In ever-increasingly complex electricity markets where technologies continue to evolve rapidly, one challenge remains constant for companies looking to optimize their energy efficiency programs: finding the right balance between comfort and energy use. Without an effective solution in place, this balance is not easy to achieve because of a multitude of factors such as extreme temperatures, occupancy levels, and equipment failure.
From the utility provider side, power companies have their own equation to continuously balance, which is supply versus demand. Since electricity is not yet being stored to a degree sufficient to meet peak demand, its production must respond in real time to match demand. Moreover, power distribution grids also need to respond quickly to shifting demand and continuously route electricity where it’s needed most.
It is now an accepted fact that power companies’ systems are most efficient if fluctuations in demand are kept to a minimum. Therefore, they encourage end-users to do their part through demand response (DR) by reducing or shifting their electricity usage (load) when asked to, especially during critical peak periods, in exchange for financial incentives. These changes to electric consumption patterns are typically in response to a shift in market electric prices or when the power grid is in jeopardy of overload.
Types of DR programs
Several types of DR programs exist which can be categorized as either dispatchable or non-dispatchable. Dispatchable DR refers to planned changes in consumption, including load control, that the system operator curtails in response to a system reliability event or market prices. Dispatchable DR resources are most reliable when the utility customer is obligated to change load by contract and meet measurement and verification standards. According to the National Renewable Energy Laboratory (NREL), dispatchable DR is typically event-based and may focus on one of four areas: capacity, reserves, delivered energy, and regulation.1
On the contrary, non-dispatchable DR generally occurs on a voluntary basis in response to time-sensitive price-based decisions. According to the NREL, four pricing models typically fall into this category, defined as follows:2
1. Time-of-use pricing – refers to rates or prices set well in advance of the actual demand response events, which differ according to different blocks of time, in peak and off-peak seasons and hours.
2. Critical peak pricing – sets a high rate for consumption during periods of high wholesale market prices or system contingencies, with customers being notified approximately one day ahead of when the critical peak period will occur.
3. Real-time pricing – reflects rates or prices that change with wholesale prices on either a day-ahead or hour-ahead basis.
System peak response transmission tariff – a rate or price structure that is engaged to reduce transmission congestion.
Demand response programs generate average peak demand savings of 10%, with savings expected to climb
Utility companies have been running DR programs for over a decade. The U.S. Energy Information Administration (EIA), a branch of the U.S. Department of Energy, has been collecting data on many of these utilities to track their reported actual savings. In a 2017 report, The American Council for an Energy-Efficient Economy (ACEEE) examined this data for 28 utilities and found that DR savings ranged from 2%-27% of the utility’s peak demand, with 10% peak demand savings being the average.3 The council’s assessment in some leading states indicates savings from these programs could reach 20% in the near future.
What types of businesses are best suited for demand response?
Generally speaking, most mid- to large-size companies participating in DR programs will realize significant savings. There are, however, a few things to consider:
1) The size of your organization’s on-site facilities. While multi-site companies often have larger electricity loads with control systems in place capable of supporting DR programs, smaller companies with just one or a few sites often can’t justify the expense and inconvenience associated with installing DR controls;
2) Your facility’s ability to accommodate reductions in energy use during peak times. Most businesses can do this without much adverse effect on comfort or disruption in activity. However, companies with critical processing environments may find it difficult to meet the requirements of DR programs while maintaining stringent operating conditions; and
3) The comfort of customers and employees. With modern building automation systems (BAS), smart thermostats, and IoT-based technologies, controlling comfort should not be an issue, but there may be circumstances where even minimal changes in comfort are unacceptable.
The following types of business are often a good fit for enrolling in demand response programs:
- Retail / specialty stores
- Entertainment venues (movie theaters, family fun centers, rec centers, etc.)
- Grocery stores
- Industrial manufacturing plants
- Industrial distribution centers
- Commercial office buildings
- Medical and wellness centers
What’s holding companies back from seizing DR revenue opportunities?
There are significant potential cost savings in the commercial and industrial sector for companies willing to embrace DR as part of their overall energy management strategy. DR programs are seeing increased adoption across the U.S. and the globe as demand on the grid and energy prices continue to increase. Still, confusion and hesitation remain when it comes to enrolling in DR programs. Here’s why:
- Facility and energy managers are already overburdened – These teams are already tasked with so many duties that change by the hour that they have little time to evaluate the true value of a DR program, let alone the time and expertise to effectively manage it.
