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NOTICEThis report was prepared as an account of work sponsored by an agency of the United States government. Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States government or any agency thereof. Printed on paper containing at least 50% wastepaper, including 10% post consumer waste.iii AcknowledgmentsThe authors would like to thank the following individuals for their valuable input and comments during the analysis and publication process: Kerry Chung, Mary Lukkonen, Trieu Mai, Robin Newmark, Ramteen Sioshansi (who also provided the price-taker value in Section 4.1), and Aaron Townsend. Any errors or omissions are solely the responsibility of the authors.iv ForwardThis report is one of a series stemming from the U.S. Department of Energy (DOE) Demand Response and Energy Storage Integration Study. This study is a multi-national-laboratory effort to assess the potential value of demand response and energy storage to electricity systems with different penetration levels of variable renewable resources and to improve our understanding of associated markets and institutions. This study was originated, sponsored, and managed jointly by the Office of Energy Efficiency and Renewable Energy and the Office of Electricity Delivery and Energy Reliability.Grid modernization and technological advances are enabling resources, such as demand response and energy storage, to support a wider array of electric power system operations. Historically, thermal generators and hydropower in combination with transmission and distribution assets have been adequate to serve customer loads reliably and with sufficient power quality, even as variable renewable generation like wind and solar power become a larger part of the national energy supply. While demand response and energy storage can serve as alternatives or complements to traditional power system assets in some applications, their values are not entirely clear. This study seeks to address the extent to which demand response and energy storage can provide cost-effective benefits to the grid and to highlight institutions and market rules that facilitate their use.The project was initiated and informed by the results of two DOE workshops: one on energy storage and the other on demand response. The workshops were attended by members of the electric power industry, researchers, and policymakers, and the study design an...

Printed on paper containing at least 50% wastepaper, including 10% post consumer waste.iii ForewordThis report is one of a series stemming from the U.S. Department of Energy (DOE) Demand Response and Energy Storage Integration Study. This study is a multi-national-laboratory effort to assess the potential value of demand response and energy storage to electricity systems with different penetration levels of variable renewable resources and to improve our understanding of associated markets and institutions. This study was originated, sponsored, and managed jointly by the DOE Office of Energy Efficiency and Renewable Energy and the DOE Office of Electricity Delivery and Energy Reliability.Grid modernization and technological advances are enabling resources, such as demand response and energy storage, to support a wider array of electric power system operations. Historically, thermal generators and hydropower in combination with transmission and distribution assets have been adequate to serve customer loads reliably and with sufficient power quality, even as variable renewable generation like wind and solar power become a larger part of the national energy supply. While demand response and energy storage can serve as alternatives or complements to traditional power system assets in some applications, their values are not entirely clear. This study seeks to address the extent to which demand response and energy storage can provide cost-effective benefits to the grid and to highlight institutions and market rules that facilitate their use.The project was initiated and informed by the results of two DOE workshops: one on energy storage and the other on demand response. The workshops were attended by members of the electric power industry, researchers, and policymakers, and the study design and goals reflect their contributions to the collective thinking of the project team. Additional information and the full series of reports can be found at www.eere.energy.gov/analysis/.The authors would like to thank the following individuals for their valuable input and comments during the analysis and publication process: Nate Blair, Chunlian Jin, Michael Kintner-Meyer, Mark O'Malley, Michael Milligan, Krishnappa Subbarao, Keith Searight, Aaron Townsend, and Aidan Tuohy. Any errors or omissions are solely the responsibility of the authors.This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. iv AbstractOperating reserves impose a cost on the electric power system by forcing system operators to keep partially loaded spinning generators available to respond to system contingencies and random variation in demand. In many regions of the United States, thermal and hydropower plants provide a large fraction of the operating reserve requirement. Alternative sources of operating reserves, such as demand response and energy storage, may provide these services at lower cost. However, to estimate the potential value of these services, the cost of reserve services under variou...

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Printed on paper containing at least 50% wastepaper, including 10% post consumer waste. iii Foreword This report is one of a series stemming from the U.S. Department of Energy (DOE) Demand Response and Energy Storage Integration Study. This study is a multinational laboratory effort to assess the potential value of demand response and energy storage to electricity systems with different penetration levels of variable renewable resources and to improve our understanding of associated markets and institutions. This study was originated, sponsored, and managed jointly by the DOE Office of Energy Efficiency and Renewable Energy and the DOE Office of Electricity Delivery and Energy Reliability. Grid modernization and technological advances are enabling resources, such as demand response and energy storage, to support a wider array of electric power system operations. Historically, thermal generators and hydropower in combination with transmission and distribution assets have been adequate to serve customer loads reliably and with sufficient power quality, even as variable renewable generation like wind and solar power become a larger part of the national energy supply. While demand response and energy storage can serve as alternatives or complements to traditional power system assets in some applications, their values are not entirely clear. This study seeks to address the extent to which demand response and energy storage can provide cost-effective benefits to the grid and to highlight institutions and market rules that facilitate their use. The project was initiated and informed by the results of two DOE workshops: one on energy storage and the other on demand response. The workshops were attended by members of the electric power industry, researchers, and policymakers, and the study design and goals reflect their contributions to the collective thinking of the project team. Additional information and the full series of reports can be found at www.eere.energy.gov/analysis/. The authors would like to thank the following individuals for their valuable input and comments during the analysis and publication process: Abstract Operating reserves impose a cost on the electric power system by forcing system operators to keep partially loaded spinning generators available to respond to system contingencies and random variation in demand. In many regions of the United States, thermal and hydropower plants provide a large fraction of the operating reserve requirement. Alternative sources of operating reserves, such as demand response and energy storage, may provide these services at lower cost. However, to estimate the potential value of these services, the cost of reserve services under various grid conditions must first be established. This analysis used a commercial grid simulation tool to evaluate the cost and price of several operating reserve services, including spinning contingency reserve, upward regulation reserve, and a proposed flexibility/ramping reserve. These reserve products were evaluated in a utility system i...