Will The Supreme Court Side With Traditional Energy Generators Or Cleantech?

That’s the basic issue in an otherwise wonky case before the court.  As new technologies enable customers to automatically change their electricity demand patterns to adjust to grid needs, companies are jumping in to organize them and then sell the bundled portfolio of customers and their bulk energy savings or changed demand as a resource to utilities and grid operators.  Per the Washington Post:

The whole situation has created an economic opportunity for “demand response” companies, like Massachusetts-based EnerNOC, to provide software to big companies that use a lot of electricity, helping them manage when they do so. These big users can then potentially shift around how much electricity they use at certain key times when the rest of the grid needs it — for instance, changing the temperature in a building or dimming lights somewhat — and their willingness to use less at these moments has an economic value because it can blunt the amount of peak demand that there is.

The product that demand response companies are selling has sometimes been called “negawatts” — they give a value to not using electricity at a particular time. Demand response companies then sell these “negawatts” in auctions where grid operators like PJM Interconnection are constantly matching supply with demand to keep the lights on, and return some of the proceeds to the actual companies cutting usage — and overall, it’s been a pretty successful business model. EnerNOC, for instance, said last May that it had received about $ 1 billion in revenue in the prior three years.

These companies compete with traditional wholesale electricity providers as a new resource, and the big generators don’t like it.  That’s why they filed a lawsuit challenging a federal agency decision to allow this competition in the wholesale electricity market.  They argue this kind of aggregated demand response is fundamentally about retail electricity transactions, which the federal government can’t regulate (it’s up to the states to do so).  The Supreme Court has agreed to hear the case, on appeal from the D.C. Circuit, which ruled for the traditional power providers.

But if these traditional providers win, then the concern is that nobody can regulate demand response, since states can’t regulate interstate wholesale power transactions and the federal government can’t regulate retail transactions.  In effect, demand response blurs the line between the two.

The Court was evidently skeptical during oral arguments last week, but we’ll have to wait and see what the final decision is next year.  The future of many cleantech industries could be at risk.


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