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OwnerJuly 2015 to presentEl Cerrito

Finding best available technologies for meeting energy needs today and tomorrow: energy efficiency, demand response,, solar, wind, electric vehicles, biofuels and smart grid. It’s all the innovations that make the energy we use more secure, clean, and affordable. The energy world's best hopes lie in what's happening in the digital realm, especially in data analytics.

Wednesday, February 3, 2016

Efficient Energy Storage


Low-cost electrical energy storage will transform renewable energy sources from a bit player to a mainstream role in our energy economy. It is required for the use of electricity generated from intermittent, renewable sources such as solar and wind.



Energy Storage Options - Comparing Power and Discharge Time

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1. Background

2. Acronyms/Definitions
3. Business Case
4. Benefits
5. Risks/Issues
6. Next Steps
7. Success Factors
8. Companies/Organizations
9. Links

In 2010, Texas wholesale power prices went negative 17% of the time due to too much wind and not enough storage. Sometimes, generators operating nuclear, gas, or other plants actually pay other generators to shut down, since ultimately that’s cheaper than ramping down their own plants.  

1.Background
  • The lack of grid-scale storage means that when there is too much wind or solar energy for the transmission grid to handle, or when there is no buyer in the market, grid operators order producers to “curtail” production — stop the turbines, disconnect the solar array.  In Texas these curtailments led to an estimated $57 million in generation losses in 2010, according to PBT Consulting. Meanwhile, Texas keeps building more wind generation.Wind curtailments have additional costs — especially negative prices in wholesale power markets. Other generators usually end up paying this cost, through depressed prices for their production

  • Large-scale energy storage is one of the Federal focus areas for the Smart Grid. Electric energy storage can increase the value of electricity by enabling it to be used whenever and wherever needed.

  • While the grid has historically consisted of power generators and power users, now we are beginning to see devices that are both generators and users -- for example, energy storage and plug in electric vehicle.

  • Improved electrical energy storage is needed for the national electrical grid to relieve current stresses on the grid and to cope with the growth of intermittent renewable energy sources. Mechanical energy storage technologies such as pumping water uphill and compressed air storage are feasible with current technology, but these can’t be used everywhere. Electrochemical energy storage using batteries offers higher stored energy per volume and easier deployment, but is today much more costly. Even so, large batteries are already being deployed to help control frequency fluctuations on the grid, because they can provide lots of power for a short period.



2. Acronyms/Definitions
  1. AB2514 - California Assembly Bill 2514, as originally written by state Rep. Nancy Skinner and would have required that the state’s utilities match 2.25 percent of their peak loads with energy storage by 2014, and 5 percent by 2020 — a goal that could have equated to about 3,400 MW of storage capacity in the next 10 years.

    When signed into law by Governor Schwarzenegger in September 2010, the law requires the California Public Utility Commission (CPUC), by March 1, 2012, to open a proceeding to determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems and, by October 1, 2013, to adopt an energy storage system procurement target, if determined to be appropriate, to be achieved by each load-serving entity by December 31, 2015, and a second target to be achieved by December 31, 2020.

  2. Ancillary Services - Balancing services used to balance generation and demand in tightly limited situations to maintain the alternating current (AC)system frequency of 60 Hz. EES is perfectly suited to provide this service by absorbing electric energy (charging cycle) whenever there is too much generation for a given demand and by injecting electric energy into the power grid discharging cycle) when there is too little generation. Traditionally, these services have been performed by conventional gas or steam turbine technologies. But rather than varying the torque of large rotary turbo-machinery on a second-by-second basis, electrochemical EES is much better suited to quickly respond to the grid needs.

  3. Battery Storage - Utilities typically use batteries to provide an uninterruptible supply of electricity to power substation switchgear and to start backup power systems. However, there is an interest to go beyond these applications by performing load leveling and peak shaving with battery systems that can store and dispatch power over a period of many hours. Batteries also increase power quality and reliability for residential, commercial, and industrial customers by providing backup and ride-through during power outages.

  4. CAES - See my blog article Compressed Air Energy Storage - Uses pressurized air as the energy storage medium. An electric motor-driven compressor is used to pressurize the storage reservoir using off-peak energy and air is released from the reservoir through a turbine during on-peak hours to produce energy. Ideal locations for large compressed air energy storage reservoirs are aquifers, conventional mines in hard rock, and hydraulically mined salt caverns. Air can be stored in pressurized tanks for small systems.

  5. Curtailment - A reduction in the output of a generator from what it could otherwise produce given available resources, typically on an involuntary basis. Curtailment of generation has been a normal occurrence since the beginning of the electric power industry. However, owners of wind and solar generation, which have no fuel costs, are concerned about the impacts of curtailment on project economics. Operator-induced curtailment typically occurs because of transmission congestion or lack of transmission access, but it can occur for a variety of other reasons, such as excess generation during low load periods, voltage, or interconnection issues.

  6. EDLC - Electrochemical Double Layer Capacitors - (Also known as supercapacitor, supercondenser, pseudocapacitor, or ultracapacitor) Store energy directly as charge. An EDLC is an electrochemical capacitor with relatively high energy density. Compared to conventional electrolytic capacitors the energy density is typically on the order of hundreds of times greater. In comparison with conventional batteries or fuel cells, EDLCs also have a much higher power density.

  7. ESS - Energy Storage System - Devices or physical media that store some form of energy to perform some useful operation at a later time. A device that stores energy is sometimes called an accumulator.

  8. DER - Distributed Energy Resources - Small-scale energy generation/storage sources capable of providing temporary changes in electricity supply. Expands on Distributed Generation (DG) to include technologies such as battery energy storage, and superconducting magnetic energy storage.

  9. Flow Batteries - (See my blog Article: Battery Storage) Flow batteries differ from conventional rechargeable batteries in one significant way: the power and energy ratings of a flow battery are independent of each other. This is made possible by the separation of the electrolyte and the battery stack (or fuel cell stack). A flow battery, on the other hand, stores and releases energy by means of a reversible electrochemical reaction between two electrolyte solutions. There are four leading flow battery technologies: Polysulfide Bromide (PSB), Vanadium Redox (VRB), Zinc Bromine (ZnBr), and Hydrogen Bromine (H-Br).

  10. Flywheel - (See my Blog Article: Flywheel) An electromechanical device that couples a motor generator with a rotating mass to store energy for short durations.

  11. NASE - Network Attached Storage for Energy - Right now, many companies are talking mostly about planting energy storage facilities where power like solar or wind is generated. But why not put energy storage where it gets consumed, sort of the way Akamai figured out how to cache network data closer to consumers.

  12. SMES - (See my blog article Superconducting Magnetic Energy Storage) - Energy is stored in the field of a large magnetic coil with direct current flowing. It can be converted back to AC electric current as needed. Low temperature SMES cooled by liquid helium is commercially available. High temperature SMES cooled by liquid nitrogen is still in the development stage and may become a viable commercial energy storage source in the future. SMES systems are large and generally used for short durations, such as utility switching events.

  13. Supercapacitors (also known as Ultra-capacitors) are DC energy sources and must be interfaced to the electric grid with a static power conditioner, providing 60-Hz output. A supercapacitor provides power during short duration interruptions and voltage sags. By combining a supercapacitor with a battery-based uninterruptible power supply system, the life of the batteries can be extended. The batteries provide power only during the longer interruptions, reducing the cycling duty on the battery. Small supercapacitors are commercially available to extend battery life in electronic equipment, but large supercapacitors are still in development, but may soon become a viable component of the energy storage field.




