Demand Response-Opportunity and Value

The Energy Independence and Security Act of 2007 specified that the Federal Energy Regulatory Commission (FERC) determine the potential for demand response defined as:

The ability for customers to change their electrical usage based on changes to price of electricity or in response to incentive payment programs, designed to encourage use of electricity during periods of lower demand.

The desired by-product of this assessment was the conservation of energy through improved efficiency in allocating and consuming power.

Opportunity Represented by Demand Response

The bottom-line opportunity presented by demand response can best be measured by the reduced need for Gigawatts (GW) resulting from either change in:

• Utility operating practices, or
• Consumer usage patterns.

And, the desired result is lower costs in building or maintaining power generation facilities. The FERC report entitled, “A National Assessment of Demand Response Potential,” hypothesizes that the 2019 peak load could be reduced by as much as 150 GW, roughly the equivalent of 2,000 peakers (power plants maintained to respond to peak loading requirements). Though these projected reductions are accurate or not is less important than the point they make:

Demand response is part of the answer to the concerns regarding energy availability, price and consumption.

Value Capture

In order to realize the opportunity represented by demand response, utilities and consumers need to partner in leveraging technology and well-established energy conservation practices:

• Compact Fluorescent Light Bulbs (CFLs), weatherization practices and EnergyStar appliances offer opportunities to improve energy efficiency while the SmartGrid infrastructure necessary to fully employ grid technologies is implemented.
• Smart Meters and Advanced Metering Infrastructure (AMI) are laying the path for empowering consumers to take advantage of new pricing schemes, and have increased visibility regarding their usage and its impact on cost.

And, as the technologies represented by Smart Meters and AMI take hold, the relationship between the utilities and their customers can take on a number of forms:

• Direct load control programs, where for some level of financial benefit, consumers allow the utility to control specific elements of their load, or
• More discretionary programs, where consumers are provided transparency regarding pricing and load, and are able to make decisions on how and when to change their energy consumption patterns.

A key element in success of demand response will be the technology that supports the necessary exchange of information. The following list of characteristics defines criteria to drive this selection:

• Simple so that the average consumer can understand how to use it,
• Secure from unauthorized intrusions,
• Versatile enough to operate on a variety of system configurations,
• Scalable to be easily expanded with system and load growth, and
• Compatible with other technologies.

Benefits of Demand Response

The benefits of well-conceived and properly implemented demand response programs accrue to all stakeholders: consumers, utilities, regulators and society. Some of the more commonly expressed benefits include:

• Less need for power resulting in reduced and/or deferred generation costs,
• Lower requirements for fossil fuel generation, resulting in a decrease in greenhouse has emissions, and
• Reduced frequency and durations of peak demand causing a decrease in required maintenance activities and associated costs.

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