demand response trends

The term "demand response" is so 2010. It’s still the phrase the industry throws around to describe shedding load when the grid needs some help. But these days, it’s so much more.

In the past few years, demand response has been morphing into demand management, where load is called upon more often -- both for economic and capacity reasons. Megawatts are now coming from sources that were previously uninterested in getting into the market.  

Here are five of the most important trends in demand response for 2013 that will only become more significant going into 2014.

Residential Gets Real

Every year, it seems as though we’re on the verge of residential demand response 2.0. In 2013, it actually started to materialize. Oklahoma Gas & Electric announced results of its commercial-scale residential demand response program, which will eventually involve more than 100,000 homes. It shaved about 2 kilowatts per home, far more than what the program was initially planning to achieve.

Some utilities, such as San Diego Gas & Electric, Southern California Edison and Austin Energy are rolling out “bring-your-own-thermostat” programs. Instead of using one-way radios on air conditioners, digital two-way thermostats that consumers have already purchased are offered a premium to participate in peak-time rebate programs.

Other large utilities, such as SMUD and Pepco, are also hoping to move toward dynamic pricing. SMUD is running a pilot in which participants are on different peak pricing plans, which all of the utility's customers will eventually be on. Pepco is seeking approval for a plan that would start next summer, in which all customers will be on a peak rebate program (think of it as training wheels for variable pricing).

More utilities will likely jump on the peak time rebate bandwagon in 2014, and we can expect many more utilities to leverage smart thermostats already in their territories next year and beyond. Also, now that the Nest thermostat has been on Ellen, there could be a lot more devices to aggregate in 2014.

DR Jumps Into Japan

Just about every large demand response player in North America made a foray into Japan in 2013. The partnerships mostly just laid the groundwork, but pilots will begin as early as Q1 in 2014.

Japan’s utilities have turned their attention to demand-side management as the industry continues to contend with generation limits in the wake of the March 2011 Fukushima nuclear disaster.

The big names are there, such as Schneider, EnerNOC and Comverge. The OpenADR Alliance is also making inroads. Large utilities, such as Tokyo Electric Power Company, will start with large commercial and industrial customers, although there could also be opportunities in small commercial and residential.

Most of the announced projects are pilots, many funded by Japan’s New Energy Promotion Council. But expect pilots to scale up fast if they are successful in 2014.

Don’t Call It "Demand Response"

We keep saying we'll call it something different, and then we keep calling it "demand response" anyway. But certainly, demand response is morphing into demand management, and traditional demand response companies, such as Comverge and EnerNOC, are making the case that they’re much more than just load-shedding aggregators.

Demand management is a combination of capacity demand response, economic demand response and constant commissioning for energy efficiency. Companies aren’t just dropping load when the mercury rises -- they're also shedding more load for economic reasons as the payments have been increased in PJM and are soon to be increased elsewhere thanks to Federal Energy Regulatory Commission's Order 745 (more on this later).

Automation is another factor that is bringing new players, such as casinos, to demand response markets. Service industries, farms, manufacturing facilities and critical government operations that may have never considered automated demand response in the past are reconsidering now that there are fine-tuned automated offerings that can allow critical operations to keep running while still shedding load.

In Vegas, NV Energy and BuildingIQ married energy efficiency and demand response, but that’s a trend happening everywhere. Some utilities are merging their formally siloed demand response and energy efficiency units. Constellation, and other comapnies like World Energy, help companies use demand response payments for energy efficiency upgrades.

The merging of energy efficiency and demand response is still early days, but it will gear up in 2014 both within utilities and in terms of vendor offerings. Eventually, regulation will catch up too.

Mo’ Money, Mo’ Money, Mo’ Money

Money talks. So it helps that economic demand response payments have risen in North America’s largest grid operator, PJM, even if only a small number of large commercial and industrial clients are getting the benefits. As the payments go up in other grid regions, it should benefit more than just the largest participants.

In Texas, which was not affected by FERC Order 745, there is talk of a capacity market or at least a change to scarcity pricing to encourage more demand response through higher prices -- and maybe some more generation too. ERCOT has already raised its market cap to $9,000 per megawatt-hour for 2015, which could also encourage more demand response as retailers look to hedge against price spikes.

Money is also talking on the residential side. The bring-your-own-thermostat programs offer a higher rebate than customers without two-way digital thermostats receive. At Southern California Edison, for example, the program offers a $1.25 bill credit for every kilowatt-hour saved during peak days, $0.50 more than customers without a two-way thermostat can earn.

And if you live in some alternate universe where LEED points speak louder than dollar bills, demand response is now a base credit for LEED v. 4.

Say Goodbye to Summer

Every year, there seems to be a new record for peak load in some region of the U.S. This year, it was in New York. But PJM also hit a record for the most demand response ever called upon in September, when it set a new power record of 144,370 megawatts for the month of September.

Sure, it was still technically summer. But the mid-September peak was higher than all but one day in July for 2013 and illustrates that capacity demands are popping up outside of July and August. EnerNOC said its dispatch on the day could be its largest ever.

In other regions, peak demand does not just stretch into September, but is flipped all together. In Europe, the peaks are due to heating in winter, which means that any U.S. company looking to tailor offerings to the European market will have to have solutions that address heating, and not AC load, which are far less of a problem in energy-conscious Europe.

Back in the U.S., most capacity constraints will still occur in summer, but demand response is increasingly being used for ancillary services, which are needed year-round. In some regions, demand response has helped ease the transition as old coal plants retire.

It is still early days for the applications of demand response in every region of the U.S., but as markets catch up with technology, it won’t just be a blunt instrument to help the grid in the dog days of summer.

Photo Credit: Demand Response Trends/shutterstock

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