Can Utilities Afford to Ignore Demand-Side Response Management?

Heidi Vella

Demand-side response technology can help utilities better manage load dispatch at times of peak demand, gain greater insight into customer behavior, and capture new revenue streams.

Traditionally, utilities have considered demand-side response (DSR)—a scheme that incentivizes customers to lower or shift their electricity use at peak times—as separate from their core business of balancing energy supply with demand.

However, as the electricity network continues to evolve, the business case for considering nonwired solutions such as demand-side response shouldn't be overlooked. Utilities are discovering that DSR technology offers many benefits and can be painlessly integrated into their operations.

Better Management of Generation Margins

Demand for electricity naturally varies throughout the day, with peaks and troughs in usage. While baseload generation is usually adequate for lower levels of demand, providing enough energy at peak times requires upfront investment in peaking plants with partial-load and/or fast-startup capabilities.

The increased adoption of intermittent renewables further complicates the real-time management of energy supply and demand. Therefore, utilities need to look at different solutions to better manage the flow of generated electricity against demand.

DSR systems, a growing number of which are currently available, can help dispatchers reduce the burden of peak demand in real time by reducing demand for short periods of time when needed. This relieves the pressure on utilities, helping them to better manage load throughout the day and potentially avoid the need to start up part-loaded or fast-start peaker plants to meet spikes in demand.

"Fundamentally, you are trying to serve demand, but the timing of when you serve demand is actually quite flexible," Marissa Hummon, director of product at Tendril, tells Transform.

"System generators are deciding when to turn up load or turn down load, which are both really important, but this problem can be solved in the system at a lower cost using DSR," says Hummon.

Tendril is a demand-side management (DSM) and orchestrated energy software system that communicates with smart devices in a home, such as ecobee and Nest, to remotely manage energy use in those homes automatically, depending on the needs of the grid. For example, electricity use can be reduced if demand peaks too high or increased if there is excess power in the system.

In December, the company announced the results of the summer 2017 rollout of its Orchestrated Energy cloud-based software, which determines the thermal mass of a home, predicts customer behavior, and coordinates with connected IoT devices to create a personalized dispatch schedule for every home.

The rollout ran across 15 states and three utilities, including Indiana Michigan Power and Xcel Energy. On days when Tendril was in control of customers' thermostats, utilities reduced HVAC load by an average of 85 percent during the demand-response window, and delivered HVAC energy-efficiency savings of 14 percent.

As the results show, Tendril's DSR model can help utilities reduce load on a consistent basis through preplanning with data insights.

Some utilities simply want a program to cut load occasionally, maybe a couple of times a year, but the utilities we work with want this combined into their continuous operation, on a day-to-day basis, to achieve small changes in the shape of the demand profile to lower the cost of getting electricity to their customers," says Hummon.

Better Customer Insights and New Revenue Streams

As the Tendril example shows, DSR can also provide more accurate predictive dispatch modes for better ongoing management.

"Maintaining a reliable system and changing demand when you have imperfect knowledge of it to begin with, such as data sources that are not robust enough, can be hard for system operators," says Hummon.

For a vertically integrated utility that manages energy supply from generation to the consumer-facing end, information from demand-side response management solutions can also provide new revenue streams.

"It is another revenue stream for a utility, so when they are evaluating the cost-effectiveness of the program, they are deciding what the system benefits are and, depending on their structure, how they can monetize that benefit," says Hummon.

DSR systems, along with time-of-day pricing, can provide significant energy-efficiency and cost-saving benefits to customers if they use energy at the preferred time. Utilities can also sell energy-efficiency devices to customers keen on cutting down their energy use for an additional revenue stream.

Other side benefits and cost savings include avoiding or delaying the need for system upgrades and using DSR to respond to sudden power plant outages, which reduces the cost of reserve power required for such events.

In India, for example, where power outages are commonplace, the startup Ecolibrium Energy is using DSR in its SmartSense analytics platform to reduce the energy consumption of industry and provide much-needed relief to the grid.

Integration and Adoption Challenges

Technological integration is considered relatively simple and will mostly be dealt with by the demand-side response partner.

"The point of integration between us and the utility is generally at a systems operations level. The systems operation group will put out the shadow price on the cost of electricity by the time of day and then forecast for the [following] 28–48 hours. We can use that to then shape demand and return to the systems operator a new demand profile," says Hummon.

However, she adds that one of the challenges to DSR technology is customer adoption, which can sometimes be challenging, particularly for residential customers who might not want to invest in extra technology or even engage with their utility at all. One way to overcome this is for the utility to share the upfront cost of the in-home devices.

The second challenge, Hummon says, is getting system operators to view the DSR systems as a reliable resource and something they can actually count on as part of their dispatch system: "I think that is more attitude-related and behavior-related than it is technical, but it is still a big barrier to maximizing the full value of load management," she adds.

Demand-Side Response for Future Agility

The National Grid in the UK is actively trying to encourage more demand-side response solutions in the energy network with its Power Responsive campaign.

The campaign states that DSR and other forms of flexible technology, such as storage, can help to provide the capacity and flexibility needed to operate the electricity system in tomorrow's world.

Hummon concurs. "There's definitely a role for managed demand in the future. I look at it as something that can fill in gaps. It can help with those high-priced combustion turbines, because: It ramps quickly; it is responsive; it is available for short periods of time; and it matches those characteristics well," she says.

Demand-side management and response technology is not a one-size-fits-all final solution for renewable integration and load management. It does, however, offer tangible benefits for utilities that need to find new ways to manage their business in a constantly evolving industry. DSR can be a key nonwired solution that helps utilities remain agile and ahead of the curve.



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