3. Business Case
  • A Smart Grid is a key enabler for energy storage with the goal of peak reduction.

  • Recently, advancements with emerging storage technologies, particularly in battery, flywheel and above ground compressed air energy storage provide the potential of making Storage a ubiquitous Smart Grid Tool. There have been advances in fast response, multiple cycles, transportability The technologies all perform differently but can excel is specific applications.

  • Distributed energy storage will find applications on both the utility and customer sides of the meter. Utilities are using storage to defer equipment upgrades and to reduce loads at congestion points. Customers use energy storage to improve power quality, reduce demand charges and to participate in demand response programs with minimal impact on their operations. Communities, campuses and bases can use storage as critical elements of micro-grids and energy management systems. Both customers and utilities can use energy storage in conjunction with photovoltaic (PV) systems to smooth output and time-transfer energy generated at times of low value to times of high value. Community PV/Storage systems are being considered for green residential, light commercial and micro-grid projects.


Power and Energy Positioning of Energy Storage Options

4. Benefits
  • Helps Manage Demand - The deployment of energy storage technologies to help balance production to demand while improving capacity factors may be more acceptable politically than other types of infrastructure upgrades and potentially less disruptive to the U.S. economy and society

  • Integrate Intermittent Renewable Generation - As wind power deployment increases, wind output may begin to exceed electricity demand during certain times of the year, which would necessitate curtailment unless energy storage options are available. The July 2008 DOE report 20% Wind Energy by 2030: Increasing Wind Energy’s Contribution to U.S. Electricity Supply discusses the scenario in which integration of 300 GW of wind energy into the U.S. grid is achieved To deal with the variability of the wind energy output, approximately 50 GW of new peaking plant gas turbines would be used to supplement or compensate for the variability of the wind power’s output. Energy storage could serve a portion of this needed capacity.

  • Defer Transmission Upgrades - Energy storage may be able to reduce the transmission capacity needed for renewables by up to two-thirds. Many large-scale renewable energy facilities for solar and wind farms are located in remote areas that require new transmission lines to access them. However, energy storage could reduce the cost of these lines by decreasing the capacity of transmission needed to transmit the electricity. Without storage, the transmission lines to these remote sites would be built to accommodate the maximum amount of wind or solar energy produced, or else the facilities would have to dump any excess energy that the line cannot accommodate. According to the Electricity Advisory Committee, for some wind projects, it is currently more cost-effective either to build transmission capacity for less than the full energy maximum of the project or dump surplus energy during the hours when output exceeds transmission capacity.

  • Control Frequency - Provides frequency regulation to maintain the balance between the network's load and power generated. Provides stability, VAR support, power quality and transfer-leveling, and reliability.

  • Supports Micro-grid Operations - Balances microgrids to achieve a good match between generation and load.

  • Improves Reliability - interruption protection, voltage support and power quality. Electric energy storage increases the tolerance of sensitive electrical equipment and end-use devices to withstand the frequent power quality variations in the electrical environment. Achieve a more reliable power supply for high tech industrial facilities.

  • Ancillary Services - Fast response capabilities allow devices to perform better than current devices (Increased need for regulation) A significant issue for regulation is that traditional fossil generation plants are required causing the renewable integration needs from increasing emissions Reduce damages from greenhouse gas emissions due to generation from clean energy generation substituting for power from less clean sources.


5. Risks/Issues
  • Regulatory Treatment of Storage & Asset Classification - Today's regulatory structure and utility processes disfavors energy storage. Storage is neither supply nor demand in a traditional sense and existing regulatory framework is not set up to manage it. It is a matter of debate whether the cost of energy storage technologies utilized to shift transmission utilization to match capacity should be a generation or a transmission asset because of its multifaceted implications for business models, sources of financing, and regulatory cost recovery.
    1. Energy Storage is a transmission application because it is directly linked to the transmission system and its operation, without any bias towards its classification as such for regulatory or business model questions.
    2. Storage can also be used for energy price arbitraging and production leveling, which are normally generation functions and which developers prefer to perform on a merchant basis so that they can access market prices. Also, the operator takes ownership of the energy in redelivering it which isn’t a transmission function.
      We need appropriate regulatory, market, and incentive treatments to encourage storage in support of renewable energy. When Storage is used in a multi-purpose application (as at a substation), it is unclear how to allocate costs and benefits for cost recovery. Because these benefits address different functions (generation vs. transmission), it may be difficult to measure the different benefits and allow for full cost recovery based on these benefits.
    3. FERC rules for energy storage asset class

  • Cost Competitiveness - High cost of energy storage technologies due to the small scale of production. The costs of energy storage options need to be compared to other options, including the construction of new transmission infrastructure.

  • Value Not Monetized - Failure of the current marketplace to monetize the true value of storage. Storage has over 30 different elements of value and, right now, very few of those elements of value are monetized in the marketplace.

  • Awareness - Lack of awareness of the benefits of energy storage among policy-makers and the public. Many policy-makers, grid operators, and the general public are unaware of what energy storage is, the specific technologies that comprise energy storage, the recent technological advancements, data about its effectiveness, and what benefits energy storage can provide

  • DER Interoperability Standards Immature - Currently, commercial storage technology is not realistically capable of supporting the full Smart Grid dispatchable storage vision, which makes it difficult to predict what information needs will be required. DER communications are covered by the IEC 61850 series. At present, it is anticipated that DER standards will support the basic information required for communication with storage devices.

  • Rate Schedules Needed - There needs to be a rate schedule that makes thermal energy storage economically feasible. We need a rate schedule for the whole state, perhaps for the whole nation, which guarantees the difference of on-peak and off-peak energy costs or demand costs, to insure and guarantee for the next, ten years, so that investors and builders and people that want to build central plants can invest and know this is the predictions we can have. Thermal energy storage is the most neglected demand-shifting optional device we've had.

  • Smart Grid Integration - Identifying the control technologies and algorithms necessary to ensure storage can seamlessly work with Wind, Solar, and Grid requirements when integrating renewables to the electricity grid.

  • Market Information - Information on energy balance, requirements for ancillary services and related market values may not be available. In the case of longer term storage (minutes to hours) for energy arbitrage, load following and ramping, market information on both the current value of energy and the expected future value will be required to effectively schedule changing and discharging. Since all storage systems will have both a capital and an operational cost component, its dispatch will depend primarily on capacity and on energy value. Also the capacity and energy limits of the storage systems will need to be communicated back to either a dispatcher or aggregator.

  • Communications - In the case of short-term storage (seconds to minutes) for ancillary services, including frequency regulation, reactive supply and voltage support, requires fast and secure communications that allow for automatic control of the resource.

  • Matching Technologies to Applications



6. Next Steps
  • California ESS Procurement Targets - AB 2514 requires the CPUC, by March 1, 2012, to open a proceeding to determine appropriate targets, if any, for each load-serving entity to procure viable and cost-effective energy storage systems.  Under the terms of AB 2514, by  October 1, 2013 the CPUC shall adopt an energy storage system procurement target, if determined to be appropriate, to be achieved by each load-serving entity by December 31, 2015, and a second target to be achieved by December 31, 2020. In addition, the CPUC should consider a variety of possible policies to encourage the cost-effective deployment of energy storage systems, including refinement of existing procurement methods to properly value energy storage systems.
    • In October 2013, the CPUC adopted an energy storage procurement framework and established an energy storage target of 1,325 megawatts for PG&E, Edison, and SDG&E by 2020, with installations required no later than the end of 2024. 
    • Read the D.10-03-040 
    • Read the press release 
    • As required by D.13-10-040, on February 28, 2015, the three Investor Owned Utilities (IOUs) - PG&E, SCE and SDG&E, filed their Energy Storage (ES) Application containing a proposal for the first ES procurement period (2014-2016).

