Demand response (DR) as a topic is well into its adolescent years.  Together with its siblings, Time of Use and Interruptible Rates, DR has opened the door for large commercial energy customers to reduce costs while improving electric grid stability.

DR offers an actual revenue stream to those customers; and in many locations, alternate means of accessing markets to maximize that revenue.  Early DR implementations were both crude and manual. Facility managers would receive signals, then manually change control settings to lessen energy demand to a predetermined level, then wait weeks to see if it worked. The local DR sponsor (a utility or third party aggregator) would disburse cash weeks or months later.

While older, those techniques have taught us much -- lessons to cope in a new energy world: New EPA rules are forcing utilities to shut down major coal generating plants while state laws mandating a specific percent of renewable energy use introduces grid stability issues. And, energy demand will increase an average of 0.7% annually over the foreseeable future, says the Energy Department, while the grid is aging and causing stress points.

This means energy costs will increase over the next ten years.  Moreover, policy makers are discussing ways to expose all customer sectors to the true volatility of energy demand. The use of energy will become more expensive over the next ten years, and the time of use will have a far greater impact.  Additionally, energy managers will have to face challenges, such as tenants with electric vehicles and the increasing use of electric powered technology.

What has old-style DR taught us that can help us solve these problems? Quite a bit, actually.

DR metering provided some of the first insights about how we use energy and when. This data made it clear that large buildings were living organisms with distinct patterns and trends, and it also provided indications of errors, such as simultaneous heating and cooling, over conditioning of empty space, and so much more.

Wealth of Data

DR showed that energy meters could provide a wealth of data far beyond energy demand and consumption information, which if properly interpreted could lead facility managers to better decision making and ultimately to lower costs and greater reliability.
Now, savvy building managers are using techniques learned in demand response to actively manage their energy usage and reduce costs. With better energy profile information, managers in competitive energy markets can negotiate a less expensive supply contract. The industry has seen examples of dramatic savings, often in the range of 6-15 percent.  Is it any wonder that the US Green Building Council now considers DR program participation for LEED points?

Meanwhile, back on the grid, utilities were quick to realize this same demand response data gave them new insights about system health. Many of us assume our local energy supplier knows when we have a power outage or if a piece of critical grid equipment has failed.  However, this is not always true.  In many cases, utilities rely on customers to call and inform them.  DR metering at customer sites provides data rapidly (every 15 minutes or so) and through different channels (Internet or telecom system rather than utility meter systems).  This means it is much faster and it is redundant, both elements of reliability. 

Utility lessons learned from DR data have given rise to the concept of Smart Grid which is nothing more than the addition of communications abilities between physical elements of the grid. Smart Grid technologies enable a bi-directional flow of information between end users and utilities.  This ability has started to lead DR to evolve towards being a more active energy management tool, often called DR 2.0 or Demand Management.

The next energy frontier is connecting the Smart Grid to the Smart Building.  This will enable real-time communication between building energy management systems and utilities or DR aggregators, and make DR 2.0 a reality.  The technology exists today and some utilities are working with the local buildings community on pilot programs. 

On the grid side, utilities use similar models to monitor grid health and power costs.  They can locate trouble spots or provide useful data to customers on predicted spot price increases.
DR will become less invasive, more pervasive, and a mainstream part of our relationships with energy suppliers. To that end, in this new energy world energy consumers and utilities must work together to make more intelligent energy management decisions; DR 2.0 will help to facilitate this process.  As building operators consider future investments, they would be wise to plan for the next energy frontier: DR 2.0.

Phil Davis, is Senior Manager, Demand Response Solutions, Schneider Electric