Demand Response is an increasingly popular component in addressing our nation’s aging electrical grid. Currently a fragmented market, Demand Response will be experiencing consolidation and growth as more businesses implement programs to achieve cost reduction and energy savings.
by Jeremy Gross, Green Economy Post
What is Demand Response?
Demand response (DR) is a way to manage electricity consumption in relation to the available supply. Basically, it’s a way to reduce demand on command. When the grid supply becomes strained or when electricity costs reach a certain price point, services (like lights, machines, air conditioning) can be reduced by the utility based on a predetermined plan.
The primary goal of Demand Response (DR) is to reduce electricity consumption during periods of peak demand. As with other tools and strategies, DR helps utilities avoid the megabucks involved with building rarely used power plants to handle peak loads. DR networks are another very cost effective measure to bring supply and demand in balance.
EnergyDSM.com describes two types of Demand Response:
- Emergency demand response: When electricity demand peaks due to extreme hot or cold weather conditions, supply may be constrained. Utilities can start up their DR programs to avoid a power outage. With mostly commercial and industrial partners, the customer’s electric load is reduced to a predetermined level during the emergency.
- Economic demand response: Instead of paying the typical flat rate averaged over the cost of the entire year (with the peaks and valleys of demand and pricing), customers pay time-of-use rates. Time-of-use rates are higher during the day and lower at night and encourage customers to use off-peak electricity.
Pike Research Report
In a report summary by Pike Research, I learned that today’s DR market is very fragmented, with just a handful of companies (mostly as pure DR companies or Curtailment Service Providers (CSPs)) that are focused on commercial and industrial sectors. However, once the DR market grows, we may see competition appear in the form of information technology (IT) companies, software companies, energy service companies (ESCOs), and enterprise energy management vendor companies.
Here are some additional projections from the Pike Research report:
- As the DR market matures, major ESCOs and IT players will make investments, boosting revenues and making DR products and services more sophisticated and attractive to utilities and end-users.
- There will be period of company consolidation and DR will become a piece within a greater energy efficiency toolkit.
- DR revenues will grow at a 17% compound annual growth rate (CAGR) from 2010 to 2020.
- The DR industry will begin a period of dramatic growth in the 2013 timeframe, as moderate forecasting scenario predict an increase from a $1.4 billion annual market in 2010 to $8.2 billion by 2020.
Three Demand Response Case Study Examples
How might you implement Demand Response in your business? I think it’s easiest to look at some examples. PG&E, a California utility, has some great case studies with details and results from implementing their Demand Response programs. Here are a few examples:
Business: E. & J. Gallo Winery received project incentives to the tune of $438,417. It realized a DR event annual energy cost savings of $92,000.
The DR event action plan included installing controls to:
- Monitor electric demand levels and adjust the operating status of selected connected loads to keep demand within pre-defined limits
- Move processing loads to off-peak periods by relying on the thermal mass of the product to maintain temperatures within narrowly defined acceptable limits during a demand response event
Business: Refrigerating and freezing warehouse manager saved $4,000 by identifying and shutting off unutilized equipment during Demand Response events.
The DR event action plan included:
- Cooling: Overcool freezer rooms before Demand Response events; dim or shut evaporator fans off.
- Lighting: Reduce or turn off lights in non-essential areas.
- Other Non-Essential Equipment: Defer forklift battery charging until off-peak hours.
Business: Safeway Inc., the largest supermarket chain in California, has been working towards the ability to reduce power consumption by 10 megawatts during DR events.
The DR event action plan included:
- When an event is declared, signals are sent to the building’s energy management system to reduce power consumption in key areas (such as lighting, refrigeration and HVAC equipment).
- Specific plans based on each store’s characteristics. For example, variables such as square footage, operating hours, customer traffic, design, location, and outside weather conditions are taken in to account.
Demand Response – Wikipedia, the free encyclopedia – http://en.wikipedia.org/wiki/Demand_response
EnergyDSM.com – discussion and education about energy demand side management –
PG&E Demand Response Frequently Asked Questions – http://www.pge.com/mybusiness/energysavingsrebates/demandresponse/faq/
California Energy Commission’s Demand Response Research Center – http://drrc.lbl.gov/drrc-bg.html
Have you had any experience or exposure to Demand Response programs? Let us know by leaving a comment below!
Photo Courtesy of Darrell Rogers
© 2010, Jeremy Gross. All rights reserved. Do not republish.