      On October 16, 2014, the CPUC approved the ES Applications with modifications in D.14-10-045.

      The IOUs will file their Applications with final ES request for offer (RFO) results for CPUC approval by December 1, 2015.

      Further information regarding IOU RFO Process can be accessed at: 
  • Power-oriented (fast) Energy Storage will grow quickly in the near to mid term but will be constrained in the long term by a modest total market size. Power-oriented (fast) energy storage is poised for strong near- to mid-term growth. Its most significant component, the frequency regulation market, has recently been opened up for direct entry by energy storage in some ISO regions of the U.S. with additional ISOs anticipated.

    This means that energy storage can secure contracts for grid frequency regulation on the open market and the owner of the system will get compensated in cash. This obtainable, all cash benefit stream makes obtaining compensation for an energy storage system much less complicated than many other implementations. New highly robust, moderate cost lithium-ion batteries are able to provide this service cost effectively and are beginning to be deployed successfully in a few regions of the U.S. and in Chile. This trend is expected to continue and accelerate with the addition of new renewable resources on the grid and further decreases in the cost of lithium-ion batteries.

  • Energy-Oriented (load shifting) energy storage has a massive total market size, however it is only beginning to be ready to be exploited. Energy-oriented (load shifting) energy storage offers a number of potentially lucrative opportunities for implementations that strategically combine applications. While wholesale load shifting is sometimes discussed, it does not create enough value to be cost effective on its own in most situations right now. There are many existing strategic load shifting implementations that are or are close to becoming cost effective.

    The challenge with these implementations is that some of the benefits are generated as non-cash benefits which can be difficult to monetize. Additionally, the benefits come from bundling different value streams, which are feasible technically but challenging to accrue to one entity for regulatory reasons. In some parts of the world, like Japan, where the value created from single applications is higher or utilities are more easily able to accrue value from the multiple benefits generated, sodium sulfur (NaS) load shifting energy storage has already gained a good foothold and has recently gained favor in other countries like France and the UAE, though only small pilot installations exist in the U.S. New flow battery technology, particularly zinc-bromide, has recently become more cost effective than NaS for many implementations and is expected to grow to surpass NaS installations by 2015. Advanced lead acid batteries are also expected to show impressive growth due to further cost reduction.

  • Create an energy storage asset class - A separate asset class could provide more certainty that energy storage costs can be reimbursed and provide more certainty in that respect, and I think if FERC were to take the lead on that, that that would have a trickledown effect for State policies.
  • Unbundled Ancillary Services - ISO's should unbundle ancillary services, to provide energy storage technologies and manufacturers and developers to have an in, to be able to bid on some of these ancillary services.

  • Research & Development
    • Modeling and analysis to determine how much storage is required to support state and national renewable goals.
    • Determining appropriate regulatory, market, and incentive treatments to encourage storage in support of renewables.
    • Identifying the control technologies and algorithms necessary to ensure storage can seamlessly work with Wind.
    • Determining how to allocate costs and benefits for cost recovery when storage is used in a multi-purpose application.

7. Success Factors
  • Allow utilities to include investments in energy storage in their electricity ratebase
  • Launch proceedings and studies to quantify the full value of energy storage and explore policies needed to stimulate its deployment
  • Extend tax credits and loan guarantees to energy storage projects
  • Make investments in energy storage a high priority and compile and publicize data on its effectiveness

8. Companies/Organizations
  • CESA - California Energy Storage Alliance - The alliance includes battery makers such as EnerVault, A123Systems, Deeya Energy, Prudent Energy, Xtreme Power, ZBB, Powergetics and AltairNano, as well as flywheel maker Beacon Power, air conditioner energy storage maker Ice Energy, solar panel giant Suntech and oil, gas and energy services giant Chevron. That list is representative of the range of technologies that could play a role in helping California meet such a challenging goal.

  • Green Charge Networks - Santa Clara, CA -  Founded in 2009, focuses on helping businesses and institutions reduce peak demand charges through a combination of predictive software and battery hardware the company calls "power efficiency." Green Charge Networks claims to be the first company to offer Power Efficiency Leases. Similar to the way that solar leases helped solar become mainstream by allowing more homeowners to go solar with zero money down, GCN aims to help more businesses utilize energy storage by offering them Greenstations at zero upfront cost.

    The idea of power efficiency builds off the difference between energy (kWh) and power (kW). Energy efficiency focuses on reducing the amount of energy consumed while power efficiency focuses on reducing the rate at which energy is used, also known as peak demand. Commercial and Industrial electric tariffs include costs for peak demand known as Demand Charges.

    Green Charge operates under a shared savings model with customers. The company owns systems at customer facilities and covers the capital expenses for installation and interconnection, as well as provides ongoing operations and maintenance services.

    Green Charge Networks received $12 million in a grant from the United States Department of Energy in 2011. The company received further funding from angel investor Richard Lowenthal, founder and CTO of car charging network ChargePoint, in December 2013.  In March 2014, Green Charge Networks received $10 million in financing from TIP Capital to finance energy storage projects for their customers with zero upfront cost.  In July 2014, Green Charge Networks secured $56 million in capital from K Road DG, a distributed energy and smart grid solution company

  • xxx

9. Links
  1. California Energy Storage Roadmap - The California Energy Commission (CEC), the California Independent System Operator (CAISO), and the California Public Utilities Commission (CPUC), developed an energy storage roadmap  that identifies policy, technology and process changes to address challenges faced by the energy storage sector. The comprehensive roadmap assesses the current market environment and regulatory policies for connecting new energy storage technology to the state’s power grid. It is the result of collaboration by the three organizations and input from more than 400 stakeholders, including utilities, technology companies, environmental groups, and interested parties.

  2. NREL - Wind and Solar Energy Curtailment: Experience and Practices in the United States Lori Bird, Jaquelin Cochran, and Xi Wang March 2014

  3. California Energy Commission  - Committee Workshop on Energy Storage for Renewable Integration - April 28, 2011

  4. Electricity Storage Association - Washington DC

  5. CPUC Proceeding on Electric Energy Storage. - On April 2, 2015, the California Public Utilities (CPUC or Commission) opened an Order Instituting Rulemaking (OIR) in response to the enactment and ongoing implementation of legislation Assembly Bill 2514 and to continue to refine policies and program details, which established the Energy Storage Procurement Framework and Program and approved the utilities' applications in implementing the program. This rulemaking considers recommendations included in the California Energy Storage Roadmap, an interagency guidance document which was jointly developed by the California Independent System Operator, the California Energy Commission and the CPUC.

  6. UC Berkeley School of Law’s Center for Law, Energy and the Environment and the UCLA School of Law’s Environmen­tal Law Center and Emmett Center on Climate Change and the Environment White paper on the potential of energy storage. July 2010

Tuesday, February 2, 2016

Consumer Behavior Change


Not all consumers will be willing to learn about Smart Meters, analyze utility bills, pay for the upgrades or even care. The story will be a particularly hard sell during tough economic times.


The Smart Grid will provide many pathways to engage the consumer



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1. Background

2. Acronyms/Definitions
3. Business Case
4. Benefits
5. Risks/Issues
6. Success Factors
7. Companies & Organizations
8. Links

1.Background
  • Developing a Smart Grid includes technical items like meters, technology, but the real goal is behavior change. My Dynamic Pricing post  showed how financial motivation will be used to engage customers to change their energy use behavior. However, the behavior change issue is more deeply rooted.

