Demand response helped some regions conserve electricity during heat wave

As blistering heat bakes the United States this month, it has been megawatts and "negawatts" to the rescue.

Power generation plants of all sorts have been able to keep air conditioners running. But last Friday, under the assault of a record heat wave, they were helped by demand response programs that were activated to raise thermostat settings, lower lighting, shut down pumps and production lines and shave peak electricity consumption in other ways.

"To be quite frank, it's imperative that those resources are there and able to perform," said John Moura, manager of reliability assessments at the North American Electric Reliability Corp. NERC hasn't determined the precise contribution from demand response in meeting last Friday's swelling electricity needs around the country. "What we do know is, we had resources out there that were committed to perform," he said.

The day passed without any significant blackouts, he added. "To my knowledge, everything performed as expected. I think we all agree it was significant."

The PJM Interconnection, which runs the nation's largest grid network in the Great Lakes and mid-Atlantic regions, relied on demand response providers to take 2,358 megawatts of demand off the grid Friday afternoon, said spokesman Ray Dotter. Its systemwide peak is over 158,000 megawatts, but the impact of demand response is greater in PJM's eastern side, where transmission connections are more crowded and excess generation is scarcer.


EnerNoc Inc., a Boston-based demand response service provider, saved 1,230 MW of electricity demand in 12 states Friday, including all of New England, New York, Maryland, Delaware, New Jersey, Pennsylvania and Idaho, the company said yesterday.

Automated cutbacks kicked in

Automated software systems triggered much of the cutbacks at hotels, retail stores and manufacturing businesses, said Tim Healy, EnerNoc's chairman and chief executive. In parts of New England, wholesale spot prices for electricity hit $560 per megawatt-hour on Friday, 10 times annual average prices, EnerNoc said.

Demand response programs reduced the amount of power that utilities had to buy at such prices, and that is of great interest to EnerNoc's business clients, he said. "Customers want to know how much money they are making. 'Am I helping bringing prices down, and what is my portion of the savings?'"

Demand response could cut peak demand by up to 15 percent in the United States, saving consumer dollars and reducing greenhouse gas emissions, according to government studies. However, a weak economy and the U.S. power industry's varied makeup and motivations are helping keep demand response programs below their potential, NERC's assessments show.

The U.S. grid reliability monitor estimated in May that about 35,600 MW of demand response programs was available to meet this summer's heaviest power demands, equivalent to the output of two dozen 1,500 MW power plants. The total is about 5,300 MW more than last year.

A 4 percent decline in nationwide electricity demand at the peak of the recession in 2009 meant that U.S. utilities had plenty of extra capacity available to meet heat wave surges. Reserve margins of available power supplies averaged an unusually high 25.1 percent of peak demand around the country at the beginning of this summer, reducing the need for demand response programs.

Automated but far from uniform responses

The enthusiasm for demand response also varies widely around the county. PJM leads with more than 11,000 MW of demand programs that customers and aggregators have pledged to supply when needed, amounting to 8 percent of peak demand, according to NERC.

The Midwest Independent Transmission System Operator (MISO) also has enough demand response on hand to handle 8 percent of its peak power requirements. At the other end of the line, the southeastern United States can meet about 3.5 percent of its maximum requirements with demand response. The Texas grid and the Southeast Power Pool are below 3 percent.

"There are certain areas where it's expanding much faster than others. There are different drivers," said Moura. PJM and MISO coordinate their utilities' operations and operate energy markets that allow demand response providers to bid against power plants for the chance to deliver peak period power, and win businesses. "There is a greater incentive for these resources to be in place," he said.

Demand response has also grown faster in regions where states have renewable energy standards and efficiency goals. "Demand response is a way to get there, to reduce carbon output, " Moura said. "There can be a market incentive and also a policy incentive."

In the current environment, aggregators like EnerNoc will concentrate on commercial and industrial clients that use enough electricity to justify the expense of installing control equipment. Larger customers also have a clearly focused profit motive for trimming electricity costs, Healy said. Companies like his have to pay a performance deposit to grid operators, as insurance that power will be curtailed when it has to be.

"We have to put down tens of millions of dollars up front to reserve the right to provide these resources to operators. The grid operator needs to plan the system and hold feet to fire and make sure someone is committed" to deliver the demand reductions, he said. That favors working with large companies whose energy responses are dependable.

Household programs grow more slowly

Similar programs for households will take considerably longer to become established, he said.

"Households will probably play some role in demand response, although not the same as industry and commercial entities," Healy said. Residential customers are more likely to sign up with utilities that provide incentives to use programmable thermostats and appliances, in some kind of bundled rate offering.

How eagerly utilities expand demand response will depend on their circumstances. Those that own generating plants and get a return on hard assets likely have less incentive to substitute demand response for running power plants than a utility that has to pay top rates to merchant peaking plant operators when demand soars, Healy said.

Dominion Power, Virginia's largest utility, is in the second summer of its Smart Cooling Rewards program. It pays customers $40 a year for the right to install a radio control device on outside air conditioning units, permitting Dominion to switch the units off for 15 minutes at a time to reduce demand.

It has enrolled 23,000 households, a fraction of its 2.4 million customer base, and is able to reduce peak demand by 25 MW, also a small slice of a 20,000 MW peak demand. Dominion isn't currently considering whether a higher price might encourage greater participation. This is the plan it decided to offer, and its state regulator agreed, said spokesman Karl Neddenien.

FERC is promoting a national plan to expand demand response programs, following a mandate in the 2007 Energy Independence and Security Act. In a sharply debated action, the commission ordered in March that demand response providers receive the same market price that generators receive.

FERC's action plan recognizes that automatic programs that produce power savings on demand are easier to forecast and more certain than market-based programs that count on consumers to respond to higher real-time prices by cutting their own electricity use.

Several high-profile smart grid programs funded by the Energy Department with Recovery Act dollars in 2009 are testing how much household and business customers will conserve power when prices rise. But it will be several years more before those experiments deliver their results and lessons, FERC said.

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