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Drive DSM By Blurring the Lines Between DR and Energy Efficiency

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Jessie Mehrhoff's picture
Energy Analyst Guidehouse Insights

Jessie Mehrhoff is a research analyst contributing to Guidehouse Insights’s DER Solutions service. Mehrhoff’s work focuses on demand response, utility customer value-added solutions, and DER...

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  • Aug 23, 2019

This item is part of the Special Issue - 2019-09 - Distributed Energy Resources, click here for more

Demand side management (DSM) programs are getting creative to expand their reach and drive deeper savings. Jurisdictions are also using DSM, responding to the threat of climate change by demonstrating leadership to transform their energy consumption. As part of this transformation, new technologies must be creatively incorporated and simultaneously transform conventional notions of energy efficiency and demand response (DR).

New York City’s climate action plan notes that DSM will be a critical component to achieving the city’s goals. A recent pilot between Southern California Edison and seven California public universities indicates that municipalities aren’t alone in undertaking flexible energy management strategies to achieve sustainability targets.

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Will DER Enable DR and Energy Efficiency to Become One and the Same?

The inclusion of a variety of distributed energy resources (DER) in utility DSM programs will be key to flexible energy management over the next decade. Integrated DSM (IDSM) is the merging of energy efficiency and DR applications in a manner that reduces operational costs for program providers and simplifies program enrollment for participating customers. However, notions of IDSM must shift to an understanding of integrated DER (IDER) and the inclusion of a wide variety of DER in technology-agnostic programs. By including distributed generation, storage, combined heat and power, and EVs into DSM programs, grid operators will deepen energy savings and customer engagement.

Numerous devices in residential homes and commercial buildings are poised to launch the next generation of IDER programs. Merging conventional notions of energy efficiency and DR, Navigant Research finds that:

  • Smart water heaters, once connected to the grid, will provide a higher value proposition for DR and energy efficiency programs. Smart water heaters help shift energy consumption to heat water during off-peak hours and shutdown during demand peaks. Con Edison and Aquanta are piloting smart water heater applications for natural gas DR but alerting customers to the efficiency benefits, such as notifications of high energy usage or potential leakage alerts. 
  • Learning smart thermostats will not only remain key components of many bring your own device (BYOD) DR programs but will also play a greater role in efficiency programs. Wi-Fi-enabled thermostats allow customers to adjust their setpoints while they are out of the home or building. Critical for deeper efficiency savings, Efficiency Vermont stresses, is the ability of some smart thermostats to learn usage and occupancy patterns, automating energy savings without the need for grid or price signals.
  • EVs will provide a platform for load shifting through managed charging programs. These programs allow customers to set charge time preferences and give grid operators access to charge the vehicles within that window as a form of load-shifting DR. Such programs work on the premise that many residentially owned EVs are plugged into a charger all night, but do not need the entire time to receive a full charge. Vehicles then charge when energy demand and prices are at their lowest within the designated window. Beyond managed charging, energy-efficient EV chargers are being piloted in California, Colorado, and Texas in vehicle-to-grid programs that would drive further grid services by allowing EV batteries to be discharged to supply the grid with power during times of need.

DSM Market to Double in the Coming Decade

By the end of 2019, Navigant Research expects combined global spending on energy efficiency and DR will exceed $31.5 billion; a number that will nearly double by the end of 2028.

Chart.     DSM Spending and Capacity Data by Technology, World Markets: 2019-2028

(Source: Navigant Research)

The abovementioned technologies plus solar PV, energy storage, and heat pump technology will increase in penetration. Accompanying this proliferation will be continued rollouts of advanced metering infrastructure and grid-edge computing to facilitate both the breadth and depth of demand side flexibility. As grid modernization efforts continue, grid operators, technology vendors, and program providers will be able to open new revenue streams by operating in a customer-centric fashion. Customers want clean, distributed energy; behind-the-meter technologies are a necessary part of making a just energy transformation happen.

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Matt Chester's picture
Matt Chester on Aug 23, 2019

As grid modernization efforts continue, grid operators, technology vendors, and program providers will be able to open new revenue streams by operating in a customer-centric fashion

Couldn't agree more-- it really seems like one of the main end results of the digital revolution and distribution of energy resources will be that customers will become more of a partner than simply an 'end user' for energy. 

Jessie-- do you see any obvious road blocks in the way that will impede progress towards this new paradigm?

Jessie Mehrhoff's picture
Jessie Mehrhoff on Aug 26, 2019

Thanks for your question, Matt. 

Some of the major barriers to the "prosumer" model referenced by interviewees along the supply chain are:

  • cybersecurity and data privacy threats-- as more DER are integrated, more expense will need to be taken to ensure safe data handling
  • small scale of new utility programs-- lots of these technologies will need to pass proof-of-concept and pilot phases, delaying mass adoption
  • challenge of sale into energy markets- despite stringent capacity performance requirements in PJM challenging DR capacity or limited ability to sell efficiency capacity, revenue stream generation and cost-effectiveness will still need to be proven. 

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