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What’s Next for Demand Response?

Demand response (DR) is the practice of having customers reduce their energy consumption when overall consumption is particularly high (such as when air conditioner use increases on a very hot day). Energy companies can then meet that lowered demand rather than allowing blackouts or firing up an extra power plant to respond to the higher-than-normal requirements. The result is electricity bill savings for customers, reduced costs for providers, and a cleaner environment for everyone.

Sounds like a great plan. A Minnesota Conservative Energy Forum article states, “Demand response is an increasingly valuable resource to meet electricity demand, maintain reliability, and be used as part of a broader resource mix in a move away from traditional fossil fuel-based generation.” Yet, for various reasons, the promise of DR has yet to reach its full potential, and some experts note that its use has tapered off.

Merely a Benchwarmer

One obstacle to putting DR to its fullest use is energy companies hesitating to enact it. The Minnesota Conservative Energy Forum article states, “For the most part of the year, if not all of it, demand response merely sits as a benchwarmer in the range of options…utilities can choose from to meet demand…. Instead, in order to meet demand, utilities will rely on their own generation units.”

The article suggests that greater competition could help, in the form of third-party DR aggregators that “offer demand response products and services directly to customers, aggregate those products for sale into wholesale energy markets, and manage the customer experience under those contracts.”

A PR Problem

Another challenge with DR is that many energy customers don’t understand what it is, or how it can benefit them. Writing for Forbes, James McPhail states, “The concept itself is not so complex, but until recently, demand response has had a bit of a PR problem. the term…is still not commonly understood by many residential and commercial customers who can benefit from the energy and cost savings it provides.”

However, according to McPhail, communication efforts on the part of utility companies, as well as new technology that makes it easier for customers to participate, are having a positive impact: “Collaborations between utility offerings and intuitive smart energy management devices [such as smart thermostats] are demystifying demand response, making the savings benefits easier to understand and tap into.”  

Another tool helping to build a stronger DR practice is distributed energy resources (DER), which can help to reduce demand in the first place. In an article published by Electric Light & Power, Amit Narayan explains, “With the on-demand, flexible capacity delivered by DR and other DERs, utilities and energy service providers can smoothly navigate the transition from the traditional, centralized, fossil fuel-powered one-way grid to a modern, distributed, renewable energy-powered and multi-directional grid.”

DER Barriers

Some barriers are specific to this DR and DER partnership. DR for renewables integration (DRRI) — a method for balancing system load with excess renewable generation — faces uncertain customer adoption, inconsistent load availability, and regulatory barriers, according to Brett Feldman writing for Renewable Energy World. Yet, states Feldman, “Several factors point to an increasing focus on DDRI.” They include an increasing share of renewable energy sources in the overall energy mix; the use of DR as an ancillary service; and dynamic pricing.  

Amid these obstacles, there are many success stories. For example, according to Jason Fordney at RTO Insider, in May 2017 California ISO “experienced its first ‘Stage 1’ grid emergency in nearly a decade.” Fordney explains that “800 MW of demand response was ‘critical’ in meeting grid needs.”

Because of the work being done by California ISO and many others, DR is still a viable component of an evolving energy distribution system. While DR activity may be slowing, it is reasonable to believe it will continue to become more widely used and appreciated by energy providers and consumers alike.

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