(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.
and thereby prevents or reduces the effects of power outages.
Several different forms of demand management can be utilized when implementing the demand management solution (see Figure 2) . Employing proactive instead of reactive demand management is one of them. With reactive demand management, TOU rates typically vary by rate period, day of the week, and season, with higher prices applied during peak rate periods and lower prices applied during off-peak rate periods, but without regard to real-time conditions. Even FERC has not included them in its June 2009 report, Assessment of Demand Response and Advanced Metering. Analyses performed by FERC-supported studies have found that static mechanisms don’t provide a dynamic price signal to customers that can be used to respond to unexpectedly high-priced days or reliability events. While this still has the potential to reduce overall usage at peak levels, they provide minimum support to a utility needing to reduce generation capacity or improve reliability.
In contrast, when proactive demand management is used, the customer is expected to perform specific actions based on the demand management mechanism to which they subscribe. The biggest benefit of proactive demand management is that specific actions deliver specific responses, resulting in a quantifiable reduction of load. One of the more advanced demand management modes involves real-time pricing.
For dynamic pricing and real-time mechanisms to work, customers need to be equipped with devices that automatically reduce consumption during high priced hours. For residential and small and medium commercial and industrial customers, the automated technology (known as a programmable communicating thermostat) adjusts air conditioning energy use where such devices are determined to be cost-effective. Large commercial and industrial customers are assumed to be equipped with automated demand response systems, which coordinate reductions at multiple end uses within the facility.
Standardizing Demand Management
Implementation of demand management isn’t without its costs and challenges. The key challenges include technological hurdles, consumer acceptance, regulatory reforms, and utility employee education. The first and most visible difficulty is the cost of the technology development required to allow customers to view and then modify their electricity usage. Much of the technology is still in the development stage and is expensive. The initial investment will be extremely hard for many consumers to accept, particularly when citizens are concerned about how the government will pay for an undertaking that would involve the electric infrastructure of the entire United States.
Another problem will be convincing individual electric customers to take the time to monitor their consumption, determining when to cut their demand and scheduling tasks that require high amounts of energy for times of the day with lower demand. To many this will be considered a major inconvenience. Also, many people will believe, however unlikely it might be, that installing equipment that monitors electricity usage will allow government to monitor their individual usage, eventually leading to the government’s ability to control when and how people use and control electricity within their own homes.
The Olympic-Peninsula project found that essential to getting customer acceptance is that customers have automated demand response equipment so they can set it