Changes in regulatory requirements, market structures, and operational technologies have introduced complexities that traditional ratemaking approaches can’t address. Poorly designed rates lead to...
Demand Response: The Green Effect
How demand response programs contribute to energy efficiency and environmental quality.
air conditioning but doesn’t fully re-cool afterwards.
An analysis of two commercial-sector programs in California revealed that less than one-fourth of participants reported compensating for DR with higher usage either before or after the DR event (5 percent and 17 percent of all participants respectively). 4
We believe that the most significant and positive relationship between DR and energy consumption is that DR increases energy awareness and provides feedback for consumers on their usage behavior. There is an extensive body of experience with utility programs that influence behavior by providing feedback; EPRI Solutions’ March 2006 meta-review sums it up well:
Numerous studies have demonstrated that customers do indeed respond to feedback on their energy use. … A review of literature from the past three decades … found savings ranging from 1 to 20 percent when customers were given real-time feedback. Most of the studies, however, found savings in the 4 to 15 percent range. … Direct feedback is what makes the link between cause and effect obvious for electric consumers. 5
In fact, the more direct the feedback is (that is, provided in real time) and the more it is offered with the provision of other influences (such as energy-saving information or dynamic prices), 6 the better it influences behavior.
The conservation effect of awareness and feedback of DR is part economics and part psychology: Consumers who are made better aware of energy use, its price tag and environmental costs tend to use it more carefully and frugally. One now-familiar example is found outside the power sector, namely the panel display in the Prius hybrid car that prompts more fuel-efficient driving for many drivers by graphically showing the rate gasoline is consumed. All of this also speaks to the oft-heard question “How can you manage what you can’t measure?”
Energy Efficiency and DR
Many DR technologies and practices also work well for energy efficiency, even when doing so is unintentional. Aggregators and other third-party providers of DR often start by conducting audits of facilities to determine DR opportunities and the audits—like Columbus searching for an Atlantic route to India—likely will find some efficiency benefits and opportunities to seize upon.
Also, it is important to recognize that two of the technologies that have played a prominent role in energy efficiency for decades are lighting and energy management systems (EMS). In the case of lighting, remote controlled dimmable ballasts allow it to be part of a DR program, and DR companies have built business models on this. In the case of EMS systems, these systems are intended to optimize the efficient ongoing operation of a building. They are thus a platform, not only for efficiency, but for DR as well. Each is a good example of a technology serving both business areas and, as should be the case, providing maximum benefits to the customer. 7
Compelling evidence of this synergy is found in the Automated Demand Response System (ADRS) pilot program in California homes during the summers of 2004 and 2005. 8 ADRS homes had very significant cuts in consumption compared with the control