  • It is very hard to drive behavior change and very few industries have done this. The technology industry usually lets people do what they were doing already in a new way. In addition, low cost electricity at any time consumers want to use it is seen as a core right. Cheap anytime electricity is seen as an entitlement, the customer feels they own the electrons in their home. Changing these attitudes and competing for customers’ attention and how they use their time will require a concerted effort.

  • As an industry, we have kept the magic behind the "wall switch" to ourselves. Therefore in order to educate our customers on the value proposition of smart grid, do we first have to educate them on some of that “magic”? Will they care?

  • The average American knows very little about personal energy consumption and energy savings. According to a survey published in The Proceedings of the National Academy of Sciences, Americans overestimate the energy savings of actions like turning off lights, and riding public transportation, but underestimate the energy consumption of other things like using central air conditioning. A key to guiding people to make better decisions about their own energy usage, will be establishing the knowledge about how energy flows work at an earlier age.

  • The power industry has seen little innovation over the past century, which is why greentech entrepreneurs in Silicon Valley are so eager to build companies in this industry. But another result is that utility consumers are used to a routine, never-changing relationship with the utility, and aren’t used to any type of change, period.


2. Acronyms/Definitions
  • Curtailment - The right of a transmission provider to interrupt all or part of a transmission service due to constraints that reduce the capability of the transmission network to provide that service.

    If customers are curtailed inconveniently, with a high frequency of occurrence, there will be tremendous push-back. Less inconvenient demand management facilitated by the smart grid is of critical importance.

  • Green Button - a feature that allows residential and commercial customers to download detailed energy-use information in a standardized format to better manage electricity consumption and cost.

    Green Button is an industry-led effort that responds to a White House call-to-action: provide electricity customers with easy access to their energy usage data in a consumer-friendly and computer-friendly format via a "Green Button" on electric utilities' website. Green Button is based on a common technical standard developed in collaboration with a public-private partnership supported by the Commerce Department's National Institute of Standards and Technology. Voluntary adoption of a consensus standard by utilities across the Nation allows software developers and other entrepreneurs to leverage a sufficiently large market to support the creation of innovative applications that can help consumers make the most of their energy usage information.

    Today, more than 60 million households and businesses can use Green Button to access their own energy usage data from their electric utility, and a growing set of companies are offering products, services, and applications that use Green Button data

    Numerous companies are already developing Web and smartphone applications and services for businesses and consumers that can use Green Button data to help consumers choose the most economical rate plan for their use patterns; deliver customized energy-efficiency tips; provide easy-to-use tools to size and finance rooftop solar panels; and conduct virtual energy audits that can cut costs for building owners and speed the initiation of retrofits.


  • PCT – Programmable Communicating Thermostats - There was a large California citizens backlash over rumors of that PCT would be required in building codes and the utilities would control air conditioning use without the consumer’s knowledge. Even though these rumors weren’t true and the building code made economic sense, the building code change was defeated.


3. Business Case
  • In April 2010, the California PUC ruled that utilities can add gains from behavior change programs to their energy efficiency goals. These programs attempt to reduce power consumption by changing the behavior of consumers.
  • A Smart Grid is a key enabler in communicating peak prices to consumers; and integrating smart appliances, with the goal of changing consumer behavior. Seeing the consequences of actions – or not is critical to successful behavior change. Successful smart grid implementation requires that electricity customers—residential, commercial, industrial, and institutional—have the information and the tools needed to participate in the market. Clear and consistent information, e.g., when the grid experiences peak demand, and effective tools, e.g., switches and smart appliances, enables informed and active customer participation in the smart grid. Service providers and others need to be encouraged to develop interoperable devices, programs, and other services on a timely basis to enable customers to participate in smart grid programs.

  • A four step process leads to behavior change:
    1. Awareness
      The Smart Grid is competing for customer attention and follow-through. It needs to be free and simple. Consumers may have no idea what to do with too many confusing choices. They may think their impact is so small, it doesn’t matter what they do.

    2. Familiarity and Education
      • Money can be a motivator, but only big energy costs motivate change. People may think of themselves as frugal, but utility bills are invisible – unless there’s a big spike. Still, savings can feel like a little reward – EnergyStar rebate feels good.
      • Customers need to see the “value proposition” for participating in the smart grid, and that their utility bills will be reduced. Levels of knowledge and quality of information will differ by region, utility, and delivery point on the grid; understanding these regional and local differences will impact the manner in which customers participate in smart grid decisions. Regulators, legislators, and others need to be educated on the opportunities provided by the smart grid, as well as the costs and benefits of smart grid investments.

    3. Consideration

      • Behavior change needs to be aligned to consumers live style priorities. It should make them feel good about what they are doing. Values are connected to emotion and behavior. Talk to people in terms of these values they will have more power. Values messages could include: don’t waste, be frugal, stay safe, political identity – no foreign oil. A direct “Green” messaging is not a strong source of value change.

      • Influencers affect what people do. Family members and trusted media personalities trigger change. To instigate change, find the influencers that matter to people and influence them.

      • Fit to life is critical. Optional behaviors must be easy and have minimal experiential and financial cost. I’m not going to “sacrifice,” be inconvenienced, or feel like I lost something. Target New behaviors that are easy to fit into life should be targeted first—follow lessons of recycling

    4. Participation
      Community is the best target for change. Seeing people from my reference community change encourages individual change. Apples to apples comparative information within a neighborhood or area results in energetic competition to reduce energy use. Change in groups feels like significant impact – and competition can motivate. Known communities support new behaviors and create communal experience. Find the Hub of change: People and influencers belong to communities.

  • Revealing the Values of the New Energy Consumer Accenture end-consumer observatory on electricity management 2011
    • Key finding #1: "While consumers regard their utilities as the primary provider for energy-related products and services, dynamic business models are emerging." Specifically, Guthridge told us, while utilities are still the default incumbent, "one quarter of customers (indicated they) would buy their simple electric service from someone other than their utility," if given the option. 73 percent of consumers surveyed indicated they would consider buying in-home products and services from non-traditional providers.

    • Key finding #2: "Price is the pivotal factor in the acceptance of electricity management programs, but price alone will not drive adoption." While 83 percent of the global population in the survey said the No. 1 impact for them was the cost the new service would add to their utility bills, 73 percent indicated that a utility loyalty program also ranked very high in perceived value. Last year's North American research clearly pointed to a focus on in-home displays as a high value-add, but Guthridge said this year the trend is moving to more set-it-and-forget-it convenience. There's a gender difference here, as well. "Men tend to focus on technology channels, while women are more focused on solutions that are intuitive and easy to use across the family."

    • Key finding #3: "A wide array of consumer preferences is driving the need for differentiated propositions and experiences." For utilities, this means "you can't have a single program or a single pricing structure that will appeal to the whole breadth and depth of residential customers, especially in the U.S.," Guthridge said. Additionally, "more than 60 percent of the customer base does not really want heavy, hands-on management of their energy savings...Tailoring the programs, products and channels to match the (customer) segments is most important."

    • Key finding #4: "Consumers will respond to programs that consider their full spectrum of values and preferences." They want programs that are easy to use, simple and convenient, and with some "uniqueness" or customization to fit their own personal needs.

  • A 2010 national survey by Market Strategies International shows that the U.S. Electric Industry faces an interesting challenge – more than three-quarters of Americans do not recognize or understand the industry’s best available technologies to improve energy efficiency, reduce energy costs and curb global warming – the smart grid and smart meters.

