The Role of DR Aggregators (CSPs)

For most Commercial & Industrial (C&I) businesses looking to participate in wholesale Demand Response (DR) programs, partnering with a specialized third party is the most common and practical approach. These companies are known by various names:

  • Demand Response Aggregators
  • Curtailment Service Providers (CSPs) - Term commonly used in PJM
  • DR Providers
  • Aggregators of Retail Customers (ARCs) - Term sometimes used in MISO
  • Qualified Scheduling Entities (QSEs) - Term used in ERCOT (can represent generation, load, or DR)

Regardless of the specific name used in a market, these entities perform a crucial intermediary role.

What Do Aggregators/CSPs Do?

Aggregators act as the bridge between individual C&I customers and the complex wholesale electricity markets or utility DR programs. Their key functions include:

  • Market Expertise & Navigation: They possess deep knowledge of specific ISO/RTO market rules, program requirements, bidding strategies, and enrollment processes, which can be daunting for individual businesses.
  • Program Assessment & Recommendation: They evaluate a facility's load flexibility and operational constraints to identify the most suitable and profitable DR programs.
  • Aggregation Services: They pool together load reduction commitments from multiple smaller C&I customers to meet the minimum participation thresholds (e.g., 100 kW or 1 MW) required by many wholesale programs.
  • Market Interface & Bidding: As registered market participants, they handle the communication, bidding, scheduling, and dispatch interactions with the ISO/RTO on behalf of their aggregated customer portfolio.
  • Technology Provision & Integration: They often provide or facilitate the installation of necessary interval metering, communication hardware (for receiving dispatch signals), web portals for monitoring, and sometimes automation/control systems to aid curtailment.
  • Performance Management & Reporting: They monitor customer performance during DR events, manage baseline calculations, verify load reductions, and provide performance reports.
  • Settlement & Payment: They receive payments from the ISO/RTO or utility based on the aggregated portfolio's performance and then distribute earnings to individual C&I customers according to their contractual agreements (often a revenue-sharing model).
  • Risk Management: They often absorb some or all of the financial risk associated with non-performance penalties in wholesale markets, providing more certainty to the C&I customer (though contracts vary).
  • Customer Support: They provide ongoing support, answer questions, and assist during DR events.

Benefits of Working with an Aggregator:

  • Access to Markets: Enables participation for businesses that wouldn't meet minimum size requirements or lack the resources to engage directly.
  • Reduced Complexity: Simplifies the process by outsourcing the complexities of market rules and operations.
  • Optimized Revenue: Leverages market expertise to place the C&I load into the most advantageous programs and potentially stack value.
  • Lower Risk: Shifts some performance penalty risk from the C&I customer to the aggregator (depending on contract terms).
  • Focus on Core Business: Allows the C&I facility to focus on its primary operations while still benefiting from DR revenue.

Choosing the right aggregator involves considering their market expertise, technology offerings, contractual terms (revenue share, risk allocation), and customer service reputation.