- Enrollment is complex – Finding which utility companies offer the best energy prices and incentive programs can be daunting. Programs vary widely with differences including incentive/rebate amounts, participation processes, defined minimum amounts of load to shed, and/or measurement and verification requirements. While some utilities may have difficult sign-up procedures, finding the right third-party partner can alleviate this burden.
- The “manual” misconception – Some managers may assume that enrolling in a DR program will create a large amount of extra work, requiring the hiring of additional personnel and manually monitoring for DR event notifications from the utility. This is no longer the case. IoT-based technologies can now automate the entire process, requiring no manual effort or intervention. In addition, third-party curtailment service providers can provide the coordination needed to evaluate sites, screen for cost-effective programs, implement and manage DR programs, verify compliance, and assess impact.
- Fear of disrupting business – To reduce energy loads, consumption needs to be reduced or shifted away from peak demand periods, which typically range from one to six hours. A strategy is defined in advance to shed load while maintaining an acceptable level of building comfort.
- Assumption that DR programs are complex legal agreements – This can be discouraging for some, and the complexity varies by utility and program. Engaging an experienced third-party service provider is a good option to assist a customer through the registration process.
- Fear of financial penalties – The rewards for DR participation can be high, and utility companies set their requirements accordingly, which includes imposing penalties for non-compliance. By working with an experienced partner to install an automated DR solution, the risk can be alleviated while maximizing the expected value.
Emerging technology is adding greater DR savings and capabilities
Today, cloud-based HVAC software is becoming an increasingly popular option to monitor, analyze, and control systems in real time and without human intervention. Encycle’s unique Swarm Logic® technology integrates with installed building automation systems, connected thermostats, and IoT platforms to optimize energy loads, achieving typical reductions of 10-20% in HVAC-related kW, kWh, and CO2. These results are in addition to those already achieved through investments in BAS controls and third-party energy demand management services.
Swarm Logic uses patented algorithms with advanced analytical capabilities to dynamically synchronize HVAC rooftop units (RTUs), enabling them to operate as an intelligent networked system. This coordinated and closed-loop approach allows each RTU to effectively adapt its operation to changing cooling requirements.
In the area of demand response, Encycle has made it a priority to support customers’ response calls for curtailment by removing barriers of complexity and capital outlay, ensuring that established agreements or contracts are met whether they are voluntary, mandatory, or price-responsive DR programs. For customers looking to reduce or shift their power usage to qualify for financial incentives, Encycle provides:
- Assistance in selecting and applying for DR programs – Encycle’s highly trained energy experts help companies take advantage of every possible savings opportunity.
- 24/7 “behind-the-scenes” energy management solution – Since Swarm Logic operates invisibly and autonomously in the background, there’s no burden on personnel for successful participation in DR events. DR calls from electric utility companies are managed automatically. There’s no disruption to business, and Swarm Logic will maintain comfort levels and adherence to setpoints, consistent with each customer’s requirements down to the individual zone level.
- Advanced analytics and reporting – At the core of Swarm Logic is a robust set of analytics tools and reports offering valuable feedback with actionable insights into your building and RTU operations. Real-time reporting also helps validate energy savings.
- Integration with automated demand response protocols – Encycle’s SwarmStat value-added solution provides connectivity and is compatible with OpenADR and CPower Link automated DR protocols that allow for standardized and automatic interoperability.
- A simplified solution that delivers great value – With Swarm Logic you can simplify operations with a coordinated DR solution that integrates with a facility’s existing control environment. This integrated approach executes DR initiatives without the need for a separate or dedicated service.
Demand response benefits are within easy reach. Call Encycle at 1-855-875-4031 or click here to learn more about how we can reduce your energy load to earn valuable incentives.
1,2 Gagne, Douglas, et al. “Demand Response Compensation Methodologies: Case Studies for Mexico .” National Renewable Energy Laboratory, 2018.
3 Nadel, Steven. “Demand Response Programs Can Reduce Utilities’ Peak Demand an Average of 10%, Complementing Savings from Energy Efficiency Programs.” ACEEE, ACEEE, 10 Feb. 2017, aceee.org/blog/2017/02/demand-response-programs-can-reduce.
Contributing author: Chris Hensley, Executive Vice President of Sales and Marketing, Encycle Corporation