-09

May-0

9Jun-0

9Jul-09

Aug

-09

Sep

-09

Oct-

09

No

v-0

9D

ec-0

9Jan-1

0F

eb

-10

Mar-

10

Ap

r-10

May-1

0Jun-1

0Jul-10

Aug

-10

Sep

-10

Oct-

10

No

v-1

0D

ec-1

0Jan-1

1

MW

H

Do

llars

PJM Economic Demand Response Activity

Total Net CSP Credits Total Load Reductions

*Data for last few months are subject to signif icant change due to the settlement window.

PJM©2010 9

Offers of Demand-Side Resources as

Capacity in PJM by Delivery Year

www.pjm.com

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2005 2006 2007 2008 2009 2010 2011 2012 2013

Energy Efficiency

RPM and FRR DR

Interruptible Load for Reliability

Active Load Management

Prior to RPM

Implementation RPM Implemented

PJM©2010 10

PJM Demand Side Response Estimated Revenue

*Capacity revenue prior RPM implementation on 6/1/07 estimated based on average daily ALM capacity credits and weighted average daily

PJM capacity market clearing price.

-$50,000,000

$50,000,000

$150,000,000

$250,000,000

$350,000,000

$450,000,000

$550,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 as of 3/08/2011

Economic Energy IncentivesEconomic EnergyEmergency EnergySynchronized ReserveCapacity*

PJM©2010 11

Demand Response Opportunities in PJM

• PJM Regulation Market

– End-use customers commit to

follow PJM regulation and

frequency response signal

– End-use customers receive

payment for this commitment

– To date there has not been any

demand response in regulation

www.pjm.com

• PJM Synchronized Reserve

Markets

– As Synchronized Reserves end-

use customers commit to reduce

load in response to a contingency

– End-use customers receive a

payment for this commitment

– If contingency occurs and PJM

asks for reserve, reductions are

mandatory

PJM©2010 12

DSR as Synchronized Reserve

www.pjm.com

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1,100,000

Aug

-06

Sep

-06

Oct-

06

No

v-0

6D

ec-0

6Jan-0

7F

eb

-07

Mar-

07

Ap

r-07

May-0

7Jun-0

7Jul-07

Aug

-07

Sep

-07

Oct-

07

No

v-0

7D

ec-0

7Jan-0

8F

eb

-08

Mar-

08

Ap

r-08

May-0

8Jun-0

8Jul-08

Aug

-08

Sep

-08

Oct-

08

No

v-0

8D

ec-0

8Jan-0

9F

eb

-09

Mar-

09

Ap

r-09

May-0

9Jun-0

9Jul-09

Aug

-09

Sep

-09

Oct-

09

No

v-0

9D

ec-0

9Jan-1

0F

eb

-10

Mar-

10

Ap

r-10

May-1

0Jun-1

0Jul-10

Aug

-10

Sep

-10

Oct-

10

No

v-1

0D

ec-1

0Jan-1

1F

eb

-11

MW

H C

leare

d

Do

llars

DSR Participation in PJM Synchronized Reserve Markets

Total Payments MWh Cleared

PJM©2010 13

CO2 Emissions Rates of Marginal Units

Average CO2 Emissions Rates

www.pjm.com

• CO2 Emissions Rates of Marginal Units - PJM has analyzed the CO2 emissions

rate information from the Generation Attribute Tracking System (GATS), which is

administered by PJM Environmental Information Services (PJM EIS), for the

specific marginal units for each five minute interval from January 2005 through

December 2010. The five-minute marginal data was aggregated into hourly blocks

and then sorted into on-peak and off-peak time periods and ultimately averaged for

each month. The on-peak period is all non-holiday weekdays from 7 a.m. until 11

pm and the off-peak is comprised of all other hours. The annual numbers are also

provided.

• Average CO2 Emissions Rates - The average CO2 emissions rate is calculated

with the CO2 emissions rate information from GATS. Each unit’s monthly

generation numbers are coupled with the CO2 rate to determine the total monthly

emissions. The total CO2 emissions values for all units are summed across the

PJM region and divided by the total generation in the region to determine the

average CO2 emission rate in PJM for that month. The annual numbers are also

provided.

PJM©2010 14

CO2 Emissions Rates of Marginal Units

Average CO2 Emissions Rates

www.pjm.com

PJM©2010 15

CO2 Emissions Rates of Marginal Units

Average CO2 Emissions Rates

www.pjm.com

PJM©2010 16

Informational Notice

PJM Interconnection, L.L.C. (“PJM) expressly disclaims any obligation to correct or update information

pertaining to the marginal and average CO2 rates (“information”) and offers no warranty of any kind, whether

express or implied, arising from or relating to this information. PJM does not intend for entities accessing this

information to utilize it for any form of reporting or compliance purposes, and such information is provided for

informational purposes only. Any use of the information contained herein is at entities own risk. In no event

shall PJM be liable for any damages of any kind, including, but not limited to, direct, indirect, general, special,

incidental or consequential damages arising out of any use of the information contained herein.

www.pjm.com