Commentary

Smart Grid Demand Response: Why Today’s Leaders are at Risk as DR 2.0 Emerges

Apr 27, 2010

I've previously written about Schneider Electric’s virtual power plants. The company is also a leader in thinking about next-generation demand response and what it will entail. If the company is correct – and I think it is – today's demand response (DR) leaders could be at risk as the market transitions from DR 1.0 to tomorrow's DR 2.0.

Schneider talks about three types of demand side management:

· Load shedding or load curtailment that simply shuts off a device during peak events, typically fewer than 10 times per year.

· Load shifting, a more sophisticated technique that moves loads away from the peaks, sometimes by preheating or precooling, other times by delaying an activity (pool pumps, defrost cycles, dishwashers, etc.).

· Load shaping, which constantly fine-tunes demand in real time to adjust to fluctuations, such as those caused by intermittent renewables.

DR 1.0 was about load shedding, and that's still at the heart of the offerings from today’s market leaders Comverge and EnerNOC. You could say that load shifting will move us to DR 1.5. It gets lots of discussion today, but it has only been tested in pilots and never at large scale.

DR 2.0 will be able to accomplish those first two tasks. It will also be capable of load shaping -- of responding within five minutes to utility signals, making it ideal for buffering the surges and sags of renewables such as wind and solar.

Schneider believes load shedding is relatively easy; load shifting a bit more difficult; and real-time load shaping the hardest of all. They think it requires highly sophisticated meters and software and, therefore, will have a high barrier to entry.

Despite the difficulty, DR 2.0 is likely to be in high demand in the next few years as intermittent renewables become an ever-increasing percentage of total power. A majority of states now have renewable portfolio standards that require utilities to ratchet that percentage up each and every year. Utilities will need DR 2.0 (along with energy storage) to integrate all those renewables without bringing down the grid.

DR stalwarts such as Comverge, EnerNOC and CPower may not be as glib as Schneider in describing the transition. And they may not have as big a bankroll. But you can be sure they have already spotted which way the wind is blowing [pun intended]. It will be interesting to see which companies will be nimble enough -- and well funded enough -- to do battle with Schneider in this next phase.

Do you agree that Smart Grid Demand Response 2.0 is on the horizon? Which vendors are best positioned to make the transition? Which utilities will need it first? Use the Talk Back comment form below to let us know.

You might also be interested in …

Smart Grid Demand Response: Schneider Reveals Ambitious Plans to Create Virtual Power Plants

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SGN Profile of Schneider Electric

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National Action Plan for Demand Response (pdf)

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Current Comments (11)

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DR 2.0

The folks at Schneider get it.

Jack Ellis - 04/28/2010 - 07:16

demand response 3

Important to note that most smart meters are read once per day even if the readings are 10-15 min readings and that will pretty much defeat the load shaping techncially which means we have to move more toward real time monitoring of we want to do real time control. There is also a business hurdle in that if a user wants to provide ancillary services they have to respond to a dispatch signal not just a pricing signal plus they would want to get paid for it - i.e. change out of the ERP level.

Challenging but i think that is where we are heading.

pat kennedy - 04/28/2010 - 07:49

iDrop

Integral Analytics has an interesting load shaping product called iDrop. As long as customers sign up for utility management of their loads, I think the model could work - but if utilities try to require it, I doubt it would fly politically or socially.

Karen Herter - 04/28/2010 - 07:53

iDrop

I agree that iDrop is very interesting and, on paper, could provide some of the capabilities needed for DR 2.0.

Jesse Berst - 04/28/2010 - 08:57

shaping does not negate need for shedding, or shifting

Yes- real time load shaping will be a necessary part of grid system operations moving forward, especially with higher penetration of variable generation. Short-term, fast response storage is also part of the solution.

That does not negate the value of load shedding and shifting. The need will still exist. All three services are going to be part of our future.

It does not make sense to suggest that companies providing demand-response services today are at risk due to the development of fast-response regulation services.

Chad Blevins - 04/28/2010 - 08:57

More than one tool in the shed for DR 2.0

Agreed that automated load shaping will be a big part of DR 2.0, although it will not be the only part of it. The challenge in using DR as a regulation service to “load shape” with 5 or 10 minute notice are the expenses for metering and control equipment. This limits participation to those that can justify an ROI for the expenses to play. In the case of office buildings, the ROI may be appealing to larger buildings or aggregated groups of buildings that have a single stakeholder paying the bill. For small to mid-size buildings or buildings that have many sub-metered tenants, establishing a convincing ROI will be more difficult.

Short term regulation resources are typically used more for load balancing than peak load reduction. As Chad points out below, there will still be a need to for reducing the overall peak. This need may be served by using traditional capacity based DR programs or by leveraging the rich set of data that will become available as the smart grid matures. As customers get easier access to real time usage data without the costs of installing additional telemetry equipment, the DR world becomes open to a much larger set of customers. Traditional “command and control” approaches for peak reduction will be augmented with approaches that “inform and motivate.” When the real time cost impact of energy use behavior becomes painfully transparent to customers, more customers will alter their behavior to shift use from the higher cost peaks. The motivation may come from real time prices or through hourly DR incentives from the customers RTO. This should not be ignored in discussions of what DR 2.0 might be.

