Leveraging Benefits on Demand

by Jay Sparling, Honeywell

Utilities have used demand response programs to reduce load when demand exceeds supply or when electricity costs increase. But these programs have been a last resort. With smart grid, a new era of demand response is emerging.

Utilities must understand what drives the change and how they can optimize smart meters and automation technology. These programs will empower customers with real-time information to make energy decisions. Demand response can become a more dynamic part of the value chain for utilities and independent system operators (ISOs). And customers can change consumption to increase system efficiency and reduce capacity requirements—two primary smart grid goals.

Automated Engagement

Historically, demand response efforts entailed a simple, homogeneous approach, particularly for residential customers. For commercial and industrial customers, demand response primarily relied on an aggregation model where a third party stood between a utility and customers. The customer was contracted to shed a specific amount of capacity, which principally came from backup generation. This made customers responsible for manually adjusting load with little consumption insight. Utilities notified aggregators of peak-demand events, and the notice was passed on to customers via calls or e-mails. The response typically involved switching to on-site, diesel-driven generation or walking through a facility to flip switches and turn off loads. This reduced system peaks, but it had limited effectiveness in curbing overall demand and carbon emissions, and it was not easily repeatable.

With smart grid, a shift from manual to automated demand response is occurring. The grid is evolving with new transmission, distribution and metering equipment. Utilities directly may engage customers more deeply and provide them with real-time insight, which the industry has lacked.

Specifically, the smart grid is giving rise to dynamic pricing structures (e.g., real-time pricing, critical-peak pricing), which more closely link overall demand with electricity delivery cost. As a result, customers want to shift or reduce their electricity use during high energy demand. Dynamic pricing structures could mean a tenfold increase of energy charges or more during peak demand, and U.S. utilities are transitioning commercial and industrial customers to this pricing structure. That’s where automated demand response comes in.

Automated demand response enables facilities to react to price fluctuations by implementing technology and strategies to automatically respond to peak pricing signals. Building owners can have granular control of their response and access additional cost savings. Many building owners recognize they have operational flexibility, which can help them respond to price signals, but building owners have lacked the tools to participate confidently in these programs. For utilities, the approach provides all the traditional benefits of demand response with significantly improved speed and accuracy.

Pricing Peaks

Southern California Edison (SCE) and other California utilities are among the first power providers moving to critical-peak pricing. Honeywell is helping implement a critical-peak pricing response program for nearly 700 commercial and industrial customers within the SCE service territory. The program is funded by a Department of Energy (DOE) Smart Grid Investment Grant. By enrolling in the program, customers will be able to automate their responses to rate changes and curtail energy use to reduce costs. The program aims to reduce utility peak demand by more than 80 MW—equivalent to the generation capacity of almost two gas-fired peaking plants.

Driving the program is a demand response automation server from Akuacom, technology based on the open automated demand response (OpenADR) communication standard. The Akuacom server helps provide a direct connection to the facility by allowing the utility to broadcast pricing signals prior to a peak event. Customers get the technology and support to automate customized load-shedding strategies at low or no cost. Powered by Tridium’s NiagaraAX Framework and JACE controller, the system receives the signal from the demand response automation server and communicates with the facility’s building automation system. The building automation equipment then makes adjustments based on the participant’s pre-set load-shedding parameters. The flexible, scalable system can talk to other technologies and software systems thanks to open standards, providing the necessary interoperability to deliver the smart grid promise.

The technology enhances the reliability of demand response efforts. As a result, automated demand response can deliver up to twice the load shed as traditional demand response efforts. The smart grid also provides a path for utilities to connect directly with this previously hard-to-reach customer segment.

Smarter Homes

For residential customers, demand response programs have involved utilities’ wiring load-control relays into a home’s outdoor air conditioning circuit, which only allows utilities to cycle the unit on and off as necessary during peak times. The device is enough to help a utility meet load curtailment goals, but customers lack insight into when peak demand control events occur and the amount of load they shed, limiting the program’s evoking long-term behavioral changes.

New demand response technologies improve residential customers’ insight, comfort and control. This includes smart thermostats, in-home displays and home energy managers. These technologies can provide real-time meter readings, cost and trending data, load measurement and a two-way connection to utility systems. Customers can monitor their consumption in real time and use automation to manage their comfort and costs. Utilities benefit by increased program enrollment and improved customer engagement.

