Last week I attended the Association for Demand Response & Smart Grid’s (ADS) National Town Meeting in Washington, D.C. The conference is an annual gathering of utilities, regulators, independent system operators and various other stakeholders to discuss the most pressing issues surrounding demand response (DR) programs at the utility level. The discussions ranged from how electric utilities are evolving their DR program design, rate design, and grid operations in the face of changing technology and market expectations.
Theme #1: Utilities can employ DR as a grid resource, more than just occasional emergency and economic dispatching.
This shift has not come easily or quickly. Traditionally, a utility’s role has been to deliver energy and maintain a flexible resource pool that it can dispatch to serve its demand requirements. Utilities have been deploying residential direct demand control programs since the 1970’s to reduce peak demands during supply shortfalls and high market prices. While utilities and regulators have preferred the device-driven control approach for its predictability, the challenge has been limited customer adoption.
Here are several key trends leading the next generation of DR programs:
- Rate designs are an effective tool to align customer and utility interests
- Default time-of-use rates and real-time pricing mechanisms will tend to educate customers and empower them to independently make cost-saving energy shifts
- Applying supply and delivery capacity charges to more customer classes (including residential) can motivate customers to contribute to utility and regional system peak reductions
- Advanced Metering Infrastructure deployment allows utilities to provide wide-reaching, low cost DR offerings
- Notification-based peak time rebates and incentives will provide customers with the flexibility to participate in peak events on their own terms, with savings calculated using customer’s interval data baseline profile
- Success Example: BGE’s Smart Energy Rewards program has seen high customer satisfaction scores and over 200 MW of demand reduction. Right now, West Monroe is working with several utilities to deploy similar peak time savings programs that leverage AMI interval data, not additional devices, to measure DR events participation.
- New technologies are directly enabling customers to manage their energy consumption
- At the compliance level, commissions should provide flexibility for utilities to demonstrate savings using multiple methods
- At the program level, utilities should be inclusive to a wide number of technology options (as Seth Frader-Thompson of EnergyHub said: utility DR programs should have a “bring your own everything” approach)
Theme #2: DR is just one of many Distributed Energy Resources on the grid
This year, the conference workshop and panels widened their focus to address customer-based energy resources confronting the electric utility, not just DR. Collectively, these ‘behind-the-meter’ activities are referred to as Distributed Energy Resources (DER for short) and most notably include distributed generation – mainly rooftop solar, but also includes fuel cells, CHP, and other standby generation resources – and energy storage technologies.
The rise of variable DERs, such as distributed renewables and energy storage, presents a significant challenge to utilities. Grid operators must account for DERs and how they modify the ‘net’ load shaping of service territories on a real-time and planning basis. The good news is that with the right price signals and utility coordination, DERs have the capability to complement and compensate for each other to deliver maximum value to grid operators. Examples of DER interplay include:
- DR programs complementing distributed renewables, like rooftop solar, during the late-afternoon summer demand peaks as the system output capability diminishes
- Energy storage compensating for the adverse load profile challenges created in areas with high penetration renewables (for more info, read about California’s dreaded ‘duck curve’ here)
The pace of technology adoption is bringing the customer closer to the utility. In response, utilities are building up their capabilities to embrace and manage the modern grid in the following ways:
- Infrastructure – deploying modern grid technologies, communications and supporting applications
- Incentives – Developing a balance of customer programs and rates to motivate their involvement in reliable and cost-effective grid operations
- Insights – leveraging real-time demand and DER data to create actionable operational decisions
At West Monroe Partners we realize that this isn’t an overnight solution. It all starts with good planning – as we like to say: “Think strategically, and carry a detailed roadmap.” During implementation, our team of technologists and business consultants work with the utility business units to deploy new technology and programs in the field. In production, we set utilities up with the tools (example: our Connect-the-Grid solution), processes and operational metrics that drive smart decisions.
For more information, please visit: http://www.westmonroepartners.com/Industries/Energy-and-Utilities