Demand response

Demand-response technologies are quickly becoming more sophisticated, and markets are treating demand as a resource. But realizing the true potential of DR requires utilities to apply today’s technology solutions and program structures—and to base their strategies on actual customer behavior and preferences—rather than yesterday’s outdated assumptions about centralized load control.

Demand response isn’t energy: It’s a separate product, traded in a separate market. Policy trends, however, are moving toward equal treatment for demand and supply resources in electricity markets. Does treating DR as energy inflate its value and create perverse incentives?

The IEEE P2030 Work Group is developing standards to encourage seamless deployment, integration and operation of energy, information and communication technologies across the smart grid. Utility input and engagement is needed to produce workable standards.

Regulatory policies are evolving to make demand response and smart-grid planning a reality across the country. Cooperation between federal and state lawmakers will allow local flexibility within a uniform national framework.

Back when the U.S. economy and power consumption still were bubbling, PJM reported in August 2006 that customer curtailments during a week-long August heat wave had generated more than $650 million in market-wide energy savings—all at a mere $5 million cost, as measured in direct payments made to the demand response (DR) providers, set according to wholesale power prices prevailing at the time. Where else but the lottery can you get an instant payoff of 130-1?

In the world of utility bill payments, few issues have generated more controversy than the use of credit, debit and pre-paid cards. Generally, regulated utilities have been unable to build a compelling business case to offer no-fee card payments to customers, preferring instead to partner with third-party processors (TPPs) who happily charge convenience fees to card users.

Advanced metering and other smart technologies will allow more granular monitoring of conservation efforts, making them highly predictable for resource planning and system dispatch. Eventually, the smart grid will erase distinctions between wholesale and retail markets.

State and federal incentives provide the carrot for utilities to invest in grid intelligence. But regulatory and technological incentives are not enough without customer participation. Smart-grid policies will succeed only by focusing on customer needs and benefits.

When the California Energy Commission (CEC) proposed to include programmable communicating thermostats in the state’s new building codes, it expected some push-back from home builders. It didn’t expect what it got: a major public outcry.

Demand response reduces overall energy usage, but the magnitude of the reduction depends on whether the technologies are developed and deployed with efficiency in mind.