Demand Response

It’s been awhile since my last blog post, thanks to summer activities with the family, so let’s review a few trends now gathering momentum:

In my previous blog post, DC Power Microgrids: Self-Sufficiency for Utility Customers, I discussed how a DC subsystem, or “nanogrid,” in a home or business might power essential loads, particularly electronic devices that enable our interactions with the world around us and that account for an increasing proportion of our electric energy consumption.

The specific example I gave was tying solar photovoltaic panels, which produce DC power, directly to DC loads in the home. Those loads could include LED lighting and an increasing array of electronics as well as EVs and PHEVs. Today, AC power from the grid must be converted to DC for these applications. There’s an efficiency loss due to that conversion and the loss is even greater if DC power from solar panels, fuel cells and batteries must first be converted to AC for integration into the grid and then converted back to DC for use.

There’s a lot more at stake here than just improving the efficiency of DC-to-DC circuits. I’m talking about greater energy independence and resiliency for consumers, who are awakening to new realities and possibilities. The drivers are many. Electric grid outages in the United States are becoming more frequent and longer in duration. Increasingly frequent and severe weather events are one cause of that decline in reliability, and these events are dramatic examples of why greater independence from the grid and improved resiliency will appeal to consumers.

Other factors are eroding the feasibility of centralized power: we’re seeing declining generation reserve margins, transmission system operating constraints, tightening environmental restrictions, susceptibility of critical grid facilities to natural and manmade threats and the increased likelihood of cyber attacks.

Hardening the existing grid to offset these effects would require massive capital investment, significant environmental and public policy challenges and a steep rise in electricity prices. And it will take lots of time.

Meanwhile, if acceptable alternatives are available, customers will look to more local generation and storage to maintain the reliability of access to electricity that is so important to their security, productivity, health, comfort and convenience.

Looming over this picture of self-sufficiency and self-interest is a bigger, global concern over the environmental impacts of our current practices. Burning carbon-based and radioactive fuels in centralized power plants and emitting resulting waste into the environment is no longer acceptable. Whether driven by the scientific consensus that emissions from coal-fired power plants are one of the primary causes of climate change, or just the recognition that fossil fuel use has demonstrable, negative impacts on public health and safety, a growing number of consumers support “clean energy” alternatives. If their power company doesn’t provide those alternatives, consumers increasingly will take matters into their own hands.

Current utility practices only exacerbate this trend. For decades the move to a so-called smart grid has focused on the deployment of instrumentation, pricing and programs aimed at changing consumers’ electricity demand patterns. The power industry calls it “flattening the load duration curve,” which is designed to better utilize existing base load power plants and at least defer the need for new ones. This approach, known as “demand response,” has emphasized reduction in demand at the peak but not a reduction in overall energy consumption, which reduces utility revenue. Decreasing reliability and increasing prices of grid-based electricity will cause consumers to reduce or displace not just demand, but energy consumption as well.

Consumer conservation and energy efficiency efforts reduce utility revenue in the short run, more than it reduces their costs. The remedy? Utilities must raise prices to make up for the revenue shortfall. Ultimately, the shortfall will be made up more in energy revenues than demand revenues. That in turn drives consumers to further reduce their demand AND energy consumption and/or obtain it from alternative sources.

Anyway, demand response is at best a transitional approach. No matter how effective demand response programs become, new sources of power will be needed. Additional power sources will be required to maintain and improve reliability, replace central power plants that are being retired, and meet continued growth in consumer demand.

Though economies of scale and exponential load growth resulted in declining nominal and real retail electricity prices in the 20th century, those forces are no more. Electric energy prices are going to increase for the foreseeable future for all of the aforementioned reasons. In fact, steadily increasing electricity prices may be the single most effective driver of the consumer’s search for affordable alternatives to grid power while at the same time making the alternatives more economically feasible.

I will discuss in my next post how accelerating advances in alternative electric energy technologies will enable a drastic transformation of the electric energy industry.

Photo Credit: Trends and Demand Response/shutterstock