Consumer Engagement Will See Demand Response Take-Off

To help make peak energy usage more efficient and manageable, utilities are tackling the issue head-on: they are encouraging consumers to get directly involved with demand response programs.
Published: Wed 22 Jan 2014

Demand response gives consumers the opportunity to play a major role in the power grid’s operation. They can do this by decreasing or shifting their consumption during peak times in response to time-based rates or other forms of financial incentives. Mostly, utilities are engaging consumers by offering time-based rates (time-of-use pricing, critical peak pricing, variable peak pricing, real time pricing, and critical peak rebates.

Advanced metering infrastructure expands the range of time-based rate programs that can be offered to consumers and smart customer systems such as in-home displays or home-area-networks. The systems, providing data on the consumer’s consumption, make it easier for consumers to alter their consumption patterns and mindset.

Customers can also join the “direct load control program” which gives the utility direct control over their home air conditioners and water heaters during peak demand periods. In exchange, utilities award consumers financial incentives (around US$20-60 per year in the US), plus they get the benefit of lower electricity bills.

What’s in it for the customer

Although direct load control can be effective in reducing peak demand, the very nature of the process may discourage customer participation. Some may simply decide not to participate from the word go and others may opt out of the program due to a lack of understanding or motivation. Disengaged customers will leave the utility with demand response programs that are unable to achieve their goals, resulting in an unstable power grid. It is therefore essential that customers are kept interested by offering highly engaging smart software, effective and efficient communication with the utility and worthwhile incentives.

Engaging software

Software should be easy to use and accessible. For instance, in-home display units should be easy to operate and data, well communicated so that consumers understand it. For even more convenience, there are Smartphone apps that will provide the same data on-the-go.

Personalized energy efficiency coaching

Software should be designed to give customers personalised reminders about consumption and tariffs, as well as advice on how to be more energy efficient. This will empower the consumer to reduce consumption.

Comfort and control during peak events

Software should reveal information on the timing and duration of peak demand events, giving customers useful tips on how to lower consumption and stay comfortable during an event. Consumers can also compare their energy saving efforts with the collective efforts of the community.

Incentives

Rebates and incentives will always catch the consumer’s attention. Baltimore Gas and Electric (BGE) has been enjoying great demand response success due to an impressive level of customer enrolments in its program, Smart Energy Rewards. It allows customers to earn a rebate of US$1.25 for every kilowatt-hour of energy reduced during peak events. It is similar to programs at other utilities, but BGE’s initiative is much bigger.

Currently, about 900,000 residential customers will be enrolled in the program, and this figure is expected to grow to 1 million participants. BGE conducted four years of pilots to test different pricing options, such as critical peak pricing, where energy costs more at certain times, versus rebate-only programs. The utility found that the energy savings accrued from peak pricing and peak rebate schemes were similar, but that the rebate approach significantly improves customer satisfaction.

Convenience and efficient communication

Unlike other new residential demand response programs, BGE’s Smart Energy Rewards is not dependent on customers having a particular device, such as two-way digital thermostats. Customers can also choose to receive alerts via email, text or phone. Rapid feedback from the utility also rates very high.

With BGE, customers are allowed to opt out of receiving alerts, but all residential customers will remain enrolled in the program since there is no penalty or downside associated with participation.

The shift from consumer to “active demand response participant” proves to be a win-win situation for both the consumer and the utility. The consumer can look forward to a lower utility bill and extra money in the form of rebates, and the utility will have a more stable grid to work with.