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How To Demand Demand Response

James McPhail's picture
Chief Executive Officer Zen Ecosystems

James is a strategic and visionary Executive and Sales Leader with significant experience in strategy and management within the energy industry. James is focused on building the business and...

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  • May 14, 2018 5:30 pm GMT

The energy seesaw of supply and demand is a wild ride for both utilities and businesses, as utilities constantly balance customer needs with production capabilities. When an incident or condition disrupts that balance and leaves a forecasted supply deficit, electric grid operators have historically had only two tough options -- bring online additional, often costly generation capacity, or neglect to meet demand by instituting blackouts. Demand response represents a third alternative grounded in a more cooperative mentality: providing incentives to customers to cut their demand or to bring on additional grid capacity when the demand for electricity exceeds its existing supply. Demand response frees up or adds to the electrical capacity so that it can continue meeting the needs of other users.

The concept itself is not so complex, but until recently, demand response has had a bit of a PR problem. The term demand response (DR) is still not commonly understood by many residential and commercial customers who can benefit from the energy and cost savings it provides. All users of the electricity grid stand to gain from DR, especially with the rising frequency and duration of costly widespread power outages.

Fortunately, collaborations between utility offerings and intuitive smart energy management devices are demystifying demand response, making the savings benefits easier to understand and tap into for us all.

Demand Response Is Trending

User-friendly, simple devices give facility professionals and homeowners the ability to manage energy use in a smarter way by executing "set it and forget it" participation parameters. According to the 2017 Utility Demand Response Market Snapshot (registration required) from the Smart Electric Power Alliance (SEPA) and Navigant, nearly one million customers have enrolled in smart thermostat programs offered by utilities for easier demand response integration. Beyond those of us in the energy world, this energy management trend is important for its cost- and energy-savings potential and the emissions reduction benefits.

Energy technology is also fueling adoption and new avenues for use. Demand response is on the rise as utilities integrate more distributed energy resources into the grid. SEPA finds almost 30% of utilities are already using demand response programs, and 70% are planning or considering applications. Programs are now deploying energy storage -- an increasingly affordable option for end users for demand response which uses participation to buffer the grid from renewable generation variability.

Our digital habits are helping shift demand response to a user-controlled benefit, rather than a backup resource only triggered during emergencies. Residential and business utility customers can opt-in to participate through communication channels we use in our daily lives: 40% of SEPA utility respondents use email to engage with customers, 27% use text messages and 12% utilize social media. The shift to intuitive communication has made demand response programs easier for everyone to understand.

Complex Name, Simple Benefits

The benefits can add up quickly for companies that use energy management devices to join automated demand response (ADR) programs designed for commercial end customers. Utilities typically offer participation payments, ranging from an average of $125 to $400 per kW of reduction capability. These incentives build on baseline savings of advanced building energy management systems, which can save anywhere from 13-66% on energy. As smart technologies advance, return on investment occurs within an average timeframe of two to four years but can happen as quickly as one year with very little oversight and maintenance from staff.

In addition to direct savings, customers are increasingly interested in supporting businesses and making purchases that align with values like sustainability. Demand response participation can replace emissions-heavy power plant supply, much like solar panels or another renewable energy resource. Implementing ADR programs and sharing the action can help make a business more appealing to conscious consumers, producing bottom-line benefits beyond energy savings, such as an overall reduction in their carbon footprint.

How To Make ADR Happen For Your Company

If you're considering an ADR program, here are a few important questions to guide implementation.

What ADR incentives do utilities in my company's service area(s) offer? As mentioned, many utilities and smart energy management companies provide equipment discounts, energy rate reductions or other participation incentives. Up to 100% of your hardware and software costs for new or upgraded equipment could be covered, depending on the available program. Additionally, ongoing incentives for participation can produce a stream of bill credits or cash that make the ROI on that energy efficiency project you may be considering extremely attractive.

Which pieces of equipment in my facility would be eligible for ADR programs? Any piece of equipment capable of receiving curtailment signals is eligible, from energy management systems and software to wired and wireless controls for lighting, thermostats, motors, pumps and more. Heating, ventilation and air conditioning (HVAC) equipment like unitary air conditioners, variable refrigerant flow systems and chiller systems also typically qualify. Check to make sure that the company from which you are sourcing is a qualified provider that is OpenADR certified.

How will demand response affect my facility performance? ADR events are often triggered by extreme outdoor temperatures that cause energy-intensive HVAC systems to work overtime. With ADR, your enrolled equipment will automatically reduce its power draw when notified to do so by the utility. In the case of qualified thermostats, for example, this results in a change to the temperature set point of your facility by a few degrees. Options like pre-cooling your facility below your regular temperature set point help to ease discomfort during load reduction. ADR programs are designed to be flexible, so your company maintains control over its implementation. For example, many allow participants to opt out of an individual demand response event and continue normal operations.

While demand response may have once been an industry-exclusive term with a select audience, the demand for programs is clear and it's not going anywhere. According to Navigant, building energy management system revenue is expected to reach $10.8 billion by 2024. That's one trend you won't want to miss joining.

This piece was originally published on Forbes

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