The Supreme Court ruled Monday that the Federal Energy Regulatory Commission can continue deciding how much consumers get paid to reduce their energy use. It’s been touted as a “tremendous win” for clean energy — but why?
In short, the ruling means that an environmentally friendly practice called demand response can keep operating the way it has for the past decade.
During hours of peak energy demand, like hot summer afternoons, utility companies have to increase energy production to make enough for everyone who wants it. That means bringing even the dirtiest power plants, which are usually more expensive and powered by fossil fuels, online.
Demand response is a solution to this problem. It’s the practice of paying big-time energy users not to consume during certain hours: Rather than amping up production to meet demand, they simply reduce demand. It’s a greener way to maintain equilibrium. Demand response helps utility companies smooth out production fluctuations associated with renewable energy sources like wind and solar.
With a 6-2 vote, the court upheld that FERC has the authority to determine compensation levels for demand response, just like it’s been doing for more than 10 years.
So it’s good news for renewables. But the decision only applies to states with competitive wholesale markets for electricity, which Colorado (like several other states) doesn’t have. So what does the decision mean for us?
Ron Binz, former chair of the Public Utilities Commission, says the state may be affected indirectly. “The ruling…enables utilities across the country to install more renewable energy resources,” he said. That kind of expansion could help bring the costs of renewables down for everyone.
The maintenance of the status quo is also significant. According to Binz, firms that provide demand response would have been “hurt badly” if the ruling had been reversed. “As a result of this ruling, these firms will continue to grow, making it more likely that they will operate in Colorado,” he said.
One such firm is Boston-based EnerNOC, which helps large industrial consumers monitor and reduce their energy use. The company saw its stocks rise more than 50 percent after Monday’s ruling.
EnerNOC senior marketing director Sarah McAuley acknowledged that athough the court’s decision has “no real effect” on Colorado at present, it sends a message to the entire country about the future of clean energy.
“On a symbolic level, it signals that as a country we’re committed to moving forward with a vision for the grid that isn’t predicated solely on 20th century constructs,” she said. “We’re open to exploring new ways of doing things instead of putting up regulatory roadblocks to innovation.”
The state is still working out exactly what the ruling means. The National Renewable Energy Laboratory hasn’t looked into it yet, and Xcel Energy just assembled a team to dissect the entire scope of the decision.
But some organizations, like the Colorado Solar Industries Association, are optimistic. CSIA director Rebecca Cantwell says the ruling will help move the electricity system towards two-way capability, where buyers who opt for alternative energy sources like solar can be producers as well as consumers.
Said Cantwell, “It will certainly help empower customers who want to generate their own power and create their own energy efficiency.”
Image Catalog, Creative Commons, Flickr.