Demand response thermostats, in particular, are starting to leverage the smart grid to improve efficiency and reliability. By transitioning from a simple switch to thermostats, utilities can establish more user-friendly and attractive programs. This entails going beyond cycling air conditioners on and off. Utilities can employ more sophisticated strategies such as increasing set points a couple of degrees. They also can communicate with customers through built-in text messaging and other features to provide updates on demand response events, energy rates and weather forecasts.

The thermostats also provide day-to-day heating and cooling savings—a benefit large enough to mitigate the need for rebates and other incentives. And thermostats are coming equipped with two-way communication capabilities to leverage advanced metering networks through open protocols such as ZigBee. This allows utilities to provide consumers with practical, detailed information on energy use and ways to become more efficient. The technology can double as an in-home display, giving homeowners an active grid management role.

The next and ongoing step is to tie in other home equipment. Although more than half of residential energy consumption is linked to heating and cooling, according to the DOE, significant opportunity exists to reduce demand from lighting, refrigeration, electronics and other appliances. Being able to automatically control these devices from the thermostat turns it into a more advanced home energy manager. Technology providers also are working to simplify these device interfaces so they are easy to program and give users the ability to balance comfort and savings to their liking.

With two-way communications, utilities also can measure loads and the impact of demand response programs with greater precision and quickly pinpoint outages and other grid problems.

Expanding Knowledge

The emerging smart grid has given rise to new technologies that are furthering the scope and power of demand response programs. Also driving this advancement is something less tangible: a widespread shift in customer mindsets. This includes a growing awareness of stress on the grid, along with concerns over national grid security and the need for a smarter energy infrastructure and self-reliance, which is an important factor to integrated demand response. Changing customer perceptions also include an increased familiarity among commercial, industrial and residential customers of the value of demand response and its services.

Utilities are better in tune and familiar with customer preferences and behavior and can target consumers with the right information so all parties can reap the maximum benefits of demand response. Through the direct linkages enabled by the smart grid, utilities can create and improve customer relationships.

Commercial and industrial customers in particular—organizations with some of the largest loads and most significant curtailment opportunities—tend to be more open to demand response programs. They are more engaged and knowledgeable and see the benefits and value they can bring to utilities and their organizations, as well as the broader societal and economic implications.

Participants today are more knowledgeable about saving energy and participating in utility and ISO programs. They also want to retain control and realize economic value for their efforts, which is increasingly possible based on smart grid capabilities.

For many organizations, working closely with their utility partners also aligns with sustainability initiatives and presents opportunities for environmental stewardship.

Standardized Forces

As with most far-reaching initiatives, the involvement of governing bodies and other outside forces can help speed evolution and acceptance. For demand response, policies and pressure from state and federal agencies are fueling change and creating tighter bonds between utilities and customers. Open standards development is also key to recent demand response and smart grid advancements.

Specifically, state and federal mandates calling for the increased use of renewable technology, including pressure from the Federal Energy Regulatory Commission (FERC), have served as motivation to increase the prevalence of and participation in demand response programs, which can help utilities manage the valleys that come with intermittent resources such as wind and solar radiation.

In addition, smart grid investments including American Recovery and Reinvestment Act (ARRA) grants are helping the industry transition to smarter energy management programs.

Also driving significant change is the growth and permeation of open standards, which spur competition and innovation and lead to more reliable, user-friendly technologies.

Central to the smart grid development is the OpenADR standard published by Lawrence Berkeley National Laboratory. The recently formed OpenADR Alliance, whose members include utilities, vendors and other industry stakeholders, aims to foster the standard’s development, adoption and compliance. OpenADR will lower the cost, improve the reliability and accelerate the speed of automated demand response and smart grid implementations across the globe.

New Reality

Many factors are influencing and directing the smart grid transition, which signals the next phase of demand response as a more integrated capability in the utility distribution network.

Customers have valuable flexibility when it comes to energy usage, and this flexibility can prove useful when they are equipped with the right tools and technologies.

Utilities, in turn, have a significant opportunity to leverage this link, building valuable relationships with customers and enabling them to play a more integrated role in grid operations. It’s not a one-size-fits-all solution, but with active insight and involvement, both sides can reap the rewards of smart grid-enabled demand response programs.


Jay Sparling is a director for Honeywell Building Solutions where he is responsible for global smart grid strategy. Reach him at jay.sparling@honeywell.com

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