Demand Response Is Here to Stay

Technology has finally begun to catch up to the concepts that predate the term “smart grid.” Case in point is demand response (DR). This technology began its life decades ago as a possible solution to rolling blackouts.

Grid congestion is not a newfangled notion. For years, utilities have been giving large customers lower rates in return for the utility being able to interrupt the customers' service. It is how sanctioned load shedding began.

As monitoring and communications technology improved, someone had the idea of combining real-time circuit information with shedding specific loads. This kept the circuit within critical parameters and that is how DR came to be. The next thing the industry knew, regulators were getting into the act with real-time pricing to take advantage of the monitoring technology. Why not control the customer's consumption by turning off and on individual pieces of equipment? Now that is really a dynamic response to demand.

Technology does not improve one area at a time, it covers the spectrum. While DR technology moved ahead so did improvements in motors, compressors, insulation and even the lowly light bulb. This gave way to more customer-related smart grid paraphernalia known as energy efficiency.

What was science fiction five years ago is now on the display floor at today's conferences — but not without cost. This has generated tremendous pressure on manufacturers to continue improving the technology, on utilities to implement the new technologies and on 43? to provide regulations that take advantage of the technological breakthroughs.

So, are DR and energy efficiency the latest smart grid buzzwords, or could they be more than that? Many electric utility customers take ENERGY STAR ratings seriously, but according to the Federal Energy Regulatory Commission (FERC), retail rates for most customers are fixed while wholesale prices fluctuate. That makes it hard to convince the customer that DR and energy efficiency are not buzz.

Many business-as-usual regulators and utilities are still locked into the old analysis-paralysis mode when they could be moving forward. FERC estimates the small percentage of customers who are on tariff rates based on marginal production costs are allocating resources more efficiently in those areas.

Something Has to Give

Unfortunately, rising peak demand is straining an already stressed electric system, which is threatening the reliability of the grid. The Edison Electric Institute (EEI) released its report “Transforming America's Power Industry: The Investment Challenge 2010-2030,” which stated that U.S. utilities would need to invest approximately $1.5 trillion to $2 trillion in the infrastructure to upgrade and add new facilities in the next 20 years.

The European Commission's “Energy Infrastructure: Priorities for 2020 and Beyond” report stated that around 1 trillion euros must be invested between now and 2020 to meet energy policy objectives and climate goals.

A Billion Here, a Trillion There

These figures are so enormous it is hard to grasp them. The EEI report projects the need for 214 GW of new generation capacity, too. The estimated cost of that is $697 billion. And do not forget about the transmission system infrastructure improvements; they are too ambiguous. The 214 GW of generation EEI said was required is more easily defined. It is the equivalent of bringing 22,500-MW base-load coal power plants on-line every year for the next 20 years.

Since there are no national power plant construction programs underway, it is safe to say the electric utility industry has a problem. There is no way the industry is going to build itself out from under this problem, and it only gets worse when factoring in the transmission system improvements needed globally.

Experts are saying investments of trillions of dollars and euros are needed in the next two decades to keep the lights on. Assuming someone could convince the stakeholders to do this quickly, the industry still would not be able to meet this timeine based on the enormity of the task. It is critical for the industry to take advantage of all the tools in the toolbox.

Technology's Potential Impact

In 2009, the Electric Power Research Institute (EPRI) published a technical report titled “Assessment of Achievable Potential for Energy Efficiency and Demand Response Programs in the U.S.: 2010-2030.” The EPRI report estimates a combination of energy-efficiency and DR programs could reduce the forecast growth rate peak demand by 46% to 65% through 2030.

To put these numbers in more concrete terms, FERC's biennial survey titled “2010 Demand Response and Advanced Metering Survey” reports that advanced metering penetration has reached 8.7% in the United States compared with 4.7% for the FERC 2008 survey. FERC's 2010 survey found that more than 500 entities are offering DR programs.

FERC did some number crunching and came up with a potential DR resource contribution from all these possible DR programs. FERC estimates it to be more than 58,000 MW, or about 7.6% of the U.S. peak demand. Keep in mind, those figures are projections of potential, not actual power. Interestingly, FERC reported actual peak load reductions for 2009 in the report. In the survey, respondents reported 15,980 MW of actual demand response, which is a pretty respectable figure.

Demand Response

Getting back to the original question: Is DR a smart grid buzzword? The answer is no, not to the stakeholders who understand DR programs will change the consumer's electric usage patterns. They do it with good old-fashioned cash incentives. The utility pays customers to reduce their electric consumption during peak hours when the grid is overloaded. The utility issues the money in the form of cash or credit on the customer's next month's bill.

Typically, the price-based DR programs include a time-of-use option, real-time pricing option and critical peak pricing option. There also are incentive-based programs that include interruptible or curtailable options and the direct load control.

When regulators approved price- and incentive-based schedules, they created a huge opportunity in demand-side management. Many third-party companies realized conservative utilities would not be the leaders in this new marketplace. If the third-party companies could develop technologies that were nonintrusive and automatic to the point the client was not aware of it, they would be very successful.

It started out slowly with aggregators signing up clients who would shed loads with a phone call. As technologies matured, offerings matured. Today, more energy management tools include carbon emissions tracking systems, demand response software, load-shifting devices and many other products and services.

