Get Connected: The Future of Demand Response
The concept of demand response seems to be gaining momentum, especially in context with the smart grid. What does this mean for demand response and what can we expect in the future?
Although demand response adoption seems to be widespread in some geographies, we are really just at the beginning. A recent study commissioned by FERC estimates the untapped potential for demand response in the US is as high as 150GW over the next 10 years. This potential is equivalent to the capacity of 2000 new peaking power plants. The importance of demand response has never been more evident. Of particular interest is that FERC sees the largest growth potential in price responsive load management programs.
Price responsive load management is where customers are incentivized to reduce load in response to dynamic pricing or other price signals. The FERC report estimates price response could account for between 50 – 70% of the entire peak load reduction available for demand response by 2019. This is an area we have focused on at EnergyConnect and will continue to focus more on in the future. Our FlexConnect product continues to lead the market for price response programs in the mid-Atlantic and mid-west areas managed by the PJM ISO. We will be propagating the platform to other areas over the next few years.
In the future customers may be forced into mandatory time of use rates where their rates will automatically go up in times of peak demand. Even if a demand response incentive payment is not available to these customers, the absence of the right tools to manage power consumption will likely become very costly for them. We see significant opportunities for our platform to help customers make smarter decisions with consumption patterns and minimize their energy expense.
You will see much more “technology enabled” demand response in the future. In the past there has been a tendency for Demand Response (DR) companies to focus on the low hanging fruit, specifically large load drops that are easily managed manually. These loads are typically enrolled in capacity programs that pay customers to be on standby for just a couple of emergency reductions per year. While there will still be a certain level of need for these programs, the largest growth area will be with programs that use technology to automatically “tune” the amount of load a customer is using to match the needs of the grid. This may come in the form of smart buildings or smart process management. If enough participants automatically make small changes in consumption it can provide an extremely valuable service to the electric grid. The more value the service has, the more value there is to pass on to consumers. Whether the value to the consumer is in reduced electricity costs or incentive payments, there is a huge upside to participating in demand response.
Except perhaps for those in the business of building more power plants, demand response is a unique opportunity where everyone wins: the consumer, the grid operator, the community and the environment.
Written by EnergyConnect CEO, Kevin R. Evans
Posted on Monday, August 24th, 2009 - BlogConnect