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Editor's note: We told you recently about further proof AutoDR is fast becoming a reality and pointed to a Swiss pilot that may offer a better way to do demand response.  That discussion continues with today's commentary from Kevin Klustner and Todd Greenwalt of Powerit Solutions which, you may recall, was one of our 12 Companies to Watch in 2012 as voted by SGN readers. Update: After reading this article, Comverge executive John Rossi wrote a response suggesting a holistic approach to demand response can meet (and exceed) the hype.

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By Kevin Klustner and Todd Greenwalt

 

With all the hype in the market about how demand response (DR) is going to grow, many players –aggregators, utilities, and smart grid technology vendors – have assumed that they could succeed by pursuing DR on a stand-alone basis. We think the market is about to realize that to be successful, DR has to be part of an integrated demand management ecosystem.

 

Today’s demand response system is not scalable. Utilities and aggregators are focusing resources on DR participants – commercial and residential customers – that can’t deliver large, on-call reductions and are challenging to sign up. For example, earlier this year the Maryland utility Pepco recruited 150,000 customers, partly by going door to door, to provide about 200 megawatts of demand response.

 

About 100 or fewer industrial customers can deliver that much electricity with advanced automation. But utilities and system operators are spending large sums of money to compensate participants who use very crude, manual-response methods that limit DR capabilities. And aggregators, which play a crucial role in developing DR capacity, are likely to see staffing expenses rise as utilities bring on programs involving more frequent, shorter-term DR events – which mean more customer calls.

 

Operating as it is, this system won’t deliver the level of participation and control we need to ensure grid stability, integrate intermittent renewables into the grid, and generally optimize energy use.

Missing links

Given the level of reductions they can deliver, energy-intensive businesses are the linchpin of a successful DR market. Yet some observers looking at industrial DR – our

expertise – have concluded that the market is saturated. We think they’re missing the elephant in the room: lack of automation. The market may be saturated in terms of what manual DR can do, but automated DR capacity has barely been tapped. In California, the nation’s largest DR market, Southern California Edison’s automated DR capacity has been estimated at less than 10 percent.

 

Much of this problem can be traced to missing links in the DR ecosystem:

·         Industrial automation vendors are new to DR and demand management, and their products currently don’t connect directly to DR programs or the smart grid

·         Industrial businesses have put DR initiatives on a separate track from facility automation projects, making them islands disconnected from core facility upgrades and business initiatives

·         Aggregators can connect to the smart grid but lack hands-on expertise in the industrial automation environment

·         Demand response management system (DRMS) vendors don’t have the capability to connect the last mile from the grid to the factory

·         Utilities don’t have the experience to sell the connection capability to end users

 

Links between all these players and systems must be forged for DR to realize its potential. Without these links, there’s simply no way to succeed on a mass scale with the kinds of short-term DR events that can instantly relieve grid stress.

Page 2: The way forward >>

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DR choices

While I agree that chillers and other equipment needs controls embedded, let us not get into the rut of the "Right Way" to do demand response, please. There are many program types, they can all work in the right setting with the right incentives. Direct load control - discredited by almost every pundit in the industry, is the major segment of the FERC report to congress on metering and demand response. The vast majority of that program comes from 1 utility – Florida Power & Light and from one program there “On Call” – a program that touches almost 1 million customers. The waiting list to get into the program by customers is months long – the reason? FPL has enough DR from the program. Pricing programs work, time of use programs work, commercial programs work and industrial programs work. They also don’t work. It is about the setup, marketing and equipment involved, as well as the on-going program management. If we decide on the “best” way to do DR, we will effectively settle for a toolbox with only a hammer in it. If you want to pound nails it will work great, but if you need to cut a new piece of window glass it might not. I appreciate people taking a stand on their technology and their programs, I think the industry needs to have a real attitude of “all of the above” and embrace all types of DR, each utility than should embrace the programs that work best for itself and its customers.

Doug Houseman - 11/09/2012 - 06:44

DR choices

I love tools and tool boxes. I also have great respect for Doug's opinions, however this time I have to disagree. Doug's suggestion for "all of the above" is a fine short-term transition strategy, but like 'flat rate pricing' it doesn't do a good job of prioritizing industry capability or DR resource allocation. We have 30+ years of pilots and implementation efforts that clearly identify that automated DR provides more flexibility to address changing grid conditions, more reliability, better impacts, and much 'better' customer acceptance than direct control. There are several problems with direct control and most other traditional utility DR programs. First, they focus on a single load shaping objective - peak reduction. That won't do much for load shifting or managing renewables. Second, all the tools reside with the utility. The customer has no tools and no capability to plan for or avoid the inconvenience or disruption of demand response, reliability, pricing, or other events. The Lawrence Berkeley Lab and many utilities have been using automated DR for almost 10 years and the results are consistent - for residential and commercial/industrial customers automated DR just works better. With DR utilities have two choices - provide customers with the incentives to automate their load and build in long-term flexibility to address uncertain system load conditions or continue with the conventional fixed programs that don't have capability to adapt. From my perspective, there is no contest - automated DR is the 'best' way to do DR. What's ironic here is that automated DR is also capable of supporting direct control but the reverse is not true. So instead of maintaining a waiting line, FPL might want to consider transitioning now to automated DR, provide real customer service by giving all of their customers the chance to sign up and then continue to pay for and dispatch only what they need.

Roger Levy - 11/09/2012 - 09:12

Pundit, Professional or Market

Why not blend the approach and put forth all of the tools and let the market in each region and utility service area decide which is best. I know this, I know my utility pretty well but I don't know my utilities customer very well at all so what I think will work for them may not. Give them the tools now and let the market find the optimal solution. How about some freedom? http://www.richardadamiano.com/1/post/2012/11/johnny-freedom.html

Richard Damiano - 11/09/2012 - 10:09

Industrial invlvement

Electricity demand response potential is relatively much higher in industry than in housholds and even commercial sector. In industry- meaning in electrcitity intensive processes, which are using electricity as important process input, in large quantities. Therefore, important question arises, how can one integrate demand response directly with production processes? It seems that volatile electricity price response, as for exampl day-ahead pricing, is gaining on attention as a potentail way to save ona manufacturer's electricity bill. However, even tody there is (very often) no technology to do so. Do you agree?

Hubert Hadera - 11/10/2012 - 11:47

Investment Decision

What would cause a consumer to invest in AutoDR? In California, it seems that this investment hasn't happened because it isn't required for participation in most utility programs. What market or other mechanisms should be put in place? As a system operator, automation is highly desired as fast response is essential during a transmission system and generation contingencies especially in locally constrained areas. Another benefit of the automation is that it gives system operators more confidence in the response.

Heather Sanders - 11/12/2012 - 10:07

Reducing the complexity for C&I DR participation

IMHO one of the issues we see in the commercial sector is the inherent complexity (and hence costs -- equipment wise and operationally) to implement DR solutions, automated or otherwise. Once commercial customers see that much simpler solutions exist than they expected, there's huge potential to address an untapped load curtailment market (and yes, I strongly feel we have developed such a solution at our firm, which is why we've been so successful at engaging this market segment).

Mark Kerbel - 11/29/2012 - 08:17

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