Demand response–how’s it working?

By Jason Cirgarran, Comverge

With all the talk about the latest smart grid technologies, it is sometimes easy to forget about the critical role established energy management programs such as demand response are playing in our energy mix.

Demand response has helped utilities, grid operators and commercial and industrial organizations optimize energy usage for more than 30 years. It helps maintain grid reliability, stabilizes energy prices and delivers environmental benefits.

But as more advanced demand response programs are demonstrating, its role is beginning to increase. For example, during the summer 2012 cooling season, Comverge contributed more than 32 gigawatt-hours (GWh) of reduced electricity demand from commercial and industrial and residential customers. This doubles the 16 GWh of energy reduction Comverge delivered during the 2011 cooling season. The benefits it delivers complement the supply-side smart grid changes underway. Demand response provides the necessary control to keep the grid online, particularly as variable generation such as wind and solar are added to the supply mix.

By comparison, think of how the telecommunications industry has evolved. Compare the connectivity and flexibility offered by the latest mobile technology to the phones we all grew up with. Like the easy communication enabled by the latest phones, demand response now connects utilities to their customers in ever more accessible ways.

And as new versions of cell phones let users personalize their appearances and functions, advanced demand response technologies help utilities tailor their programs to meet different customers’ needs.

Finally, as phone companies vary their payment plans for customers, demand response can include different rate and price structures. This type of flexibility is key to maximizing the number of program participants enrolled in an opt-in demand response program.

By following the example set forth by the communications industry and using a combination of smart grid software and hardware to build a modern, digital network, we will be able to achieve a cleaner, more resilient power infrastructure.

Events such as Superstorm Sandy show why this is so important. Although Sandy is considered a once-in-a-generation storm, we have seen during the past few years that extreme weather is becoming more common. Record-breaking summer temperatures, unseasonal weather or ongoing freezing conditions are once seldom events that are occurring more frequently and causing costly power outages.

Advanced Communication

Advanced systems enable utilities to engage customers in their energy consumption decisions through two-way communications. These systems can manifest even more load reduction through demand response. They enable demand response to offer solutions beyond reliable load reduction; with advanced communication systems, demand response can combine direct load control and dynamic pricing with energy efficiency, an increasing concern as conservation becomes a priority.

With the right infrastructure, utilities can facilitate these communications easily with their customers. Investments in advanced metering infrastructure (AMI) technologies continue to move the industry closer to realizing a true two-way exchange. AMI can work with retrofitted legacy systems or new installations. They enable the delivery of customer feedback that informs utilities of their programs’ performances and allow them to optimize their demand response initiatives and offer the promise of new programs that more directly involve customers. For example, with AMI, utilities can design price-responsive and pay-for-performance demand response programs. AMI technology, however, is not optimized for a rapid dispatch of a quick, full-scale reaction to a demand response event.

Utilities that seek a richer information exchange have begun to implement advanced price-responsive and load control programs using existing broadband and cellular networks. Broadband makes possible the implementation of more robust two-way communications than AMI to deploy customer engagement-driven demand response programs. Gulf Power, a Southern Co. subsidiary in northwestern Florida, and Tampa Electric Co. in southern Florida have employed customer broadband networks to bring comprehensive dynamic pricing programs to their customers.

Personalized Programs

Customers come from varied walks of life and consume energy differently. As a result, a one-size-fits-all approach doesn’t work. The nature of customers’ businesses or lifestyles determines the demand response structures that will work best. For example, residential customers will look at ease of use and ask, “Will taking part in a demand response initiative complicate my daily life?” The simpler and more automated the demand response system, the more likely participation will seem enticing and prove worthwhile in customers’ estimations.

Depending on customers’ needs, successful demand response programs might incorporate a suite of solutions. They can include communication tools such as thermostats, switches and online portals. Program structure also can vary significantly based on the sophistication of the pricing options available to customers.

Personalized Compensation Structures

More sophisticated rate structures and pricing schemes give customers flexibility in how they choose to curb their energy consumption. This flexibility leads to more participation in energy management schemes because customers can determine which actions best suit their needs.

Effective dynamic pricing implementation centers on demand response management systems (DRMS). A DRMS provides the tools utilities and their customers use to communicate with one other, including Web portals, programmable controllable thermostats, smart thermostats, in-home displays or even mobile devices such as smart phones. Through this technology, utilities send customers real-time or day-ahead price signals, and customers respond by using these endpoints to set appropriate high energy-use appliances–air conditioners, pool pumps, water heaters and more–to reduce their power demands automatically at the time of the price increase.

The word “appropriate” is important here. Reducing the energy to the appliances mentioned is unlikely to disrupt customers’ lifestyles and can provide significant load reduction. By contrast, turning off the TV during the Super Bowl or shutting down the oven as Sunday dinner cooks will alienate customers and provide minimal load reduction.

Giving customers the ability to “set it and forget it” makes participation in dynamic pricing programs simple and allows utilities to manage large volumes of participants easily. Utilities also benefit from advanced insight into the load capacity that program participants will make available during scheduled events. According to The Brattle Group Inc., automation can result in a nearly 40 percent increase in peak demand reduction compared with customers’ manual electricity use adjustments.

Dynamic pricing also amplifies the importance of customer engagement in demand response programs. Because the infrastructure gives customers the opportunity to save money, dynamic pricing changes the framework of demand response programs by incentivizing customers to increase their engagement with utilities. In doing so, it places an increased importance on the value and frequency of customer interactions.

Always in Demand

Demand response will continue to play a crucial role in moving the U.S. to the smart grid. The success it has had in helping manage complexity is resulting in demand-side management’s becoming integral in the worldwide energy mix.

As emerging economies of India, China and Brazil continue to develop, their energy demands continue to soar. To address growing needs, these countries are investing heavily in their power sectors, primarily in the development of clean, supply-side technologies such as solar, wind and wave. From 2010 to 2011, India’s clean energy investment jumped more than that of any other country.

But in India, the lights keep going out. In July, India suffered a historic blackout that cut power to nearly 600 million people, crippled train systems and sabotaged traffic flow on congested Delhi streets. India’s leaders attributed the blackout to particular states’ drawing too much power from the national grid. In the northern and eastern states, the regional grids could not support the increased demand and gave out under the strain.

The blackout illustrates that the rate at which supply is being boosted is not nearly fast enough to ensure electrical demand is met. Demand-side management programs such as demand response must coincide with supply-side initiatives. It is arguable that there is an even more immediate need for advanced demand response programs than for new supply-side resources. Demand management initiatives are readily available to address peak load and prevent the economic and social impacts of blackouts.

As in the evolving U.S. energy landscape, the demand response industry is ready to meet the needs of India and other energy markets. Comverge is implementing demand response in one such expanding economy: South Africa. Since 2011, the company has managed the complex supply and demand challenges of Eskom, the largest electricity provider in Africa, by helping create and co-manage the continent’s first open market for demand response resources. The program has contributed to enhanced grid reliability across South Africa by balancing supply and demand across a diverse customer base that includes mining, agricultural and commercial and industrial customers and redistributors.

Next time someone talks about the smart grid and the latest technologies that are being introduced, remember proven solutions such as demand response are playing key roles. With the introduction of more advanced programs, expect demand response to continue to play an increasingly larger role in helping address changing and growing energy needs around the world.


Jason Cigarran is vice president of corporate marketing and communications for Comverge. He has nearly 20 years’ marketing and communications experience in the information technology industry.

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