Introduction to Demand Response

The traditional electric grid is a one-way system in that it provides electricity in response to an initiating event such as turning on an appliance or the cycling of a home’s heating and cooling system. A smart grid, the 21^st century version of today’s grid, offers 2-way communication between the utility and consumer, where:

• The flow of electricity can be automated as needed,
• Load problems can be identified and isolated, and
• Renewable energy sources such as wind and solar power can be effectively integrated into a comprehensive energy portfolio.

The capabilities of a smart grid are limited if the terminals and appliances in a home are not operating on an equal technology basis. Though the grid might be able to identify a load problem, it can only identify (yet not correct) the problem if the building in this case cannot automatically adjust its use of energy. Thus, a key element to a smart grid strategy is the equipping of homes with comparable technology that provides a level of self-monitoring within the home by established routines to adjust power usage based on pricing criteria or overall system loading considerations.

Naturally homeowners will need to maintain the capability to override these routines, but by establishing those significant savings in energy consumption and costs can be realized. In fact, the U.S. Department of Energy (DOE) found in a recent study of homes in the Olympic Peninsula in Washington that homeowners with smart meters, programmable thermostats, and energy smart appliances saved, on average, 10 percent on their electricity bills and peak demand was reduced by 15 percent.

The Impact of Demand Response

The electric industry faces myriad of seemingly conflicting challenges:

• As electricity becomes more vital to economic growth and prosperity, the resulting increase in load demand requires the construction of new production, transmission, and distribution capacity
• The current energy delivery system is both aged and nearing obsolescence with a number of technologies that are not compatible with a modernized grid
• Pressure continues to be applied to utilities and consumers reduce the emissions of greenhouse gases. Compliance actions will increase in costs of energy

In 2003, the U.S. used almost 3,900 billion kWh with a population of 280 million people, or approximately 14,000 kWh per person. Of course, energy consumption is not spread equally across the country. Coverage area, location, and population density are all factors to consider, so though these average consumption numbers are valid for trending overall usage, the challenge of ensuring sufficient capacity must consider regional specific requirements. Brownouts and rolling blackouts are not just inconvenient, they are costly.

The 2003 blackout in the eastern U.S. is estimated to have cost New York City $750 million in lost revenue and for businesses across the U.S. power outages typically impact annual revenues by $50 billion. Demand response (DR) potentially plays a role in the solution:

• Automatic DR will sense emerging demand load shortfalls and divert or reduce power as necessary. This will lessen the occurrence of system overload and resulting power failures.
• Providers and consumers of power can also save money, as the need to build additional power plants and delivery systems strictly to handle peak loads would decrease.

The U.S. Department of Energy (DOE) estimates that the average home uses about 11,000 kWh of electricity annually, which equates to approximately $1,100 per year of household spending on electricity. Recognizing that the actual rate paid by the consumer, currently estimated at $0.10 per kWh, is determined by:

• Regulation
• Fuel Costs
• Weather
• Time of Day
• Consumer Demand

Without automatic demand response systems in place, consumers are on their own to reduce consumption and “hope” the reduced consumption will reduce their costs. Demand response allows for dynamic pricing and time-of-use (TOU) rates, where:

• With dynamic pricing, consumers can be offered rate discounts during normal usage periods and charged higher rates during peak times.
• TOU provides consumers with the economic motive to shift usage patterns from high-price peak hours to less costly off-peak hours.

These capabilities produce the ultimate win-win between utility and consumer. The grid saves power and the customer saves money.

Demand Response – Impact on the Environment

The underlying assumption of any energy efficiency and demand response program is that given the option, consumers will opt to conserve energy, if for no other reason than it feels right. That notwithstanding, there are quantifiable benefits to be realized in our continuing drive to improve the environment:

• Demand response technology not only shifts power from one source to another, it also lowers the amount of power consumed.
• Lower power consumption, in turn, lowers the amount of pollutants released into the environment.
• Without demand response, systems used to heat and cool homes across the U.S. release 150 million tons of CO2 annually. With demand response, the opportunity to optimize the use and trade-offs of fossil fuels and renewable energy sources exists where, at the very least, the surge of power and subsequent emissions during peak load conditions can be accommodated by “green” power alternatives.