Susan Covino Senior Consultant, Emerging Markets March 31, 2015 DER Participation in the PJM Wholesale Power Markets Mid-Atlantic Renewable Energy Association Susan Covino Senior Consultant, Emerging Markets March 31, 2015

PJM as Part of the Eastern Interconnection KEY STATISTICS Member companies 900+ Millions of people served 61 Peak load in megawatts 165,492 MWs of generating capacity 183,604 Miles of transmission lines 62,556 2013 GWh of annual energy 791,089 Generation sources 1,376 Square miles of territory 243,417 States served 13 + DC For those of you who don’t know, PJM is one of the largest grid operators in the US. 21% of U.S. GDP produced in PJM As of 4/1/2014

PJM's Priorities Reliability, Market Operations and Regional Planning

Current Demand Response Participation DR Capacity – 2017/2018 Delivery Year = 10,975 MW Typical Economic Energy DR in market = ~50 MW DR Synchronous reserve capability ~ 320 MW, typical amount in market ~65 MW DR Regulation capability ~ 10 MW, typical amount in market ~ 3 MW www.pjm.com

Who Offers Demand Response into PJM’s Markets Today? Curtailment Service Providers Specialize in DR/EE services and do not supply the energy needs of their customers Competitive Retail Suppliers Some retail suppliers provide DR/EE services to their customers Retail Choice States Utility DR/EE programs offered to SOS/BGS/POLR customers Utility DR/EE programs offered to any customers Vertically Integrated States Utility DR/EE programs offered to the utilities customers Utilities www.pjm.com

Registered Demand Response by State Delivery Year 2014/15 LSE category = DR offered by utilities/Electric Distribution Companies (or their agents) and competitive retail electric suppliers CSP category = DR offered by entities specializing in demand response and do not serve energy needs of customers www.pjm.com

Demand Response Registrations Business Segments in 2014/15 www.pjm.com

Demand Response Registrations Reduction Methods in 2014/15 www.pjm.com

Demand Response Revenue by Year by Wholesale Service *Capacity Net Revenue inclusive of Capacity Credits and Charges

Price Responsive Demand Implemented by PJM in 2011 & 2012 New option for wholesale participation by load reduction capability Market rules require: Metering capable of providing hourly interval usage values Dynamic retail rates that are triggered by nodal Locational Marginal Prices in the PJM energy market Automated response (and supervisory control for capacity market participants that can override automated controls www.pjm.com

MW Today’s Economic Dispatch of Supply Resources $100$85$70$55$40$25$15$10$5508090100110120130211713951Hour of Day www.pjm.com

Dispatch Incorporating Price Responsive Demand Load Curve without PRD Load Curve Dispatch $90 resources Same area of detail $88 Price-Responsive Demand Dispatch $85 resources Energy Independence and Security Act of 2007 requirement that FERC provide an assessment of DR potential. FERC staff’s 2009 report included a “full participation” scenario = “advanced metering infrastructure universally deployed and dynamic pricing made the default tariff + proven enabling technologies” = looks a lot like PRD. No dispatch of additional resources due to demand response at indicated price level www.pjm.com

Distributed Energy Resources – the Vision Presentation in Irvine, California, February, 2015 by Sean P. Meyn of the Florida Institute for Sustainable Energy, Department of Electrical & Computer Engineering, University of Florida Presentation in Irvine, CA, February 2015 by Sean P. Meyn of the Florida Institute for Sustainable Energy, Dept of Electrical & Computer Engineering, University of Florida www.pjm.com

Comprehensive Plan: EE & DR Load Curve Usage Value (kW) Consumers decrease energy demand during all hours of the day Consumers decrease demand during peak load times- may shift load to higher than baseline after Monetary Value ($) Value in Energy Market (Money saved through decreased energy usage) Value in Capacity Market (Revenue in PJM capacity payments in RPM) Energy Market ~90% of Cash Flow ~5% of Cash Flow Capacity Market ~10% of Cash Flow ~95% of Cash Flow Energy Efficiency Demand Response RPM eligible kW RPM eligible kW Capture highest value from each to maximize returns under one, comprehensive energy plan Used Average price, cleared MW in PECO for DR, EE $ value calculations