What Is Demand Response?
Key Takeaways
Buildings can earn money for cutting back energy use at crucial times, and even for just agreeing to participate.
Demand response helps protect the grid during critical times.
When demand for electricity spikes, grid operators call on consumers to help reduce or shift usage in response to time-based rates. The process is known as demand response (DR). Grid operators and electricity providers are building out demand response programs across the country, changing the way usage is billed to incentivize participation. The goal is to strengthen the integrity of the electric grid to ensure it can meet demand when power is needed most.
Protecting the Grid
Moving away from fossil fuels means switching to electric mechanical systems, appliances, automobiles, and more. Asking the electric grid to produce additional energy once produced by fossil fuels is raising the demand for electricity across the board. On a typical day that’s not a problem, but on days with extreme heat or cold, when air conditioning systems are running constantly, excess demand can threaten brownouts or blackouts. Brownouts or blackouts on such days with extreme conditions have proven deadly, keeping electricity flowing to all consumers is matter of life or death. That’s where demand response comes in.
When an event is called, building operators cut usage by shedding and shifting electrical loads. That may mean cutting lights where they’re not needed, temporarily raising indoor temperatures, and shifting appliance loads to off-peak hours. Anything to temporarily reduce usage. It’s all about each building saving a little energy to collectively save a lot.
Pricing The Problem
Grid operators augment energy pricing to reflect the strain on the grid during peak times. When demand spikes, peaker plants that burn costly fossil fuels are fired on to meet demand and prevent brownouts, causing the cost and carbon emissions of energy to skyrocket. Time-of-use pricing, real-time pricing, critical peak pricing, variable peak pricing, and critical peak rebates are used to communicate the cost to consumers and incentivize reduction. Commercial owners know much of their bill is based on some form of peak pricing, assessing energy costs based on how much the building demands during peak hours, typically around midday. Demand response is a way for owners to turn the most expensive time of day into one of the most profitable.
Demand response incentives can be packaged in various ways, some more active than others. Many grid operators like New York’s ConEd offer money to commercial owners simply for agreeing to participate. Grid operators are rolling out advanced metering infrastructure (AMI), also known as smart meters, which provide energy use information at real-time intervals. Armed with this technology, building operators can manage their energy use dynamically and grid operators can offer incentives programs to shift or shed load at critical times. Any building with its own on-site generation can earn additional revenue for supplementing its demand with on-site power or double down and sell power back to the grid for even greater profit when called upon. Tariff structures like peak demand pricing are a passive incentive, encouraging building operators to ‘flatten’ energy use to save daily.
Nantum OS helps buildings achieve both passive and active incentives by managing communication between grid operators and on-site renewables and automating daily reduction efforts. Agreeing to just four hours of demand response can net a building thousands of dollars on a hot summer day.