  • Seventy-nine percent of Americans claim to know little or nothing about the smart grid, while 76 percent lack knowledge or understanding of smart meters However, the study also shows that Americans are very supportive once the technologies have been explained to them. 75 percent feel implementing Smart Grid/Smart Meters should be a priority over the next 1-5 years. 67 percent support their utilities implementing these technologies (when costs to consumers are estimated at $6-$10 per month). To underscore the support, the results vary only slightly at lower or higher monthly cost estimates.
Direct feedback on energy use can save up to 120 billion KWh by 2030

4. Benefits
  • Make smart choices based on better information alone results in 5% - 15% savings seen in studies. Average US electric bill is about $1200 per year so the savings are about $120 per household. With about 100 million US households this equates to $12 billion per year.
  • More Options for Consumers
  • Lower overall energy costs
  • More choices on how to meet individual consumer needs
  • Dynamic rates to better integrated needs of grid and consumer

5. Risks/Issues
  • Market Size - Green True Believers represent the smallest percentage of total consumer market. For example, only early adopters care about a Carbon Calculator. Mainstream people have little interest in any of this stuff. According to the 2009 Green Power Progress Survey released in August, $48 is the average price American will pay in a one-time fee for installation of hardware to facilitate the "benefits of smart grid technology" And out of the respondents that yielded that average, a quarter weren't willing to pay anything at all, another quarter weren't willing to pay more than $25, and only 7 percent would pay more than $100.

    The survey found there is another category of "green elites," or people who said they are involved in sustainability or environmental efforts, willing to pay about $70 on average, with 14 percent of them willing to pay $100 or more.

  • Immateriality of Savings - The few dollars per month that consumers get for letting the utility control their lights, refrigerator, AC, etc. are miniscule compared to my original justification for purchasing that appliance. They don't want the complexity added to my life. A 2011 Accenture study found the modest savings from active energy management in a home—doesn't necessarily motivate persistent behavior. But price incentives bundled with other offerings can motivate persistent behavioral changes, Accenture found. Rewards programs used in other industries, for example, may work for utilities. Convenience, loyalty points, a technology or some other variable must be combined with price to find the right combination to drive higher levels of adoption upfront and over time.

  • Short Term Cost vs. Longer Term Benefit - A 2011 consumer survey by Harris Interactive found There is little understanding of the longer-term benefits in energy cost savings, many of which can exceed the initial higher cost of the equipment investment in less than a year (which translates to an ROI greater than 100%.) The biggest obstacle to widespread consumer, industrial and commercial adoption of energy efficient technologies remains the up-front sticker shock.

    34% of US respondents to the Harris survey said they would make more room in their budget for energy efficiency efforts. On the other hand, a significant two-thirds said they were willing to make behavioral changes like using their energy-intensive devices at different times to conserve energy.

  • Carry-Over Perceptions - Consumers remain unconvinced of the value of energy efficiency, in part due to skewed perceptions of its true cost. For example, the general public believes that an energy-efficient building has an upfront cost premium of nearly 20%, while the actual premium is a mere 0% to 3% on average.  Consumers equate energy efficiency with sacrificing choice, function, comfort, convenience, and aesthetics. Efficiency still bears a stigma from flawed, first-generation versions of products like compact fluorescent light bulbs (CFLs) and electronic ballasts. Despite subsequent technology advances, many skeptics still associate saving energy with the reduced function and high initial cost of those early devices.

  • Entitlement - Smart grid, in order to return the benefits of the business case must overcome this societal concept that electricity is a right. To just assume that people will buy into the concept because it is "good for society" is naive and dangerous.

  • Fear of Big Brother - Auto correct can be annoying to some. A Prius Display provides real time feedback on gas mileage to help drivers modulate the way they. Some people like it, but others hate it because they don’t like to be hectored by car.

  • Cost – Consumers expect to pay $300 or less Consumers may be reluctant to add new devices and retrofit homes to save a few dollars a year

  • Privacy – Consumers don’t want an intrusive system.

  • Security – Concerns about compromising personal and home safety

  • Hassle– Competing for scarce consumer attention and time.. People will only do optional things if it is easy and fits with life There is a 40% churn rate on twitter, participation needs to be encouraged over time.

  • Ignorance - It is still unclear what percentage of the public is aware of the Smart Grid. It is clear that consumer awareness will be needed for adoption of the program and supporting the ultimate goal of energy conservation.

  • Chasm Model - Holds that there’s a big difference between what companies need to do to effectively sell technology products to early adopters and what they need to do to sell to the early and late majority of the technology adoption lifecycle (source: Joe M. Bohlen, George M. Beal and Everett M. Rogers)


    Early adopters are technology enthusiasts looking for a radical shift, where the early majority simply seeks productivity improvement. Early adopters hope to get a jump on competition, lower their costs, get to market faster, have more complete customer service or get some other similar business advantage. Those in the majority of the market, however, want to minimize discontinuity. They want evolution, not revolution. They want technology to enhance, not overthrow, established ways of doing business. And they don’t want to debug someone’s product—they want it to work properly and to integrate with existing technology.

    The chasm occurs because the majority of the market wants references from other customers like them, but all that pre-chasm vendors can offer are references to early adopters. Companies trying to cross the chasm run into trouble because they’re essentially operating without a reference base, trying to sell to a market that’s highly reference oriented.

    Bridging this gulf is awkward, because if they’re to be successful, companies must adopt new strategies just at the time they’re becoming most comfortable with ones that seem to work.

    The only reliable way to exit the chasm is to target a niche market on the other side made up of pragmatists united by a common problem for which there is no known solution. These pragmatists are motivated to help the new technology cross the chasm if it is packaged as a complete solution to their problem.

    Why is this counter-intuitive and hard?
    • Niche marketing feels like leaving sales on the table – Companies that are sales-driven and lured into selling to any market segment miss the opportunity to build momentum and authority in their strategically chosen segment

    • Everyone wants to be a big fish, but not in a small pond – Being a market leader is every company’s objective. But no company wants to be known of as king of a small hill. Even though conquering successive small hills leads to mountains.

    •  Not all features and benefits may be required – For companies that have invested time and money developing a deep product, focusing on just one small niche and a subset of their features can feel insulting to engineering. Crossing the chasm means making decisions that are best for a narrowly defined customer, not for your product’s bragging rights.


6. Success Factors
  1. Education - Chances are consumers would be more accepting and possibly even demand updated power systems if they actually knew about the Smart Grid and how it will benefit them. Consumer benefits need to be defined and advocated by utilities and policymakers alike across all economic levels. Education should include a Call to Action; people need to know what they need to do. Feedback on the impact of customer participation in the smart grid will be necessary to allow and improve coordination between the utility and its customers, to minimize customer disruptions, and improve customer service.

  2. Visibility - Put feedback “in my face” People need to see their impact at the point of use. There seems to be promise in putting easy-to-digest information "tidbits" based on their personal smart grid data in people's hands when we already have their attention, for example when they login to bill pay. This is where we find the masses instead of the excel-loving-green-early-adopters. There may be potential for simple messages that speak to the customers' bottom line -- for example when they login to pay their power bill, to see "You spent $25.00 more this month than last month, and you could save $x.00 by turning off your printer each night" seems to have potential to inform and to motivate behavior change.

  3. Community - A program of telling homeowners how their electricity use compared with their neighbors' had the effect of cutting energy consumption by 2%, the same as the impact of an 11% to 20% rate hike, says Hunt Allcott of MIT. The research shows that interventions not based on electricity prices can substantially and cheaply change consumer behavior.

