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Demand response ...but in a proactive fashion

image credit: Rafael Herzberg
Rafael Herzberg's picture
Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • May 19, 2022
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Demand response ...but in a proactive fashion

DR programs are based on the assumption that when the electrical system is reaching a high demand there is a call to reduce it. Energy users who go for it get a hefty financial compensation.

I take this initiative to propose an enhanced version of the DR programs. It is based on the same concept (demand reduction) but in an synergistic fashion with respect to the ongoing DR programs.

Let me call it DRP. Demand Response but Proactive!

Industrial, commercial and institutional energy users must contract demand before their local utility companies. This happens in two ways around the globe. The fixed contracted demand and the ratchet.

When it is a fixed demand the local utility charges the maximum between recorded demand and contracted demand. If the recorded demand is higher than the contracted demand there is a penalty. If it is below, the end user pays an "idle" demand.

When a ratchet is in place, the local utility charges the maximum between the recorded demand of that month or the maximum recorded demand of the past "x" months (usually 12) times an established factor (usually in the range of 50% to 85%).

In both cases it is a very stiff condition. Especially so considering that changes are the name of the game for these energy users. Their demand varies with the intensity of their activities, with the technologies that are incorporated in their facilities, energy conversion processes and most importantly with the changes in what they do!

Bottom line: recorded demand is always changing.

How to go for a better billing structure?  Better for the local utility company AND for the end users?

My proposal is a Demand Exchange (DEX). An internet based service to be sponsored by the local utility company, that will allow/stimulate end users to exchange their demand differences.

The end result is: the local utility company will increase its load factor as there will be a reduction in idle demands because they will be transferred to other energy users who are willing to increase their contracted demands. In real life it is a zero sum game!

This flexibility will end up reducing clients demand charges and the local utility to sell more energy with the existing infrastructure. Simply put because what was an idle demand becomes an active one.

If you are interested to learn more about this concept, watch this video!

The take away of this article is: the DRP might become a very powerful tool for every other local utility company that has a strong base of industrial, commercial and institutional energy users.

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