FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
Demand Response: The Green Effect
How demand response programs contribute to energy efficiency and environmental quality.
DR and Improving Energy Efficiency
Our 2005 Fortnightly article reviewed results from more than 100 DR programs around the country for more than a quarter century and found that these programs have a “conservation effect,” cutting energy consumption from more than 20 percent to minus 5 percent (an increase in use).
The new evidence from around the United States and abroad that has become available in the two years since that review further increases confidence in the conclusion that DR reduces total electricity consumption, principally (but not exclusively) during peak periods, but consistently, and has the potential to be a major indirect factor in increasing overall energy efficiency nationally. The new results are included in Table 1.
Important new findings on DR’s conservation effect come from a day-ahead hourly pricing pilot run by the Community Energy Cooperative in Chicago. The 1,400 households who have been in the Energy-Smart Pricing Program (ESPP) pilot for three years “are not just shifting their time of use, they’re using less electricity … a reduction in [kWh] usage of 3 to 4 percent, relative to what their usage was estimated to be had they not received hourly electricity prices” 3 [emphasis added]. Furthermore, lower-income participants were “as demand responsive” as higher-income participants, and participants are buying certified efficient EnergyStar appliances as replacements more often than are the control group. And it should be noted that these reductions occurred in a program that did not have energy conservation as a major design goal (as is all-too-common in DR efforts). Following this pilot, the Illinois legislature and Commerce Commission ordered that statewide real-time tariffs be available to Illinois customers—utilities’ proposals have been approved and took effect Jan. 2, 2007.
How Does DR Reduce Electricity Consumption?
Several aspects of DR reduce consumers’ overall energy usage, the magnitude of which depends not only on the DR technologies and practices used, but whether they are developed and deployed with efficiency in mind. Education and support to the customer, important in energy-efficiency programs, also are important to DR programs.
One of the most common DR applications (particularly in commercial buildings and particularly for short periods) is the dimming of lights or switching off of certain fixtures. Lighting-based DR does not shift load, it eliminates the load without a rebound because post-event, the area won’t be “overlit” to compensate for the earlier “under” lighting. (Additionally, the reduced lighting may lead to a reduction in air conditioning during peaks.)
Another source of DR-driven load cuts that don’t rebound are those that take place at the end of the work day, which often is the case as summer peaks can commence in the late afternoon. If reduced air conditioning is used for DR late in the work day of an office building, by the time the event or price signal is over, the workers may have left and the air conditioning will move to the (warmer) evening-hours setting. Finally, a familiar source of non-rebounding shifts are those in which the consumer chooses to not (or forgets to) rebound, such as the homeowner who reduces