Demand Response Valuation Frameworks Paper

While there is general agreement that demand response (DR) is a valued component in a utility resource plan, there is a lack of consensus regarding how to value DR. Establishing the value of DR is a prerequisite to determining how much and what types of DR should be implemented, to which customers DR should be targeted, and a key determinant that drives the development of economically viable DR consumer technology.Most approaches for quantifying the value of DR focus on changes in utility system revenue requirements based on resource plans with and without DR. This "utility centric" approach does not assign any value to DR impacts that lower energy and capacity prices, improve reliability, lower system and network operating costs, produce better air quality, and provide improved customer choice and control. Proper valuation of these benefits requires a different basis for monetization. The review concludes that no single methodology today adequately captures the wide range of benefits and value potentially attributed to DR. To provide a more comprehensive valuation approach, current methods such as the Standard Practice Method (SPM) will most likely have to be supplemented with one or more alternative benefit-valuation approaches.This report provides an updated perspective on the DR valuation framework. It includes an introduction and four chapters that address the key elements of demand response valuation, a comprehensive literature review, and specific research recommendations.