City of Naperville issues a voluntary demand response event – Is this the new utility customer engagement model?

From 3pm to 7pm today (Tuesday, July 22, 2014), the City of Naperville has asked its electric customers to voluntarily reduce their energy consumption. By doing so, the City hopes to reduce the amount they’ll pay their electricity supplier in peak demand charges this month. More details and energy-savings tips are available on the City’s website here.

The formula for predicting monthly demand on a summer months is relatively straight-forward: Look for a hot day (91˚F predicted) and a time window that overlaps businesses with residents coming home (3pm to 7pm). Naperville is tapping into one of the most basic demand side management engagement practices – asking customers to reduce energy. In the case of Naperville, they stand to reduce overall electricity purchases and costs. In the case of an independent third party demand response provider, they are able to generate revenues from regional electric markets by selling back capacity resources for either emergency or economic reasons (e.g., expensive peak generation power).

Demand response (“DR”) program goals mostly break down into three core elements: the ability to monitor, engage, and verify overall effectiveness. However, program approaches vary:

  • Device-driven DR programs, dating back to the 1980’s and still used today, often involve installing control switches on end-user appliances, such as air conditioner units or electric hot water heaters. Regulatory bodies are comfortable with these resources, because the provider has the rights and access to directly control their device over defined times and durations. The device-driven model is the most familiar and widely-accepted form of DR resources in the market.
  • Behavioral DR programs, on the other hand, directly engage the customer to act as the load-modifying resource. Utilities with smart metering technology, in turn, can measure the incremental effectiveness of the DR events through data analysis as a way to compensate participants. A rising number of demand response providers (such as OPower with their recent BGE experiment or today’s Naperville public notification) are attempting to demonstrate that these behavioral DR programs can have predicable and verifiable demand savings to utilities and regional electric markets as device-driven models. If successful, these programs will be capable of delivering more incentives to drive participation.

Do you think that the future will be more or Device-Driven or Behavioral DR programs?

How do you see solutions like NEST and Open-ADR coming into play?

Regulatory bodies hold a tremendous amount of influence in guiding the DR markets. One thing is clear – Customers like options. We’re likely to see more DR programs offer flexible participation methods. For example, some customers will prefer to allow direct control of their devices, others will want to leverage their own equipment (for example, the ~1 million Nest Learning Thermostats in the market), and some further will prefer the freedom to voluntary manage their home or business load during each demand response event. Most importantly, the utilities and electric markets must continue to develop and tune their analytical methods of rewarding customer demand reductions – no matter how they are achieved.

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