Demand Management as a Stepping Stone to Demand Response

Sep 22, 2016 | Blog

By Jeremy Laundergan, Vice President of Consulting Service

Since our founding in 2003, EnerNex has been involved with grid modernization efforts related to Demand Side Management (DSM) including energy efficiency (EE) and demand response (DR). Our work with Southern California Edison (SCE) on the Use Cases for utilizing Advanced Metering Infrastructure (AMI) to facilitate DR included the enablement of dynamic pricing (time-of-use (TOU), critical peak pricing (CPP), peak time rebate (PTR) and real-time pricing (RTP)) as well as meter functionality to receive and relay DR signals from a utility to DR enabling devices in the home or building.

While the technical aspects for enabling DR have continued to mature over the past decade, DR continues to be predominantly a reliability resource associated with utility load control of customer’s hot water heaters or air conditioners. Reliability resources are needed as contingency resources when there is not enough supply (generation) to meet demand or there is a delivery constraint (e.g. distribution capacity) preventing electricity from getting to where it is needed. While reliability and contingent resources are still needed, modern DR technologies are more customer friendly and enable more versatile programs, such as quick response and short duration DR events.

EnerNex has worked with the California Independent System Operator (CAISO) to examine barriers to DR participating in the wholesale energy market as well as the cost of integrating DR into that market. The idea is that electricity is a commodity. With a typical commodity, demand decreases when prices increase and demand increases when prices decrease. In the case of electricity, consumers have neither the insight into nor exposure to the real-time wholesale energy price. For example, consumers can see the price for a gallon of gasoline at the gas station or a gallon of milk at the grocery store and directly trace that to wholesale commodity prices, but there is no similar price transparency when using electricity. Electricity rates are typically flat with one price per unit (kWh) regardless of when the electricity is consumed.

There are some areas like California that have a tiered rate structure for residential customers to promote conservation as well as dynamic pricing for non-residential customers. Additionally, commercial and industrial customers may have a demand charge associated with their peak monthly and/or yearly peak demand (kW). Therefore, to get a commodity interaction between the real-time price of electricity and electricity demand, consumers have to either be on a RTP rate (like some customers in Illinois and elsewhere) or participate in an aggregated demand response resource managed by the utility or third party DR provider. The utility or third party DR provider then participates in the energy market by bidding the DR resource into the market at an economically feasible price, which is hopefully competitive with the next available generation resource while compensating the customer for their participation.

Unfortunately, the basic concept of DR is not very familiar to the majority of customers, let alone the more advanced participation of DR in wholesale energy markets. On the other hand, EE programs have been highly successful for over two decades, which can take at least partial credit in relatively flat growth in energy (kWh) consumption over the past decade[1]. As a result, customers now understand the concept of purchasing more efficient devices and equipment in order to save electricity. As states like California try to address future energy needs with the loading order[2] and New York contemplates Non-Wires Alternatives (NWA) for Reforming the Energy Vision (REV)[3], consumers will need assistance in understanding electricity demand management. The California loading order provides a logical progression for meeting future electric energy needs:

  • Optimize strategies for increasing conservation and energy efficiency
  • Set Energy Efficiency and Demand Response as preferred means of meeting growing energy needs
  • Meet generation needs with renewable energy resources and distributed generationHowever, with recent EnerNex experience in a Demand Management program, we have learned that we can utilize demand management programs as a stepping stone from EE programs to DR programs. Customer education through a demand management program can act as an entry level course to understand the concept of reducing peak electricity load while simultaneously saving the customer money with lower demand charges and laying a foundation for potential participation in demand response programs. By treating the energy management approaches of conservation, energy efficiency, demand management and demand response as successive steps for customer education and voluntary participation in demand side management (DSM) programs, the industry will achieve a more holistic approach for DSM.

    [1] U.S. Energy Information Administration 0 Sales (consumption), revenue, prices & customers: http://www.eia.gov/electricity/data.cfm#sales

    [2] California Energy Action Plan I, May 8, 2003: http://www.cpuc.ca.gov/PUBLISHED/REPORT/28715.htm; Energy Action Plan II – Implementation Roadmap for Energy Policies October 2005: http://www.cpuc.ca.gov/PUBLISHED/REPORT/51604.htm

    [3] Ney York Alternatives for Reforming the Energy Vision (NY-REV): https://www.ny.gov/programs/reforming-energy-vision-rev
Smart Metering (SM) and Advanced Metering Infrastructure (AMI)

Smart Metering and AMI is a transformational process addressing multiple business and technical needs of the utility enterprise. This is more than just smart meters and communications networks; it includes all of the back end applications that can leverage the meter assets, such as outage notification, demand response, call center optimization, disputed billing process handling, pre-payment opportunities, and service connection management methods and procedures, to name a few.

Implementing SM and AMI faces the same business, engineering, and operational challenges as any other across-the-utility information technology endeavors – most notably risk associated with embracing proprietary technology, missing functionality and early obsolescence. Effective SM and AMI development, implementation, and operation relies on a marriage of electric power engineering with information technology expertise: a key component of EnerNex’s expertise and experience.

