Demand Response-A More Operational Resource for Utilities

Utilities should appeal to the customers’ needs when “selling” demand response programs.
Published: Mon 16 Jun 2014

The US Demand Response market has reached a point where it can potentially meet about 9.2% (i.e. 72,000 MW) of peak demand nationwide. This represents an increase of 22% from 2010, according to the annual demand response survey conducted by the Federal Energy Regulatory Commission (FERC).

Over the next few years, with the grid becoming even ‘smarter,’ a number of demand response programs can be integrated. This will further assist in harnessing the full potential for peak reductions.

Demand response benefits are undisputed

The importance and relevance of demand response to the advancement of efficient and cost-effective grid management is undisputed. Successful programs can lead to more competitive electricity markets, cheaper responses to emergency system overloads, more efficient incorporation of distributed energy, increased reliability of supply, and greater information flow between the utility, customer and load serving entity (LSE).

In the US, there are a number of utilities that are constantly aiming to expand their demand response programs. This is in response to the successes of these programs. Jason Cigarran, vice president, corporate marketing and communications at Comverge, points to Pepco Holdings, which recently expanded its residential demand response program, Energy Wise Rewards. This expansion was done with Comverge, a leading demand response services provider.

In addition to the benefits, utilities in the US take demand response very seriously since the regulator holds them accountable if demand response targets are not met. Penalties vary from state to state for utilities who fail to meet their set targets. Some may face a financial penalty if they fail to achieve at least 70% of the target.

To expand demand response programs, utilities reach out to their customers via the following mediums:

  • Direct mail-Flyers are normally sent out along with the utility bill. The flyer discusses the financial benefits of taking part in demand response programs. Cigarran says that this is the most popular form of communication.
  • Email

  • Call Centre
  • Website

  • Door to door

Appeal to customers’ needs and expectations

Cigarran explains that customers don’t care as much for the capacity issue which utilities are up against but rather, reducing their utility bill and being more environmentally sensitive. This is the approach that utilities should adopt when approaching customers to join demand response programs.

He adds that some customers prefer a more passive participation, but others like to have control over their own appliances and consumption. With this approach, customers are able to remotely control their thermostat according to the tariffs. Utilities send mobile messages, for instance, to appeal to customers to adjust their usage.

Says Cigarran, “Utilities need to provide the consumer with a simple explanation of the program’s terms and aims. Customers also respond well to options so choice within the program is very important. It’s also important for customers to understand their level of participation and know that their day to day operations will not be affected. Once the benefits are understood, customers are generally willing to participate.”

We asked Cigarran whether utilities are prepared to pay for the demand response technology. He said that utilities are willing to spend on demand response technology as the cost savings are well worth the product cost. “In the long run, demand response usually proves to be economically beneficial,” explains Cigarran.

Demand response is cost-effective

Many utilities are viewing energy storage as the next best thing as far as grid flexibility is concerned. We asked Cigarran what his company’s thoughts are on this and he responded, “While there are many approaches to dealing with peak demand, energy storage is currently not yet as cost-effective as demand response.”

We asked Cigarran whether utilities are a necessary part of Demand Response or energy efficiency programs and he listed two types of programs:


2. Run by Independent System Operators (ISO)

He added that they both have a different dynamic and economics but both are crucial to the success of demand response overall.