Rich Quattrini - 04/28/2010 - 11:41

What are we shaping and by how much??

First the objective; to reduce the running time on fossil plant and ensure the remainder runs at best efficiency (usually full load) when on the bars.

Next, there is only so much demand you can move around on a given day. However, bigger benefits can be gained by shifting demand between weekdays and weekend days. Seasonal shifts are of course really difficult, but, wouold they be possible??

And, where you have large penetrations of variable output and unpredictable renewables, the residual load on fossil plant will be very different from day to day and carry a high level of uncertainty. It requires a high level of customer activity to counter that so efficient storage is probably going to be required as a buffer.

The main issue is to explain all this to the customer in an interactive constructive dialogue. New tariff structures should be introduced in stages and, at each stage, billed in parallel with the customers' existing rate structure to show the effect of change. Also allow the customer to pay the cheaper of the two rates as a safety net.

Stephen Browning - 04/28/2010 - 12:40

Is DR 2.0 about Demand Side Innovations?

Hello Jesse,

This is a very good contribution which makes me go back to more than 5 years ago. Your commentary is truly an eye opener for many people, as it goes beyond the homogeneous Smart Grid (SG) and Demand Side Management (DSM) conventional wisdom. Under a heterogeneous SG it is clear that three “s” market segments –shedding, shifting, and shaping (instead of shaping, I suggest below a system operation function) are available, the question is about their potential value creation to stay in business.

I first met some folks (now) at Scheneider Electric back in 2004 and 2005, where I made one presentation at each of two Peak Load Management Alliance (PLMA) meetings. At that time the folks I met were at RETX. As will be seen next, it seems that I made a lasting impact on their mental models and project opportunities.

In the September 2004 PLMA Presentation, "Achieving Electricity Market Value Through DR Technologies ( http://bit.ly/cfhmgY )," I suggested that "DR is performed to keep the system in the Normal Operating State economic dead band." In addition, I wrote about in slide 10 of a difference between supply and customer orientations. That supply orientation is all about DSM to manage the value of lost load in the whole system.

The customer orientation, however, is about an innovation on each customer’s individual value of lost load that needs to be well coordinated. I guess then that DSM is a concept which makes a DR 1.0 application for the homogeneous SG.

As Schneider Electric write about real time load shaping, saying that "They think it requires highly sophisticated meters and software…" the idea of a homogeneous SG goes to the drain. Each customer should be able to choose to invest and thus require competitive retail markets. By the way, I suggested in the mentioned presentation the changing of EPRI's shape objectives to a superior approach based on keeping the system in the Normal Operating State with DR actions.

As explained in the EWPC article "Forget Demand Side Management (DSM); Think Demand Side Innovation (DSI) ( http://bit.ly/8LtybG ),” I firmly suggest that your commentary and this post are clear evidence of the emergence of DSI. In other words, as DR 1.0 was designed for a homogeneous SG with a DSM with a supply orientation, Should we agree that DR 2.0 should be designed for a heterogeneous Smart Grid as a DSI under a customer orientation?

José Antonio Vanderhorst-Silverio, Ph.D. (at http://bit.ly/d38itj )

José Antonio Vanderhorst-Silverio, Ph.D. - 04/28/2010 - 13:13

Service Entry Load Management

Jesse,

Thanks for the interesting article. As the grid experiences more demand and less dependable power sources, customers can expect greater voltage variation and power suppliers will have a greater need for consumption management. Voltage regulation at the service entry of the customer can help mitigate power problems and a means for energy suppliers to "load shape".

I encourage you to investigate Microplanet's programmable voltage regulation products at microplanet.com

All that remains is a mechanism to provide reliable, hack proof communication from the voltage regulator and the central control system. This would provide an accurate, dynamic tool for setting voltage at the load and allowing the grid servo to manage temporary brown outs without service interruption. The customer would enjoy a steady voltage setting for increased electronic product life.

Dan Lennon - 04/28/2010 - 14:36

Smartgrid 2.0

Jesse:

I couldn’t agree more with your sentiments. As others have noted, Schneider is not the only player in the market that is addressing “Smartgrid 2.0.” See for example Energy Intellect (www.energyintellect.com) out of New Zealand. Energy Intellect already has the sophisticated metering and software that enables real time load shaping and they have commercially deployed their technology in the ISO market in New Zealand. In other words, the Kiwis have already blown through the barrier and are deploying Smartgrid 2.0 today.

Hugh D Baker Jr. - 04/29/2010 - 19:45

Pilot programs testing "Smartgrid 2.0"

You may already be aware of this but if not, there are pilot programs underway funded by Bonneville Power Administration and others here in the Pacific Northwest testing the use of load with thermal storage (electric water heaters, space heaters and refrigerated warehouses to provide wind/load balancing services. System operators here are very concerned with excess generation, so the ability of load to go up as well as down is crucial. Results next year.

Ken Corum - 12/08/2010 - 08:13

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