Transforming Buildings into Prosumers with the Smart Grid

The Smart Grid will trigger many transformations.  Chief among them is the change in the relationship that consumers have with electricity.  We can transform from consumption roles to prosumption roles – producing electricity as well as consuming it.  One of the most prominent enablers for us to engage as prosumers are the buildings we inhabit as work and home spaces.  Buildings as prosumers will have profound impacts on the Smart Grid value chain.  It is also a harbinger of another transformation – the shift of “power”, so to speak, from being concentrated in the hands of utilities as the sole owners/distributors of electricity, to prosumers on a vastly distributed and decentralized basis.

Buildings use 40% of the nation’s energy.   From an energy efficiency perspective alone, the National Academy of Sciences noted in a study that the “full deployment of cost-effective energy efficiency technologies in buildings alone could eliminate the need to construct any new electricity-generating plants in the United States” until 2030.

But a building functioning as an electricity prosumer goes beyond energy efficiency programs and investments.  Energy efficiency is a passive tactic that delivers firm negawatts* through reduced electricity use on a consistent and reliable basis.  Automated Demand Response (ADR) is an active tactic that enables buildings (commercial, industrial, and residential) to produce negawatts on an as-needed basis and receive ongoing payments for it.

The most common manifestations of DR programs are voluntary reductions in energy use within buildings, often accomplished by modulating interior lighting, or HVAC temperatures.  But the advent of more embedded intelligence in the forms of sensors and actuators with remote communications can create more opportunities for participation from greater numbers of buildings.  The OpenADR initiative is focused on standardizing, automating, and simplifying Demand Response programs and technologies.   It’s the most comprehensive and widely used IP-based communications standard for electricity providers and system operators to exchange DR signals with buildings and equipment within buildings.

For building owners and managers, participation delivers payments for reductions in electricity use or lower rates throughout the year – nice impacts to their operating costs.  Another benefit currently in pilot is to offer LEED credits for participation in ADR, which means that buildings will receive sustainability recognition too.

That’s not to say that there aren’t challenges to OpenADR adoption.  And these challenges map the same three drivers that consistently frame the pace of Smart Grid deployment.  Those drivers are technology, policy, and finance.  For instance, regulatory policy is extremely balkanized across the states.  While 50 states may be a great laboratory for democracy, it’s not so great to develop national cost justifications of OpenADR investments.  It is difficult for vendors to quantify the benefits of ADR to a property management firm that operates in 20 different states, with 20 different regulatory directions, multiple tariffs, and various building codes.  Technologies are still lacking in multi-tenant solutions for both commercial and residential buildings.  And green leases, one interesting financial innovation that can accelerate Open ADR adoption rates, are still at the early stages of gaining industry acceptance.

Despite these challenges, OpenADR has good momentum in some utility territories in the USA, and there are interesting information exchanges occurring between Lawrence Berkeley National Lab resources and research counterparts at labs in the Netherlands that I wrote about here and here.

This topic will be discussed in greater depth at the upcoming IBcon event in Orlando, Florida on June 12.  I’m one of the panelists in the session titled Smart Grid and ADR – How Far Have We Come?  Join me there to hear about the intersections of innovations in technology, finance, and policy that are transforming buildings in the Smart Grid.

* Defined in the Smart Grid Dictionary as Watts of electricity saved through a reduction in electricity use or increase in energy efficiency.  It is the greenest form of energy.