Demand response set to grow

Demand response, or demand side management, one of the biggest potential solutions to manage surging power needs across the grid, is set to double worldwide by 2020.

According to a recent report “Market Data: Demand Response”, demand response (DR) sites will grow from 10.3 million today to 21.9 million in 2020, representing 155,479 megawatts (MW) of potential electrical load curtailment. 

It also predicts automated demand response (ADR) programs where utilities can curtail demand without customer action to grow faster than the market average. Europe’s need to integrate a larger number of renewables will fuel its ADR growth, while Asia-Pacific markets may effectively “leapfrog” over the basic DR programs directly into ADR adoption.

DR is already helping US grid operators keep the lights on during this summer’s heat waves, and it could not only help balance growing demand in developing economies, but also help integrate more renewables onto the grid in North America and the European Union.

Generally speaking, DR is any kind of agreement between an electrical utility and its customer where the customer agrees to reduce power consumption by a pre-determined amount when peak demand hits the grid and power supplies are tightest. The US Energy Information Administration recently projected energy use will increase 56% worldwide by 2040, with most of the growth coming in non-developed countries, and most of the electricity demand being met by fossil fuel generation. As energy needs grow, DR will help global grids get smarter, better able to integrate renewables, and be less dependent upon fossil fuel.

Utilities view these “reserves” as a way to shave electrical demand when they need it most, helping to not only keep the grid stable, but prevent having to dispatch the most expensive power plant options. In return, customers are compensated for their participation, either in the form of bill credits or direct payments.

95% of the more than 1,300 DR programs currently underway across the globe are located in North America, with a potential peak power reduction capacity of 66.4 MW, roughly 9% of US peak demand.

Now the benefits of DR are set to spread rapidly in most other regions of the world, and that could have a major impact on energy access and fuel mix in fast-growing economies. The aforesaid report expects global load curtailment to grow at a compound annual growth rate of 13.5%, mainly fueled by the European and Asia-Pacific regions, with smaller but notable growth in the Middle East and Africa.

The Negawatt of power

Demand response management of power has started fetching positive results in the US. Grid operator PJM last week released a report detailing the results of its demand-response programs after a new pricing rule was put in place last spring. Since last April, $8.7 million of revenue was generated in the seven months after the rule, called Order 745, went to affect – that was more than was made in the previous 41 months.
Last year, PJM increased its use of economic demand response by 714%, with 141,568 megawatt-hours taken off-line over the course of the year. One of the main reasons for the increase is a change in rules. With Order 745, large energy users, such as commercial buildings or factories, get paid the wholesale price for their power reductions when it’s cost-effective.
The sharp uptick in participation shows that big energy users are willing to turn down non-essential power use to earn money and that utilities can rely on this “resource” in a significant way. EnerNOC, which manages demand-response programs, says its services have displaced the need for 80 power plants that provide peak power.
Traditionally, grid operators turn on auxiliary power plants to keep pace with electricity demand, which typically starts going up in the morning and peaks in the late afternoon and early evening. Demand response helps meet that climbing need for energy during the day through reductions, such as adjusting thermostat settings, dimming lights, or changing when hot water heaters run. The idea is to run these voluntary programs so there’s no disruption to electricity customers and the changes, such as thermostat resets, are minor. Utilities run programs, such as raising air conditioner set points across thousands of homes, during very hot summer days when power generators are maxed out.