EnerNex provides an array of engineering and consulting services geared towards intelligent and effective implementation of SM and AMI. This covers all phases of project development, starting with capturing system requirements where our experts leverage a “Use Case” centric view of activities needed to be accomplished and their interaction with systems and other users. Subsequent project steps typically examine other critical areas, such as: modeling of business cases, building inter-department consensus, assembling and assessing system functional requirements and non-functional requirements, developing a system design, hardware and software specifications and standards, complete procurement services including RFI and RFQ process support, supplier rating system, response evaluation methodology, deployment management, and training of office and field personnel.

Demand Response (DR)

Demand response can be as simple as load interruption directed by the energy supplier in response to severe demand requirements, to complex customer defined load management in response to price signals. DR is one of the components of a “Non-Wires Alternative” that many utilities are effectively using to avoid expensive distribution fortification or upgrade.

 

Often the success and/or failure of demand response programs can be linked to program implementation challenges such as rate/tariff design rate structures communication (e.g. price signals) or ineffective incentives used by utilities to encourage customers to accept operational change. The issues of program design, rate structure and customer impact have a tremendous influence on the success or failure of load management initiatives. Demand response has traditionally been used as a tool of the energy industry to ensure system stability. However, the introduction of microelectronics, communications, home automation and the Internet of Things (IoT) has led to the development of cost effective solutions that have the capability to allow the consumer to take control of managing their energy load and ultimately, the price they pay for energy.

EnerNex has the experience and skills to turn your DR program into a successful operational asset and customer engagement process that can deliver value to all parties.

Energy Assurance Planning

Natural and man-made disasters cause an estimated $57B in average annual costs for all parties; large single events have resulted in losses of $100B or more. Events, such as the World Trade Center disaster, Hurricane Katrina, and most recently Hurricane Helene, have demonstrated an acute need to revisit, revise and implement an effective energy assurance plan. Energy assurance plans assess the functionality and interdependencies of buildings and infrastructure systems and the role they play in sustaining service and rapidly restoring critical services to a community following a hazard event.

 

EnerNex assists our clients in developing comprehensive energy assurance plans that mitigate and minimize the impact of energy disruptions. Our experts assess critical infrastructure risks and evaluate appropriate mitigation strategies and can help in developing an effective business continuity/disaster recovery (BC/DR) plan for utilities and your customers.

Microgrid Development

As the electric grid becomes more distributed and interactive, microgrids are playing an increasingly important role in our energy future. Decision makers at military bases, corporate and institutional campuses, residential communities and critical facilities across the world are exploring and implementing microgrids to meet economic, resiliency and environmental goals. Utility-grade microgrids are being deployed to meet transmission constraints, reliability requirements and safe-havens in the event of a significant storm event.

Microgrid_development Graphic steps to support grid modernization

Bringing together a portfolio of distributed energy resources into a controllable, islandable microgrid comes with its own set of challenges. The key to solving these challenges is in architecting a system to support information exchanges between components across well-defined points of interoperability (interfaces) in a technology independent manner. This interoperability ensures that the system is resilient to technology change. Modern systems engineering techniques must be employed to ensure that individual sub‐systems are clearly identified, their functions enumerated, their data requirements known, and the points of interoperability clearly specified, along with the commensurate monitoring, command and control that is needed to ensure grid stability. With such architecture, we can apply best of breed technology available today to support those information exchanges at interface boundaries but be free to upgrade / change the implementation technology later without causing a ripple effect throughout the system.

Enterprise Architecture

Enterprise Architecture focuses on aligning an organization’s business strategies with its anticipated, desired and planned technology enhancements. Enterprise Architecture provides a framework to cost-effectively transition from a current “as-is” technology to future enterprise-wide technological solutions. An effective Enterprise Architecture program aligns business investments with long-term business strategies while minimizing risk and providing superior technological solutions. EnerNex’s key asset is its highly skilled and experienced staff who are closely connected to both the smart grid and EA standards and practices. We provide clients with the insight necessary to operate a fully functioning smart grid, which is flexible, scalable, and vendor independent.

Grid Modernization Roadmap

Utility companies across the globe are continually modernizing their grid. Each company often has different rationales, objectives and priorities. Frequently, smart grid plans are developed for individual, incremental initiatives, rather than as a part of a whole, intelligent and interoperable infrastructure. Planning may be developed around technology choices rather than business and technical requirements. The result of incremental and flawed planning leads to increased cost and risk, lost opportunities, disconnected expectations and dead ends.

 

EnerNex’s approach to grid modernization roadmap development follows a proven, industry-standard approach to grid modernization planning by collaboratively working with the utility to develop a set of prioritized and time-phased grid modernization initiatives unique to its business strategy and objectives. The roadmap developed is holistic, requirements-based, business value driven and actionable. It often builds on and leverages existing applications and infrastructure, and incorporates industry standards to ensure interoperability, flexibility and reduced cost and risk.

Utility Communications

Utility communication and control systems are increasingly interconnected to each other and to public networks and as a result, they are becoming increasingly more susceptible to disruptions and cyber attacks. EnerNex has experience with the various issues relating to development, implementation and optimization including feasibility analysis, design, software development and customization, project management and acceptance. Our expertise extends from being involved in the development of the fundamental standards that support utility communication and automation, through deployment and securing of those resources. EnerNex personnel were heavily involved in development of such standards and protocols as IEC 61850, IEC 60870-5 and DNp3. Our staff played a key role in the EPRI Utility Communication Architecture (UCA) project and the IntelliGrid Architecture effort.

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