Third Parties Come to the Party

Commercial and industrial loads were the first markets, but it was not long before the trickle-down effect took place. Residential customers also are being provided with the same type of systems, but designed for their needs.

With all the activity in the DR arena, it is not surprising to find manufacturers joining together in a DR trade association like the Demand Response and Smart Grid Coalition (DRSG), which has more than 50 members at last count. The DRSG was founded to provide products and services in the areas of DR and smart grid technologies. Its goal is to educate and provide information to regulators, utilities, policymakers, the financial community and other key stakeholders involved in modernizing the grid.

What Is Available?

The current leaders in this marketplace are improving and refining DR products. EnerNOC offers a suite of energy management products for big-box retailers, supermarkets, office parks and other middle to large electricity consumers. EnerNOC enrolls companies into programs to reduce their consumption and offers utilities load reductions, when needed. It has roughly 5,000 MW under management.

Comverge manages more than 4,000 MW with more than 500 utility and 2,100 commercial customers. Its Intelligent Demand platform provides DR systems for residential, commercial and industrial clients. It is a system that allows the utility to communicate with customers in real time to control peak power demands on its grid.

Utilities can be on both sides of the equation but this is rare. Constellation NewEnergy acquired CPower, which managed more than 1,500 MW. CPower provides load management and other energy services including renewable energy credits. The purchase allows Constellation to expand into Texas and New England.

Honeywell has been a major player in the energy management sector for years and has entered the DR marketplace with the purchase of the demand-response company Akuacom. The Akuacom Demand Response Automation Server provides utilities and independent system operators (ISOs) two-way communication with energy management systems at commercial and industrial sites. This gives utilities and ISOs the ability to automate the delivery of price and reliability signals to these facilities, and more effectively trim peak demand.

Schneider Electric offers a DR program that can shed load and shape load, which gives it the ability to adjust loads in real time to take advantage of the dynamic nature of utility pricing incentives. Schneider has announced a partnership with Verisae to provide DR products to commercial and industrial customers. They are calling their platform DR 2.0, which performs the traditional load-shedding function found in many DR solutions and offers load shaping, too. The partnership also gives them the ability to adjust, in real time, the dynamic nature of utility pricing. Schneider and Verisae point out this allows utilities to adjust pricing quickly, heading off spikes in demand, rather than simply reacting to emergencies by dropping load.

Silver Spring Networks and Itron Inc. have an agreement in place integrating Itron's CENTRON II electric meters with Silver Spring's smart energy platform. This allows utilities to directly connect with their customers and take advantage of advanced metering capabilities for DR. It also helps reduce peak loads and defer additional generation capacities.

Siemens recently acquired Site Controls, an enterprisewide energy management company. It makes a DR technology called SureGrid for multisite commercial business. This is a turnkey energy aggregation and DR offering that reduces peak demand when the electrical grid is overloaded.

Lockheed Martin and Tendril announced they are teaming up to integrate Lockheed Martin's SEEload DR management method with Tendril's energy management platform. This new system will give consumers greater control over their energy consumption and enables utilities to deploy a comprehensive, secure, standards-based DR program.

Cooper Power Systems is positioning itself to take advantage of real-time pricing programs and two-way Internet-protocol-based DR technologies through a partnership with Digi International. Cooper's Yukon Energy Services software platform will be combined with Digi's ConnectPort X2 platform to connect a home area network to a utility through a broadband connection.

ABB is assembling quite an impressive energy management portfolio. Adding to its own expertise, ABB has acquired Ventyx. Ventyx brings a broad range of solutions to address the most critical needs of utility, power and communications companies, including asset management, customer care, energy analytics, energy operations, energy trading and risk management.

GE's Demand Response Management System (DRMS) is an integrated approach to DR. GE's software has continuous-learning algorithms as part of a complete system of two-way communications, smart devices and dynamic pricing incentives to deliver a new level of precision and control to demand-side management.

IBM and Johnson Controls have partnered on smart building technologies. IBM is an expert on networking, hardware, computer simulations and all things IT. Johnson Controls is an expert on building management. In the past, building management networks and IT networks have been separate and managed by separate divisions within companies, so this will be a big plus for commercial and industrial clients and their interaction with utilities.

Utility Integration Solutions Inc. (UISOL) developed the DRBizNet platform, an automated DR business process that includes direct load control, price-responsive load control and energy information programs. Roughly 750 users in 200 market participant organizations in the PJM Interconnection are using it to enable more than 7,500 MW of DR for approximately 450,000 end-use customers.

Cisco has developed an end-to-end smart grid strategy on a Linux-based touch-screen home energy controller. It has multiple connectivity options including WiFi, USB 2.0, Ethernet, ZigBee and ERT (Itron's protocol). It has applications for residential customers (appliances and energy use) and utilities (smart meters). It even offers cloud application.

Shedding, Shifting, Shaping

What started out as a technological change has become a social one. DR has moved from load shedding to shifting and shaping load. The customer wants choices and a voice. The technology is on the shelf, but utilities are struggling to meet the demand for change. Regulators are feeling the pressure to change the present usage-based business model that rewards increased electricity sales.

One thing is certain: Change is coming, like it or not. There may not be a silver bullet to correct all of the industry's problems and troubles, but there might just be a shotgun shell with silver pellets.