  4. Excitement - Make Home Control Fun To get beyond the early adopters—who are primarily concerned with functionality—offer a fun and easy user experience, from purchase through installation and use.  Energy efficiency measures should provide enjoyment to those who implement them and for everyone who encounters them. Interactive websites, such as energy use dashboards for the home, can provide visual, real-time feedback to help users understand and make better choices about their energy consumption decisions.

  5. Ease of Use - Minimize Behavioral Changes By their nature, many products and services within the family ecosystem are complex, requiring that users learn new behaviors. Consumers have difficulty evaluating the efficacy of investing time/effort in learning new routines. To militate against consumer inertia, companies should offer products that facilitate existing behaviors, helping consumers save time or effort. People don’t change default settings – default to conservation. When set appropriately, programmable thermostats provide a high degree of customization for region and season, save time and effort, and deliver a quick payback.

  6. Rate Design - Participation hinges on the accurate design of electricity rates that reflect appropriate economic realities.  Consumers need much more access to an innovation called “smart pricing” — in other words, electricity prices that vary based on supply and demand — a key change the Smart Grid was designed to enable, and one that might make it a lot more worthwhile to pay attention to your energy behavior.

  7. Market Segmentation - Different Consumers want different things. A 2011 Accenture study identified six separate categories for residential customers. Energy efficiency solutions should fit with a customer’s location, situation, and socio-economic status. Each of these customer segments requires a completely different value proposition.
    • Self-reliants: Prefer to manage electricity consumption on their own.
    • Social independents: Enjoy testing new technologies.
    • Cost-sensitives: Look above all for the best financial rewards.
    • Service-centrics: Would like the best service for them and their family.
    • Traditionalists: Prefer a familiar experience.
    • Tech-savvys: Value convenience and efficiency.

  8. K.I.S.S.: A study of successful pilot programs in Illinois confirms that utilities struggle to communicate about the smart grid in simple and clear language. Jargon and unnecessary acronyms are rampant, and these ultimately breed confusion, suspicion and mistrust among consumers. Ontario-based Hydro One, by way of positive example, has done a strong job in using digital animation and Internet-based graphics to clearly illustrate how the smart gird works and what its benefits are.

  9. Leverage Power of Third Parties: According to the Accenture Study, consumers trust third parties more than utilities for information on optimizing electricity consumption. Often in this regard traditional adversaries can become cooperative partners. For example, the Natural Resources Council of Maine has supported smart meter installation in that state, lending a reasoned and credible voice to the debate over Central Maine Power’s smart meter roll-out. These kinds of groups should not be overlooked for collaborative educational outreach, if and when possible.

  10. Separate the Forest from the Trees: When it comes to the smart grid, it is vital that customers understand the big picture – the larger context of and justification for smart meter deployments. This is especially important because most of the long-term economic benefit of the smart grid could come not from reduced utility bills but from mitigated rate increases due to the inevitable, long-term rise in the costs of generation.

  11. Embracing New Media: Ultimately, endorsements from friends and peers are the most effective way to spur adaptation of the specter of technological change posed by the smart grid. Generally, utilities have been slow to employ the most powerful tool available today to achieve this: social media. Through a technology platform provided by Virginia-based OPower, utilities are engaging online communities of enthusiastic smart grid advocates through Facebook and Twitter ‒ who make up just five percent of their customer base ‒ to spur adaptation from the other 95 percent. Innovative utilities understand that social networks represent a powerful channel for in-depth engagement with residential users, and are embracing them.

  12. Aesthetics. Energy-efficient products should please the eye. For example, LED lamps look sleek and stylish, and flat-panel computer screens look streamlined and modern, with the added benefit of using less desk space.

  13. Emphasize Comfort, health, and safety. Energy-efficient solutions should address the well-being of consumers and their families. Daylight can reduce eyestrain, and greener buildings can offer better indoor air quality.

  14. Empowerment. Energy efficiency solutions should provide an array of choices that allow anyone to do something positive for the environment according to their level of commitment. Rebates and tax credits provide incentives for low-cost actions like weather-stripping on up to big-ticket items such as efficient furnaces and central air conditioning units.

  15. Productivity. Energy-efficient solutions should enhance working and academic environments. Efficient lighting and air conditioning can improve comfort and morale, leading to improved business output and sales, and better student performance.

  16. Status. Energy-efficient products should have a cachet that enhances a customer’s self-image, rather than seeming like a sacrifice. As with solar panels and hybrid vehicles, LED lighting shows promise of becoming a status symbol and a highly visible display of environmental commitment.

  17. Success Criteria Key NIST Customer Metrics for enabling participation in the smart grid include:
    • Percent of customers/premises capable of receiving information from the grid
    • Percent of customers opting to make decisions and/or delegate decision-making authority
    • Number of communication-enabled, customer-side of the meter devices sold
    • Number of customer-side of the meter devices sending or receiving grid related signals
    • Amount of load managed
    • Measurable energy savings by customers

7. Companies and Organizations
  1. C3 Energy, Redwood City -  Develops and publishes energy software. The Company offers smart grid analytics to utilities to helm them manage their systems. C3 Energy provides utilities with end-to-end system visibility across supply-side and demand-side smart grid operations.

    In May 2012,  C3, purchased Efficiency 2.0, a residential energy efficiency company that uses rewards to encourage people to save energy.  For C3, which was founded by Siebel Systems’ Tom Siebel, the acquisition allows the company to bring more comprehensive offerings to utilities that want to tackle all of the customer classes.

    Efficiency 2.0, which is based in New York City, recently picked up Southern California Edison as a customer, and also counts ComEd, Northeast Utilities and Cambridge Energy Alliance as some of its clients.

    The appeal of Efficiency 2.0 is its low-cost solution compared to other hardware-intensive options.  What Efficiency 2.0 does that no one else does is offering cash rewards for saving energy. The customers who just receive mailed reports save about 2.5 percent, while those that log into the web program to earn rewards save just over 6 percent. 

  2. OPower - Arlington, VA - #Opower (on twitter) - The most prominent company in the field of consumer energy behavior modification. Opower compares your power consumption with the power consumption of similarly situated neighbors. It then puts a paper note bearing the results of the analysis inside your next utility bill. Opower has found that consumers who use more power than their neighbors will reduce their power consumption to hew more closely to the status quo. Here's a great statistic from the company: in 2010 the firm  provided the equivalent of one-third of the U.S. solar industry's output in energy savings -- simply by sending out an actionable set of data once a month to utility customers.

    Opower Neighbor Comparison Insert
     Opower’s business model has been successful because utilities send Opower’s detailed bills to its customers automatically (as an opt-out service), and the bills have a very high chance of being opened because the envelope looks like their standard utility bill. Opower has evolved a lot over the years. The software provider started with a simple efficiency solution for utilities, and has since deepened its analytics and moved into demand response, billing, segmentation and customer care.

    Opower finished 2014 with $128.4 million in revenue, a 45 percent increase over 2013. The utility-consumer behavior expert posted a GAAP net loss of $41.8 million in 2014.

    For years, Opower has helped utilities tackle easy-to-fix energy-efficiency problems and improve basic customer offerings. But now, many utilities are thinking about more sophisticated segmentation and increased customer satisfaction. In most cases, utilities lag behind other industries in the evolution of customer services.

    Opower has approximately 50 million endpoints each for its digital engagement tool and energy-efficiency offering, and expects to double its demand response numbers from 1 million to 2 million this summer. In the first quarter 2015, OPower signed its largest deal to date, a nearly $90 million, seven-year contract with Pacific Gas & Electric and a significant deal with Sacramento Municipal Utility District for enterprise-wide digital engagement and energy efficiency

    Video interview with Opower's marketing and strategy VP Ogi Kavazovic. We think you'll be particularly interested in his comments on when in-home displays will catch on. (Hint: never.)


