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My Summer Adventures in Demand Response

Veronique Bugnion's picture
ClearlyEnergy, Inc.
  • Member since 2018
  • 19 items added with 15,688 views
  • Sep 17, 2013

Demand response pilot program

This summer, I was part of a pilot “real-time” residential demand response program. The program’s success is described in a recent article, but I thought it would be helpful to give it some personal color. Unlike a direct load control program where the utility pays me for the right to cycle my air conditioning during times of peak power demand, this plan “warns” me that a peak time is coming and offers me money for not using as much air conditioning on those days. Before really hot summer days, I get an email warning me that tomorrow will be a “peak savings day”.  If I cut my energy use during this time, I earn $1.25 for every kilowatt-hour I save relative to a benchmark determined by my prior average electricity usage. The warning is repeated right before the start of the event.

The program actually got me excited about saving power, and it’s a game to see how much I earn. In the traditional demand response programs, the utility takes over and cycles the air conditioning in participating households as needed, with every household getting the same $50 or $100 for participating.  By putting the power in the consumer’s hand, the experiment plays on my gaming instinct. Overall, I’m convinced the program works and may well be the future of residential demand response…But I did encounter some pitfalls and many unanswered questions – read on to see what happened:

  • Day 1 – July 10: I earned $10.63 barely doing anything to my thermostat, yeah! In retrospect, this must have been a “test day”. The maximum temperature at Baltimore airport was only 88 degrees, nothing to sweat about in steamy Mid-Atlantic summer heat. I’m left pondering why I earned anything on a day that was after all perfectly normal?
  • Day 2 – July 17: My best day, I earned $21.75. The maximum temperature was 96. Following textbook procedure, I pre-cooled the house in the morning, then set the thermostat to 85 at 2pm and went to the office, leaving husband, child and babysitter to suffer. I gave the babysitter some ice cream money with instructions to go out for a cone if the house got too hot. That worked, but by 3:30pm I received a text from my husband that I shall not reproduce on this site – the whole pre-cooling thing didn’t help much after all. As a side effect of the abnormally high house temperature, my kitchen compost pail started smelling particularly bad, which didn’t help my husband’s mood for the day. Was that really worth $20?
  • Day 3 – July 18: $12.63. Fatigue comes very quickly with this type of program: my husband refuses to go along for another sweltering experiment. I set the thermostat to a much more tolerable level while the outside temperature reaches 97 degrees, but I still made money! This leaves me very confused about how that benchmark is calculated.
  • July 19, it’s still 96 degrees, why no alert?
  • Day 4 – Sept 11: The only day this summer when the grid teetered on the edge of disaster. Unprepared for 95 degrees in September, the grid operator (PJM) was forced to cut power to tens of thousands of customers, some for as long as seven hours. Working from home with my husband travelling and child in school, I decided to subject myself to the 85-degree house experiment. I found the heat quite tolerable, and earned $9.13. It turns out  my benchmark has changed! The program no longer assumes that I use 24kwh/day, but only 22kwh – I feel cheated of the free latte those extra savings would have earned me. Is it because I was on vacation prior to the event? Or because the benchmark is based on the season? Either way, it feels unfair given that I did my part to avoid a blackout

Total for the season: $54.14 minus the ice cream money. Granted, it was a pretty mild summer – so maybe that’s all I deserve…but the $100 payment for direct load control seems like a better deal.

Photo Credit: Demand Response/shutterstock

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Jesse Jenkins's picture
Jesse Jenkins on Sep 17, 2013

This is really interesting Veronique! Thanks for taking us inside your first-hand experience with a Demand Response program. Cheers,


John Miller's picture
John Miller on Sep 17, 2013

Veronique, as you are aware, Residential demand response will be an important part of balancing future power grids as fossil fuels intermediate and peaking power capacity is retired.  Your chosen process of cooling the house at night and/or during the early, non-peaking power periods of the day is a classic approach to minimizing AC power consumption during the heat (or peaking power period) of the day.  One way to improve your situation is to obviously better insulate and seal the house.  However, with annual power savings of $100 per year or less justifying the potentially multi-thousand dollar expense of insulation, duel-pane windows, door seals, heavy duty window coverings, etc. will be a financial challenge for average Residents.  Another possible option would be to install solar PV in combination to your tested demand response process.  Each Homeowner will have to work numbers to see which option(s) best position them to afford and benefit from possible upgrades.

