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The Next Frontier for Demand Response: Natural Gas

This year’s polar vortex in the Midwest and Northeast strained our grid systems and compelled many utilities in the regions to ask customers to conserve energy.

These extreme weather events tend to focus our collective attention on potential weaknesses in our grid systems. Utilities are working 365 days a year to prevent disruptions, reduce emissions and improve service. This increasingly has included looking for new demand-side management opportunities as part of the solution.

Demand response (DR) programs have been widely adopted by utilities in order to balance supply and demand for the electric grid. These programs have become increasingly effective as customers recognize the benefits of installing smart thermostats, key devices for utilities to facilitate DR participation and savings.

Now, several energy providers across the country are leading the charge to deploy gas DR in areas where there are resource or infrastructure constraints. Several pilots are underway, and early results and the history of electric DR show that gas programs have great potential.

Building on the success of electric DR programs

In 2014, the United States Energy Information Agency (EIA) found that 9.3 million customers participated in electric DR programs, helping to shave nearly 6 percent off peak electric load. As with many innovative energy programs and policies, California has long been a leader in DR program implementation and has the most active DR market, according to the EIA. The state made up 20 percent of the total demand-response customers in 2014, despite making up only 12 percent of the U.S. population.

Beyond California, it is clear that electric DR is providing value across the country. In 2017, the contribution of demand resources in meeting peak demand was 5.6 percent, according to a Federal Energy Regulatory Commission (FERC) report.

During the August 2017 total solar eclipse, Nest conducted a Solar Eclipse Rush Hour experiment as the sun was blocked from Oregon to South Carolina throughout the day. The eclipse reduced solar energy output, replicating the effect of peak demand that is experienced during heat waves and cold snaps.

More than 750,000 Nest thermostats participated in the Rush Hour event, reducing energy demand by 700 megawatts, equivalent to about the same amount of power produced by seven gas-powered peaker plants. The eclipse was a unique opportunity to show that utility customers across the country are open to participating in demand response events and are eager to use technology that makes opting-in easy.

Early moves toward gas DR

Recognizing the success of electric DR, SoCalGas, Con Edison and National Grid have each implemented gas DR programs and pilots. The service areas of these utilities are well suited to these programs, as they tend to experience gas constraints.

Meanwhile, the trend of smart technology adoption is continuing to grow — 29 percent of broadband households intend to purchase a smart thermostat this year. Utilities testing out gas DR have the assurance that customers will be able open to participating through increasingly popular smart devices, based on adoption rates and electric DR success.

New federal policies are also being implemented and introduced to increase gas DR opportunities. In February, a bill was proposed that directs the Secretary of Energy and FERC to establish a five-year natural-gas demand response pilot program using the latest technology available. This followed legislation that passed in 2018 calling for the U.S. Department of Energy to study natural-gas DR.

Identifying gas-saving opportunities is especially crucial in California, following the Aliso Canyon gas leak that revealed dangerous weaknesses in the state’s natural-gas infrastructure. The state also has the second-highest natural-gas consumption rate in the country.

Fortunately, California has again shown leadership in gas DR with the SoCalGas Smart Therm program. Customers who enroll in the program agree to allow their smart thermostats to be adjusted automatically by up to 4 degrees when a Smart Therm Event is called. Participants are eligible to receive a $50 incentive, plus an additional $25 for staying enrolled through April 1.

In the first few weeks of the program, enrollment more than doubled — increasing from around 9,000 participating households to 24,300. Some of these households include more than one device, making the total number of thermostats enrolled 28,500 at the end of January 2019.

Early indications of this program’s success following the Aliso Canyon leak can serve as inspiration for other regions like the Midwest and Northeast. Utilities in these areas can use gas DR as a tool in the toolbox to combat shorter-term but impactful shortages that often arise during extreme weather.

Barriers remain

Similar to what was revealed through the Solar Eclipse Rush Hour experiment and with other electric DR successes, enrollment in the SoCalGas program indicates there is a significant customer appetite for participating in gas DR. Along with other demand-side management strategies, gas DR can help utilities improve reliability, reduce or eliminate demand spikes and alleviate infrastructure constraints.

That said, barriers remain as hourly energy costs for gas are more complex than for electricity, and controls systems tend to be less sophisticated. Education for gas utilities and their customers will be essential in expanding gas DR programs, along with ongoing legislative momentum like we’ve seen over the past couple of years. 

Finally, smart thermostats will remain crucial for ensuring customer participation, as they facilitate the connections between individual gas furnaces and utilities that make gas DR possible. 

As adoption rates of connected devices continue to rise, utilities can leverage the technology — and the customer engagement that the technology supports — in order to boost participation in both electric and gas DR.

(This article was originally published in Greentech Media, https://www.greentechmedia.com/articles/read/the-next-frontier-for-demand-response-natural-gas#gs.2p7u83)

Jeff Hamel's picture

Thank Jeff for the Post!

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Matt Chester's picture
Matt Chester on Sep 9, 2019 8:35 pm GMT

Really interesting to see DR get moved into the home gas heating sector, thanks so much for sharing, Jeff. It seems that DR has gotten so tied to the electric grid and smart meters that it's easy to overlook the possibilities from gas-based DR, but I recall there being request for customers to lessen their gas usage in Michigan (I believe?) last winter during a shortage, and this looks like a great way to get ahead of that. 

You note that some of the barriers to gas DR are the more complex hourly pricing and the less sophisticated control systems-- are these the main barriers that gave electricity an advantage for several years or are there other technological reasons why DR with gas wasn't introduced in lockstep with electricity? 

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