Demand Response Contracts Being Signed
- April 17, 2019
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Demand response is the process of encouraging customers across residential, commercial, and industrial sectors to shift the timing of when they use their most energy-intensive applications for energy in an effort to diminish the demand on the grid during traditionally peak demand. Industrial customers may agree to conduct a specific process overnight in exchange for a rebate from the utility, or residential customers may be offered different electricity rates that incentivize running the washing machine or charging an EV outside of the early evening hours when demand typically peaks. This ability to shift the timing of power use is a valuable addition to the toolbox of utilities who are getting creative in managing energy loads in an efficient, clean, and affordable way.
As the idea of demand response gains more momentum, a real sign of that progress is being seen in the number of demand response contracts that have started to get signed recently. Utilities and markets are increasingly treating demand response agreements and programs as a commodity, akin to how additional generation tapped into during peak demand is a commodity. This trend seems to only be increasing, and the deals signed in the past week are likely a sign of things to come.
For example, Ameren and Enel X announced a contract for Enel X to provide 100 MW of demand response:
Under the terms of the agreement, Enel X will manage Ameren Missouri’s entire C&I demand response portfolio. It will recruit participants from different industrial sectors in the utility’s territory and manage the portfolio of C&I demand response resources. Participants can enroll in Ameren Missouri’s demand response program by contacting Enel X directly.
Customers participating in the C&I demand response program can earn payments for committing to reduce their electricity consumption temporarily when demand on the system is highest.
Enel X will fully manage Ameren’s portfolio of C&I customers participating in the demand response program, optimizing each customer’s participation and maximizing their financial return, the company said.
Additionally, Solect Energy was awarded a contract with Medford for Microgrid Energy Management System which included in its terms some valuable demand response. While the whole contract includes solar and storage in addition to demand response, the announcement noted:
An added benefit of the microgrid’s “solar + storage” combination is the ability to lower expensive demand charges. Demand charges are based on a customer’s monthly peak load, and in many cases [in Massachusetts] can account for up to 70 percent of a commercial customer’s electricity bill. In addition, the city can take full advantage of the storage capacity to more effectively participate in a range of Demand Response programs to further reduce operating expenses.
Lastly, Centrica recently agreed to a demand response deal with the Tokyo Electric Power Company. Tokyo Electric Power is Japan's largest power provider, and it looks to harness Centrica's demand response technology to provide enhanced flexibility to the grid. The software solution of FlexPond:
"will be delivered under a commercial ‘software as a service’ model that allows the utility to use the proprietary platform as a basis for its own virtual power plant, ultimately delivering demand side response capacity from various flexible generation and demand assets.
Kyushu would appear a pitch-perfect location for the introduction of a VPP given its density of industrial customers and renewable energy projects.
How do you see demand response in the coming years-- will it continue to be marketed and sold as a commodity in these cases? Will utilities bring the efforts more in-house that prevents the need for such contracts?