Your Utility Company’s resetting your power consumption basis for demand response compensation is going to be problematic.  The apparent diminishing returns for consumers may doom the program in the longer term.

Bob Meinetz's picture
Bob Meinetz on Sep 17, 2013

Very interesting Veronique, thanks for sharing.

It appears that PJM’s power cuts in September could have been avoided by scheduling the maintenance of four nuclear reactors for later in the year.

Veronique Bugnion's picture
Veronique Bugnion on Sep 17, 2013

yes, it seems like they put their maintenance calendar a bit too close to summertime!

Veronique Bugnion's picture
Veronique Bugnion on Sep 17, 2013

Hi John! Thanks for your comment, these are all good points.

The program is actually managed by OPower, and my main question after this summer is indeed how they calculate the “benchmark” the program is based off of, but your point that if it indeed is recalculted periodically, it penalizes good behavior is a very good one.

John NIchols's picture
John NIchols on Sep 20, 2013

The way the demand response program operates is as follows:  The utility “packages” the expected  demand response and sells it the grid operator.  All consumers, not just those who participate in the demand response program, have the sale (cost) of the demand response added to their monthly capacity charge, but the “rebate”, for the reduction in consumption, is paid to only the participants in the demand response program.  In my former life, using the investor’s own money to pay a promised return was called a Ponzi Scheme.

The arguement is,” it is cheaper to pay people to not consume electricity, than it is to build new generation”.  This is true, but the payment is the ratepayer’s money and no new capacity is added.  Which means there won’t be any supply to support any hoped for economic recovery. 

The real reason the demand response exists is to hide the intermittancy of wind and solar, and thus delay intermittent electric supply for a longer period of time.  

Nathaniel Pearre's picture
Nathaniel Pearre on Sep 20, 2013

Which means there won’t be any supply to support any hoped for economic recovery.”

But if, as you say, it’s true that it’s cheaper to pay people to shed load than it is to build new capacity (or buy peak power from neighboring jourisdictions), then DR actually fuels that recovery, by minimizing systemwide costs.

And to your ‘Ponzi Scheme’: If a new plant were built, everyone’s rates would go up (just like they do for DR, but more so), and some people would profit, specifically the operators of the new generation and the banks that loaned them money.  If DR is implemented, rates go up, and some people profit, specifically, those who value that little bit of money more than those extra 2F of cooling (or whatever).  DR simply means that you don’t have to be a massively invested, capital intensive company to contribute to, and benefit financially from, insuring grid capacity.

Bob Meinetz's picture
Bob Meinetz on Sep 21, 2013

John, utilities don’t sell “demand response”, whatever that is. They sell energy, and it’s up to the grid operator to decide, with some ground rules provided by FERC and state legislation, whether to buy it or not.

Also, in CA (and in most states) utilities are prohibited by law from marking up their rates over 10% of cost. That makes for a pretty limited Ponzi scheme. One of the more socialist – and successful – industries in American business, utilities have over the last century created a model for the world.

John NIchols's picture
John NIchols on Sep 21, 2013
  • Bob, generators sell energy. Some utilites have generation capacity, some do not. Utilities can, and do, sell the reduction in anticipated demand by their customer base during peak demand hours. See Delmarva Power for their program. Which, by the way, is a regulated utility that has no  generation capacity  After deregulation, company sold all of its generation capacity.  Demand response enables utilities to anticipate the reduction in demand. I should have made this more clear. The reduction is packaged and sold. The cost is added to the ratepayer’s capacity charge, in much the same way a capacity charge is used to pay for real available generation capacity.  I wish it were otherwise, but my description is accurate.

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