    In April 2012, Opower and Facebook unveiled their first social energy application, the results of six months of development aimed at making household energy efficiency as cool as Words With Friends.

    Opower’s app also draws from the reams of data that the Arlington, Va.-based startup has collected from the 70 or so utilities it now serves, which collectively have about 60 million customers. That means Facebook users can see how efficient they are compared to others that share similar living space in terms of square footage, climate zone and type of heating and air conditioning, for example.

  3. People Power - Palo Alto, CA - Founded in 2009, provides energy consumption monitoring solutions. The company offers carbon emissions reduction and energy efficiency solutions.

  4. Simple Energy - Boulder, CO-   Attracting utility customers to energy efficiency via contests. prizes are important to get people involved. But once they’re in the game, they tend to start taking pride in saving money, getting into conversations with friends and neighbors, and otherwise getting involved with the subject in a new way, driving long-term behavior changes,

     Supports energy efficiency efforts (helping to change customers’ behavior and boosting program sign-ups), demand response programs (driving customer load shifting and increasing auto-demand response participation), and smart grid initiatives (providing fun and easy ways to interact). Simple Energy enables people to become more engaged with their own energy consumption by comparing their use with friends and neighbors on social platforms where they’re already spending time: Facebook, email, and mobile apps.”

  5. SmartEnergy IP - Philadelphia - Provides strategic communications, strategy and solutions for utilities across the world. From the development of specialized customer education programs to the implementation of those programs, SmartEnergy IP™ provides a wealth of knowledge and experience to improve the customer experience. In Jan 2014 has launched what it is calling the "first-ever" Smart Grid Customer Education Model, providing a common framework for utilities to educate customers on the benefits of smart grid and encouraging close collaboration and communication between IT, metering, and marketing departments within utilities.
8. Links
  1. BECC -  Behavior, Energy and Climate Change Conference - Entering its ninth year, BECC is the premier event focused on understanding individual and organizational behavior and decision-making related to energy usage, greenhouse gas emissions, climate change, and sustainability
  2. CIEE - California Institute for Energy & Environment - UC Berkeley, Behavior & Decision Making - The potential for saving energy in California is huge. But getting people and organizations to do things differently is a tricky proposition. Energy efficiency isn’t just about new technology, it’s about new behaviors and better decisions. Understanding how we think — and what motivates us to action — is the catalyst of change toward a sensible, sustainable energy future.
  3. Smart Grid Consumer Coalition - A new nonprofit coalition of utilities, academics, smart grid companies and consumer advocates that is hoping to find out what the customer knows and wants when it comes to a 21st-century electrical grid, and how players can deliver their messages so consumers will listen and learn. Current members include Future of Privacy Forum, IBM, Control4, Silver Spring, GE, NREL and various utilities. The organization will share best practices amongst members as they are developed.
  4. The Smart Grid: An Introduction” (PDF 4 MB) is a publication sponsored by DOE’s Office of Electricity Delivery and Energy Reliability. It is the first book of its kind to explore – in layman’s terms – the nature, challenges, opportunities and necessity of Smart Grid implementation. Give one to key staff, your colleague, your lawyer, your accountant or your spouse…and watch the lights go on

Demand Response (DR)

A temporary change in electricity consumption in response to market or reliability conditions


Demand Response pushes Discretionary Load out of the Utility System's Peak Hours



Navigate this Report

Back to Load Shifting Index


1. Background

2. Types of Demand Response
3. Acronyms/Definitions
4. Business Case
5. Benefits
6. Risks/Issues
7. Success Criteria
8. Companies
9. Links

1.Background
  • Demand Response is a temporary change in electricity consumption by Demand Resources in response to market or reliability conditions. Demand Resources are loads or aggregation of loads capable of measurably and verifiably providing temporary changes in consumption.

  • Today demand response today is largely invoked when there are imminent brownouts or blackouts and the programs are triggered by reliability trigger of some kind. Legacy technology focused on large commercial and industrial loads is being replaced by new smart grid, internet based technology that can reach residential consumers as well.

  • According to December 2015 report by the Federal Energy Regulatory Commission (FERC), potential peak reduction from wholesale demand response rose slightly in 2014 to 28,934 MW, a 0.5 percent increase from the previous year, and accounted for 6.2 percent of peak demand in 2014, essentially unchanged from 2013. Since 2009, potential peak reduction from demand response in wholesale markets has increased by approximately 6 percent, but peak demand has also increased by a similar amount, resulting in little net change in the contribution of demand response to meeting peak demand.

  • Nationwide, total potential peak reduction from retail demand response programs decreased by 1,408 MW between 2012 and 2013, a drop of 4.9 percent from 28,503 27,095 MW.

  • According to GTM Research, demand response was a $1.4 billion market in the U.S. in 2015.

  • Still, that's just a fraction of the 38 to 188 gigawatts of demand response capacity that the nation could harness to reduce overall peak energy use by as much as 20 percent, according to a 2009 report from FERC.

  • According to data from the Energy Information Administration (Data Sets Form EIA-861 Advanced Meters ), In 2013, 51.9 million advanced meters were operational nationwide out of a total of 138.1 million meters, indicating a 37.6 percent penetration rate. This represents significant growth over 2012, when EIA reported that 43.2 million advanced meters were operational out of a total of 145.3 million customers, representing a 29.7 percent penetration rate. In 2014, advanced meters grew a further 12.7% to 58. 5 million with a 40.7% penetration rate. Smart meters are a prerequisite for a smooth, advanced demand response system.

  • According to Navigant Research, global Commercial and Industrial DR capacity is expected to grow from 30.8 GW in 2014 to 196.7 GW in 2023. Just a couple years ago, they forecast 132.3 GW in 2023 so the market looks brighter now.

  • In January 2016, the US Supreme Court (SCOTUS) ruled in a case that has had the clean energy community biting its nails since 2014. In October 2015, the court heard arguments about how demand response is compensated in wholesale electricity markets. On January 25, 2016 SCOTUS ruled in favor of the Federal Energy Regulatory Commission (FERC), deciding that demand response should be regulated at the federal level and ensuring that the U.S. demand response industry can continue its impressive progress.

    The case is a victory for clean energy and consumers, but it also highlights the ongoing evolution of the electricity industry in the U.S., namely how “wholesale” and “retail” aspects of the market are coming closer together. The court itself noted in its opinion that “It is a fact of economic life that the wholesale and retail markets in electricity, as in every other known product, are not hermetically sealed from each other.”

    The decision is also a victory for consumers, because by allowing compensation for DR customers at wholesale rates, DR saves money for the grid as a whole as well. From the court’s opinion: “[demand response] will put ‘downward pressure’ on . . . the rates wholesale purchasers pay. Compensation for demand response thus directly affects wholesale prices. Indeed, it is hard to think of a practice that does so more.” And those wholesale purchasers (i.e., the utilities that sell electricity) pass these savings on to their customers.

    Financial markets immediately took notice of the impact of this decision on the business opportunity for clean energy; EnerNOC, an established DR company, saw its stock price rise 65% in the day following the court decision. It has come down some since, but still remains more than 25 percent above its one-month average prior to the SCOTUS ruling.

Direct Load Control and Interruptible Demand by NERC Regions 2006 vs. 2007

2. Types of Demand Response
  1. Ancillary Services DR (My Blog Article) - End-use customers are allowed to bid load curtailments in ISO/RTO markets as operating reserves. Accepted bids are paid the market price for committing to be on standby. In order to participate in ancillary-service markets, end-use customers must be able to adjust load quickly during a DR event.

