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Energy-Efficiency Funds and Demand Response Programs, Pennsylvania

Updated September 2008

Below you will find questions and answers regarding Pennsylvania's utility energy efficiency programs, including options for load management, demand response, and distributed energy resources, and information about state-sponsored energy efficiency programs.

What public-purpose-funded energy efficiency programs are available in my state?

As a result of restructuring in the state, the Pennsylvania Public Utilities Commission established four Sustainable Energy Funds (SEFs) to promote renewable energy, advanced clean energy technologies, and energy conservation. Each fund is managed by an independent, non-profit administrator in the service territories of five of the state's major utilities (one fund covers both Met-Ed and Penelec). These funds offer financial assistance through providing financing (including favorable loans and in some cases grants) for eligible projects. Interested federal customers should contact the program administrator for their service territory.

What utility energy efficiency programs are available to me?

Utilities in Pennsylvania do not currently offer any energy efficiency programs targeted at commercial and industrial customers.

What load management/demand response options are available to me?

The PJM Interconnection (PJM), a regional transmission organization (RTO), offers several demand response programs, three of which may be attractive to federal facilities:

  • The Economic Load Response program allows electricity users to provide load reductions in exchange for a payment based on hourly wholesale electricity prices. Participation is fully voluntary. Program participants have the choice of two options: the Real-Time or Day-Ahead Option. In the Real-Time Option, participants can decide at any time to provide load curtailments (with one hour notice to PJM), and receive payment based on the real-time electricity price (minus their retail rate for generation and transmission). In the Day-Ahead Option, participants submit load reduction bids (of at least 100 kW) into the day-ahead energy market. Participants whose bids are accepted are paid for their load reductions based upon the day-ahead, hourly electricity market prices (also with their generation and transmission rates subtracted). Reductions are figured based on a "customer baseline load" (CBL), essentially the average load levels for the same hours in four of the facility's previous non-responding days. Retail electricity customers can participate in the program through any existing PJM Member, such as their utility, a third-party electricity supplier, or a specialty "curtailment service provider" (CSP); they may also participate directly by becoming a "Special Member" of PJM. Regardless of which type of firm it is, the CSP will generally offer to split the revenues with the customer at a pre-determined percentage. Customers on real-time (hourly) electricity pricing can participate, but at much less attractive remuneration terms (since they are already exposed to market electricity rates).

  • The Emergency Load Response program (energy only) provides participants with a payment representing the marginal cost of power at the nearest hub on the PJM system (the locational marginal price, or "LMP") for providing load reductions when notified by PJM of a system emergency. Compliance with any load reduction request is voluntary; no penalties are assessed if a participant decides not to respond. Retail electricity customers may participate through any PJM Member (for example, their utility, third-party electricity provider, or an independent CSP) or directly, by registering as a Special Member with PJM. While the remuneration can be very high in an event, the emergency program is rarely called (only five times over the past three summers, and each time only in certain zones). However, emergency program customers may also participate in the economic program (above), as long as reductions are not credited toward both programs simultaneously.

  • PJM's Interruptible Load for Reliability (ILR) offering is an emergency "capacity" program in which participants pledge to either reduce their load by a specified amount (guaranteed load drop, GLD) or to a specific kW level (known as firm service level, FSL) within one or two hours of an event notification. Load reductions are mandatory and may occur up to ten times per year, lasting up to six hours per event. Penalties for non-compliance are substantial. Participants must register by March 2, 2009 (and should start sooner since registrations must be cleared by their third-party electricity providers and distribution utilities). Remuneration is based on the results of annual capacity auctions in various PJM regions, but ranges from about $40 to $80/kW (depending on the zone and year) through 2011-12. Most participants are also eligible to receive energy payments for actual reductions, if and when the program is called.

In all three programs, participants can provide load reductions either through curtailing electricity use or operating on-site generation consistent with local environmental regulations and permits.

PECO's (Exelon) Smart Returns program is available to federal customers with curtailment capacity of 100 kW or more. Smart Returns has two options, which closely mimic PJM's ILR and Economic Load Response offerings above:

  • The Mandatory Load Reduction program (also called the Active Load Management or ILR program) requires that customers reduce load to a firm service level for no more than six hours when requested (with at least one hour's notice) by PECO during periods of system limitations (primarily on summer weekdays); credit is provided based on the difference between the firm service level and the facility's peak load contribution (PLC, which is the facility's average peak during PJM's five highest load hours during the summer).

  • The Voluntary Load Reduction, or VLR, program compensates customers for cutting usage during periods of high energy prices and has two alternatives, day-ahead and day-of, which vary based on the desired lead time to respond to PECO's curtailment calls and the price per energy reduced that is attractive to the facility.

Pennsylvania Power and Light (PPL) is offering a real-time pricing option, the Demand-Side Initiative Rider (PDF 55 KB) to large (> 1,000 kW) customers through December 31, 2010. PPL provides participating customers with day-ahead hourly market prices for electricity. Participants are then credited or charged at the market price for usage below or above their predetermined customer reference load (CRL) profile. This allows facility operators to schedule the following day's operations accordingly. Download Adobe Reader

Duquesne Light Company offers the Energy Exchange program, wherein participants with a curtailable load of 500 kW or greater can, upon notification by the company, offer to provide specified day-ahead load reductions for between two and twelve hours through a program Web site. If the company offers an attractive price in return (minimum of $0.30/kWh), the customer can accept and Duquesne, which does not own generating capacity itself, will attempt to market the reductions to its primary power supplier. If accepted, the utility again notifies the customer, this time that its offer has been accepted. Curtailments are quantified based on the customer's ten previous days' use.

What distributed energy resource options are available to me?

The Database of State Incentives for Renewable Energy (DSIRE) provides information on programs that offer incentives for renewable distributed generation. In addition to grants and loans available through the Sustainable Energy Funds (see above), the following programs may be of interest to federal customers:

  • The Pennsylvania Energy Development Authority (PEDA), part of Pennsylvania's Department of Environmental Protection, manages a fund offering loans, loan guarantees, and grants for alternative energy, energy efficiency, and load management projects. Projects must show financial commitment from at least one source other than PEDA and demonstrate a net environmental benefit to Pennsylvania. Solicitations for the funding generally open up just once each year for a short window, but PEDA offers a notification service for interested parties.

  • The Pennsylvania Energy Harvest Grant Program offers grants to alternative energy and energy efficiency projects with preference for those that address the state's environmental goals (particularly in air quality improvement and watershed protection). Technologies ranging from wind power to waste coal utilization are eligible. As with the PEDA program (above), interested parties can sign up to be notified when the (usually annual) solicitations open.

  • In July 2008, the Pennsylvania legislature passed, and Governor Rendell signed, the Alternative Energy Investment Act, which will set aside funds for incentivizing renewable projects in the state. For more information, refer to Pennsylvania's Department of Environmental Protection website, below.

Are there energy efficiency programs sponsored by state government?

The Pennsylvania Department of Environmental Protection administers a variety of pollution prevention (including energy conservation) programs. No programs are currently available to federal customers.

What additional opportunities are available to me?

Federal customers also have energy efficiency opportunities available with utilities that have area-wide contracts with GSA (e.g., Consolidated Natural Gas, First Energy, PP&L, and PECO Energy) and, by extension, all other federal agencies. Federal facilities should contact their account executive to determine the level of participation by their local utility.