The Power of Permission: Accelerating Demand Response Programs
- Oct 3, 2016 2:30 pm GMT
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Residential demand response (DR) programs perform a vital role in maintaining grid stability and helping both customers and utilities avoid high peak demand prices. With the emergence of connected thermostats, such as the Nest Learning Thermostat, utilities now have a new tool in their demand-side management (DSM) toolbox. According to Navigant Research, the communicating and smart thermostat market is expected to quadruple over the next 10 years. This represents a unique opportunity for utilities to recruit and engage with the millions of customers adding connected thermostats to their homes.
Bring You Own Thermostat (BYOT) DR programs provide an opportunity for utilities interested in engaging their customers in new demand response programs. By removing the barriers that can make DR programs potentially confusing or inconvenient for customers, and making the “opt in” action as simple as possible, electric utilities can now boost participation rates and maximize demand reductions. That’s the power of permission.
BYOT programs that capitalize on the power of permission and leverage the ongoing market growth, change the conversation with customers. Enrollment messaging no longer needs to use confusing terms like “Demand Response” and “Peak Load Curtailment.” Instead, utilities now simply invite customers to learn more about their programs and the important role customers can play in helping to keep the grid operating smoothly.
This new approach seizes on customers’ “pre-interest” in devices that they’ve already welcomed into their homes, such as connected thermostats, smart plugs and other energy saving devices. Tapping into these devices not only removes the obstacle of new equipment installation, but it also eliminates the cost of “rolling trucks” to install static DR devices. By capitalizing on this power of permission, utilities can rapidly expand their DR programs, while reducing operational and enrollment costs.
With devices installed, the next step is convincing customers to participate. This includes financial incentives; ease of enrollment (can customers sign up with a click, or do they need to fill out a long form?); comfort level (will reduced energy use noticeably change customers’ lives?); and effort (will DR actions require changing device settings, or will they happen automatically?). The simpler and easier it is to opt in, the higher the participation rate; the smaller the impact on participants’ day-to-day lives, the higher the retention rate.
Launched in 2013, Nest’s Rush Hour Rewards demand response service is partnering with electric utilities across the U.S and Canada both to raise awareness among homeowners on how they can benefit from participating in DR, and to make 'opting in' simpler. From this bottom-up approach, large numbers of customers are realizing that they can receive a financial incentive from their utility for participating in DR without sacrificing comfort or control during DR events.
Residential DR programs with high participation rates can quickly add up to significant energy savings that can have a profound positive impact on a utility’s operations. Through a reduction of electricity demand from aggregating residential cooling systems connected to thermostats such as Nest, utilities are able to provide the grid a “virtual power plant.” With that level of DR program participation, utilities are able to manage grid load swiftly and seamlessly, and even avoid tapping into peaking generation resources.
Today, the value of the virtual power plant is most apparent in Southern California. The natural gas leak at Aliso Canyon reduced the available supply of fuel for a number of power plants that are needed in the Los Angeles basin on the hottest days of the year. As a result, Southern California Edison and SoCal Gas have turned to customer-oriented DR, among other strategies, to help reduce demand and mitigate the fuel shortage.
SCE and SoCal Gas are working with Nest to tap into connected thermostats for cost-effective demand management. Through a focused marketing campaign, SCE and Nest hope to achieve 50,000 enrollments in DR programs by the end of next year. The program is starting out with the advantage of tens of thousands of potential participants that can be targeted—customers with Nest Learning Thermostats already in their homes—which frees utilities to focus on raising awareness and removing obstacles to participation.
In addition to SCE and SoCal Gas, Nest has partnered with the following companies to provide DR solutions: Austin Energy, ComEd, ConEd, CoServ Electric, CPS Energy, Direct Energy, East Kentucky Power Cooperative, Georgia Power, KCP&L, Indianapolis Power and Light, Orange and Rockland Utilities, National Grid, Portland General Electric, PG&E, United Electric Cooperative, and Vectren Energy.
Millions of connected thermostats installed in homes are all components of a virtual power plant. Unlocking this potential with the power of permission can help deliver more successful, cost-effective DR programs.