(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
Active Demand Management
A system approach to managing demand.
future energy requirements.
Demand management is garnering attention throughout the electric power industry as a significant mechanism to offset some of this growth by reducing peak demand and allowing the industry’s current generation capacity to supply more of customers’ required power. If the average consumer were to adopt the practices associated with demand management and all it entails, peak demand can be reduced significantly, allowing current production capabilities to cover more of the estimated future demand. Smart grid tests conducted in the Pacific Northwest have shown that demand management can reduce the need to build new power generation facilities by reducing peak consumption by up to 15 percent. The Olympic Peninsula pilot project demonstrated that beyond peak demand, even base demand can be reduced significantly (up to 9 percent), which could allow utilities to avoid or delay investments in transmission and distribution.
A simple way to describe the impact of demand management is to say the least costly carbon kilowatt is the one that’s never used.
While certain concepts inherent to demand management might seem abstract to the general public, the current energy environment quickly will require a population-wide education on the limitations and future requirements of energy resources and generation and distribution of energy. Establishing the definition and purpose of demand management is the first step in educating the public. The consumer needs to know that it’s a process by which electricity providers, distributors, transmitters, and customers—residential, commercial, and industrial—manage their electricity needs, particularly at times of peak usage or in response to market costs, thereby limiting, growing, or eliminating demand for short periods of time. This process of controlling the amount of electricity used at crucial times has significant benefits. If usage decreases during intervals of peak demand, overall plant and capital cost is reduced, decreasing the cost of electricity for most people. Reducing peak demand also minimizes the likelihood of brownouts, blackouts, and voltage fluctuations.
Electricity’s high cost is driven mostly by the cost of electricity incurred during times of peak demand, when energy providers are forced to produce energy from generators which are only used for short periods of time and generally tend to be inefficient. As increasing amounts of electricity are required, the cost of production is greater. When the cost increases for the producer, the price paid by consumers also increases. Aside from lowering the cost at these times, limiting peak usage also allows the grid to more easily recover from any fluctuations.
When demand management is utilized to its fullest extent, significant progress can be made in improving the reliability and security of the large interconnected power systems that comprise power grids across the world. In addition, during times of peak demand, a great deal of stress is placed on electric infrastructure as a whole. When this happens, using normal mechanisms of demand management that focus on reduction in peak demand still won’t reduce stress in the network. Targeted demand management actually holds promise to reduce or delay the need for infrastructure and feeder system capacity expansion. Eventual impacts of demand management will