The DR Value Prop

Will Business Customers Embrace Future of Demand Response?

Redistribution is a big issue in the realm of economics and politics, motivating full-throated politicians to expound on the joys or evils of the idea from metaphorical soap boxes. In the world of energy, however, a form of redistribution is universally considered a good thing that can balance supply and demand to keep the grid steady as it goes.

Demand response (DR) is redistribution calibrated for ultimate grid efficiency. Utilities are increasingly developing DR programs via programmable thermostats, smart appliances and a myriad of software-empowered additional options. Take a little bit here to add a little more there when needed most. The movement of power depending on the time and need brings together and reallocates load and demand for resident and business customers alike.

The latter group may be where the greatest demand resource potential resides. Residential customers offer the greater number of resources, but the energy use and potential of a large business offers more volume from which to draw.

“For commercial customers it almost makes more sense,” said Rolf Bienert, technical director for the OpenADR Alliance, a group formed by industry stakeholders seven years ago to push for standardized and certified automated demand response products. “Each of them are simply consuming more energy and has therefore a better return on investment.”

Rolf Bienert

The Untapped Wealth of Capacity

The OpenADR Alliance, utilities and vendors which offer certified demand response tools such as Honeywell, Universal Devices and EnerNoc are exploring ways to utilize the business sector’s vast potential for curtailing and rebalancing energy load. Many believe it’s an untapped gold mine which will benefit utilities, grid resiliency and, last not but least, the customer. A Pacific Gas & Electric Corp. study last year found that small business customers, for instance, accounted for 78 percent of end users but only 33 percent of energy efficiency program incentives and a similar portion of energy savings from those programs.

“Commercial buildings, including small- and medium-sized businesses have even more capacity hanging there,” Bienert noted. Doing something as simple but crucial as dimming lights could save 30 percent of power in a section of a building. “This actually will add up to quite a bit of energy savings,” he said. “Many of the measures can be taken without you even noticing it as an occupant of the building.”

The core competency of a utility remains generating the power and delivering it safely. The advancement of renewable energy resources connected to the grid–and thankfully control technologies to help smooth that out–is forcing them to shift the business model toward ancillary services such as energy efficiency, voltage regulation and greater two-way engagement.

California-based OpenADR Alliance recently announced the first certified product based on its 2.0 Demand Response Program Guide. Universal Devices will market an OpenADR-certified energy management and building automation product that incorporates numerous DR templates for utility use, Bienert said.

Demand response is surely a growing part of that new wave of services and has been for years. The power providers can now consider becoming a sort of high-tech middlemen, connecting customers with products by vendors.

Keith Teichmann

“The common thread among these technologies is networking and, in particular, Wi-Fi-centric networking,” said Keith Teichmann, chief technology officer at Delta Energy & Communications, which offers its own communication tool with its trademarked DSGN networking protocol. “What if utilities adopted the same networking principles within their smart grid? This convergence of smart grid technologies with widely adopted networking protocols could drive synergistic adoption of the broad array of power-centric technologies within businesses. As such, utilities and their business customers would be able to benefit from these sizable economies of scale.”

From Curtailment to Balancing Act

The scale seems to be shifting upward. As OpenADR’s Bienert pointed out, DR is nothing new, but its manifold benefits are becoming more apparent in the age of intermittent generation sources such as wind and solar, particularly in renewable-heavy places like California.

“Traditional DR was based on the idea that you do some curtailment,” he said, “and some part of the day save power intentionally” to deal with the burdens of peak demand such as a hot summer day when nearly everyone is home from work. “Now we’re seeing more and more that the customer side (of DR) needs to be used to balance the grid out for frequency stability, or capacity to balance the renewable fluctuations.”

A program in Australia is ready to do just that. EnerNOC, the Enel company, recently won a contract with the Australian Renewable Energy Agency and the New South Wales government to develop and operate a 50-MW DR resource to help maintain system reliability. The program, set to begin by December, could respond within 10 minutes as needed, dispatching aggregated load curtailment from commercial and industrial (C&I) customers in New South Wales and Victoria.

Pacific Gas & Electric also offers several incentives to businesses, including peak day pricing, base interruptible and scheduled load reduction programs. Other options include capacity bidding and permanent load shift, the latter of which provides financial incentives for installing equipment that facilities load shifting using thermal energy storage technologies.

Energy storage, of course, is a huge buzzword in grid circles these days. San Diego Gas & Electric, Indianapolis Power & Light and others are installing giant battery sites to store power and help smooth out loads. Many experts say DR should be considered a similar alternative energy resource to smooth out renewable energy, and that both have their pros and cons when compared to each other.

“Demand response offers the fastest uptake based on several compelling reasons,” Delta Energy’s CTO Teichmann said. “First, the proliferation of demand response consumer technologies–and the manufacturing economics afforded by this uptake–has drastically reduced the pricing of these products. Second, unlike energy storage activities, the infrastructure costs toward shifting demand response activaities to business customers is mostly dependent upon the investment in the demand response products themselves. The electrical infrastructure can remain relatively unchanged.”

The Invisible Hand of Demand Response

In other words, energy storage has its place but also takes up a lot of space. Automated DR in the workplace, on the contrary, can occur almost invisibly. In addition, it can work in tandem with things like renewables and storage, as long as the communication technology is up to the job of coordinating all of that.

The main thing with involving business customers into DR, like everything else, has to do with cost-benefit analysis. Once the initial connection is made between utility and customer, visits must be made to the buildings to make the best possible energy evaluation and logistical understanding for installing and activating tools such as thermostats and smart lighting.

“Automated DR does not necessarily mean that all resources in a factory or building need to be fully automated,” OpenADR’s Bienert said. “In a factory environment, an OpenADR signal to a building controller could dim lights, etc. on the factory floor, but typically an energy management person would do the implementation.”

Once it is determined what kind of energy consumption could be mitigated and put back on the grid as a resource–and how much that automation and installation would cost–the utility can decide if the cost is worth it.

“The biggest question, for the most part, is return on investment,” Bienert said. “The utilities involved with OpenADR use demand-side management, simply because of the increasing amount of renewables. I think we will see more utilities in the future consider demand response to help flatten the curve during the day as a result of increased energy usage due to electric vehicles charging, etc.”

What makes it complicated for businesses often depends on where they are located. Energy costs are often higher on the coasts, while some in the heartland of the U.S. pay as little as 7 cents per kWh. In that case, many ask why hold off on using the air conditioning? Bienert pointed out, if it doesn’t really cost that much more. “That is probably one of the biggest challenges,” he said. “We know from a grid balancing perspective we will need demand response management, but how can we make it more attractive?”

Remember the age-old proverb about doing what is difficult while it is easy and what is great while it is small? So look on the Sun Tzu side. Demand response resources connected to business customers are certainly moving forward, but it’s still early enough that the potential capacity for savings will be large in the long run.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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