Demand Is The New Supply – The Future Of Demand Response


Demand Is The New Supply – The Future Of Demand Response

As we search for new sources of clean energy it is becoming increasingly evident that many areas will experience growth rates for electric demand that will eclipse our ability to roll out clean supply to match that demand. The electric industry is responding by learning to use electricity demand as a source of clean supply.

Defining Demand Response

Demand response programs pay electric customers to reduce their load during high electric demand hours. This product provides the opportunity for customers to earn money by shifting their electric consumption to off-peak hours. Across the United States the vast majority of the customers for demand response fall into the Commercial & Industrial (C&I) category.

Imagine a manufacturing plant that operates on shifts. During the summers that plant might be able to eliminate their afternoon shift and replace it with an overnight shift, thereby reducing the overall load on the electric system during peak hours of the day.

Alternatively, the same plant might have their own generation resources on site that can be utilized in the event that they are called to reduce demand.

C&I customers weigh the financial benefits of the demand response program against the inconvenience and cost of making changes to their electricity usage.

Demand Response Technology

Participation in demand response programs requires the use of advanced electric metering technology. This technology allows a central operations center to communicate with the C&I customer to let them know when to reduce demand.

In order to access the necessary technology demand response providers will contract with companies that aggregate demand response as a resource. Two well known demand response aggregators are Enernoc and Comverge.

The companies provide electric customers with the necessary technology and act as an intermediary between the customer and the utilities and electric system operators who run the demand response programs.

Enernoc has posted a video that explains how their system and processes work.

Residential Demand Response

The availability of residential demand response is extremely limited in the United States. There are two main reasons for this. Residential electric prices are rarely tied to the wholesale electric markets in any way.

As a result the reduction of demand provides no financial benefits for the residential consumer. Electric meter technology also requires an upgrade. The vast majority of electric consumers have older meters that do not provide the granularity required to track electric consumption changes within the day.

Some customers do have the option to benefit from reducing demand via Time Of Use (TOU) rates. Time of use rates adjust the price of residential electricity based on the time of day when the electricity is consumed.

TOU rates are a form of passive demand response because the customer is not obligated to change their habits. As a result, electric system planners don’t have a strong ability to factor the effects of TOU when determining generation schedules.

Bringing residential customers into the demand response fold will require advances in technology and market rules, as well as an investment by local utilities. Such advances generally fall under the umbrella of smart grid technologies.

The Future of Demand Response

I expect demand response to become increasingly popular and eventually make a stronger move into the residential electric market for the following reasons.

  • Demand response is considered a clean energy resource since its activation can reduce the output of fossil fuel powered resources
  • Demand response will allow many states to meet increasingly onerous electric efficiency requirements that mandate reduced electric demand
  • Unlike nuclear, clean coal, and even wind projects, there is no consumer opposition to demand response programs
  • Competitive electric markets are expanding the opportunities for providers of demand response in order to meet ever increasing demand
  • As electricity prices increase all classes of consumers will demand products that allow the flexibility to control costs via shifts in demand

Wide integration of demand response is going to take some time. But when you compare the effort and cost to siting a nuclear plant or offshore wind farm it’s easy to see why investing in demand response is a better bet than counting on those technologies in the near future.

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