  2. Emergency DR (My Blog Article) - The emergency demand response option provides incentives to customers for reducing load during reliability triggered events. These events may also be called in response to high wholesale electricity prices. End-use customer participation in this option is most often voluntary. Upon notification, customers can choose not to curtail and in turn not receive any payment. Usually on-site generators are allowed to participate and supply power during curtailment periods.

  3. Capacity Market DR (My Blog Article) - Typically offered by wholesale market providers such as ISOs and RTOs. Participants commit to provide pre-specified load reductions when system contingencies arise. In return, they receive a fixed incentive payment in the form of capacity credits and are paid to be on call even though actual load curtailments may not occur. Enrolled loads represent a firm resource and can be counted toward Installed Capacity (ICAP) requirements.


Automated Demand Response can be implemented in several different ways. Smart controls can reside with 1. Utility in Direct Control, 2. Consumer with Price Response or 3. down to the Smart Appliance

3. Acronyms/Definitions
  1. DSM - Demand Side Management - Includes two components: energy efficiency (EE) and demand response (DR). EE is designed to reduce electricity consumption during all hours of the year, attempting to permanently reduce the demand for energy in intervals ranging from seasons to years and concentrates on end-use energy solutions. DR is designed to change on-site demand for energy in intervals from minutes to hours and associated timing of electric demand/energy use (i.e. lowering during peak periods) by transmitting changes in prices, load control signals or other incentives to end-users to reflect existing production and delivery costs.

  2. Demand Flexibility - Unlike wholesale demand response, demand flexibility interacts with granular retail rate structures (such as real-time pricing and demand charges) and leverages simple technologies such as smart thermostats and grid-interactive water heats to shift demand across the hours of a day. Having both options available—demand response allowing customer resources to participate in the wholesale markets and demand flexibility allowing customers to respond to retail rates—is likely to lead to the lowest-cost outcomes for customers and the grid.

  3. Demand Response Aggregator- A company joining two or more customers, other than municipalities and political subdivision corporations, into a single purchasing unit to negotiate the purchase of electricity from retail electric providers. Aggregators may not sell or take title to electricity.

  4. Dispatchability of DR Options - The ability to provide a DR-inducing signal within a limited timeframe. Some argue that dispatchability is a requirement of a DR option. Time-of-use (TOU) rates are sometimes considered a demand-response option. TOU rates are non-dispatchable and produce a consistent reduction in peak demand.

  5. FERC - The Federal Energy Regulatory Commission - The United States federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. FERC also reviews and authorizes liquefied natural gas (LNG) terminals, interstate natural gas pipelines and non-federal hydropower projects

    The Energy Independence and Security Act of 2007 requires FERC to conduct a national assessment of demand response potential, develop a national action plan on demand response, and with the Department of Energy develop a proposal to implement the national action plan. So far the Commission has accomplished the following:

    2010 National Action Plan
    2009 National Assessment

  6. -Options - Incentive-based - pay customers to reduce load during events called by the program sponsor. These events can be triggered by an emergency on the grid or by high electricity prices. Incentive-based options include:
    • Direct load control (DLC)
    • Interruptible/Curtailable rates
    • Emergency DR option
    • Capacity market DR
    • Ancillary services

  7. Options Reliability Triggered are called in response to emergency conditions on the grid (e.g., outages). These options typically provide short notification time due to unpredictable nature of emergencies

  8. Options Price Triggered are called in anticipation of high market prices 
4. Business Case
  • A Smart Grid is a key enabler in achieving demand response / load management; with the goal of peak reduction.

  • The extensive use of demand response could potentially cut the peak power demand in the United States by up to 20% in the next decade, according to a 2009 report from the Federal Energy Regulatory Commission (FERC). This study estimates the potential growth of DR in the United States from 2009 to 2019. Four different scenarios are considered (from least to most potential) – Business-as-Usual (BAU), Expanded BAU, Achievable Participation and Full Participation. Demand response gives utilities the ability to cut large commercial and industrial loads and to control other customer's use of air conditioning, refrigeration, and other large electrical appliances. For instance, demand response could cause your air conditioner to delay its next cycle or to cycle less often in times of high demand, usually in exchange for a credit on your power bill. More sophisticated means of demand response include the use of smart meters and "dynamic" utility pricing that varies with demand, so that customers are motivated to reduce or delay their electrical use during times of peak demand.
    Demand Response Potential

  • Looking ahead to 2019, the FERC report projects a 38-gigawatt (GW) reduction in peak load under business as usual, equal to 4% of the projected peak load; an 82-GW peak load reduction under expanded business-as-usual, equal to 9% of peak load; a 138-GW peak load reduction under the achievable participation scenario, equal to 14% of peak load; and a 188-GW peak load reduction under the full participation scenario, which yields a 20% reduction in peak load. The full participation scenario results in essentially no growth in U.S. peak power demand over the next decade. In this scenario, much of the load savings is achieved through dynamic pricing, combined with smart devices.

  • There are three necessary components for demand response.
    1. Advanced Metering Infrastructure - You clearly have to have advanced metering so that, so that usage can be measured on at least an hourly basis. This includes: Digital meters, Two-way communications enables programmable communicating thermostat control and in home displays
    2. Price and Event Communication - Information is necessary for customers to take action and the rates provide the motivation to respond. Enabling technology allows residential and small commercial/industrial customers to respond to price easily.
    3. Larger customers with energy management systems linked to pricing signal over the internet or through other communication channels

  • DR Options
    • Signal to the end-use customer: incentive-based or price-based
    • Trigger for the DR event: reliability vs. price
    • Program implementation: wholesale vs. retail
    • Response requirement: mandatory vs. voluntary
    • Dispatchability: dispatchable vs. non-dispatchable
    • Notification: day-ahead vs. day-of notification
    • Control: utility-controlled vs. customer-controlled
    • Type of incentive payment: fixed vs. market-based

5. Benefits
  • Save Costs– The Galvin Institute estimates that widespread national use of demand response would save U.S. consumers at least $30 billion a year. For example, Chicago’s Community Energy Cooperative initiated a demand response program that saved the residential consumers an average of 19% on their electricity bills in 2003. Reducing spikes in demand will cut the need for peakers small power plants such as pumped storage systems that exist solely to deal with such spikes.

  • Improve Reliability - Voluntary price response can reduce the probability of emergency events occurring. Even day-ahead notice of an event can, even if enough people respond even a small amount, reduce the probability of needing an emergency response that next day. Respond to temporary grid anomalies

  • Increase Consumer Choice - Introduce new markets for aggregators, micro-grid operators, distributed generation, vendors, and consumers; Engage the consumer by allowing market participation and consumption/billing choices.

  • Manage Demand - Control peak power conditions and limit or remove brownout/blackout instances; Flatten consumption curves and shift consumption times; Maximize use of available power and increase system efficiencies through time-of-use (TOU) and dynamic pricing models.

  • Improved Planning - Demand Response can be considered in long term planning exercises as a supplement to long-term planning reserves, and provide operational reliability through operating reserves and flexibility.

  • Reduced Capital Requirements -  Demand Response resources can be used to manage the risk associated with construction and operations of traditional supply-side resources.

  • Support Intermittent Renewables - Demand Response resources can be used to manage the risk associated with a variety of new operating characteristics associated with variable renewable resources. However,  no vendors are currently offering a full-service platform to manage both demand response and on-site generation, which limits the option in the short term.   DG integration is a very smart way for DR to expand, but utilities shouldn't be asking for full-blown DR-DG platforms from vendors yet. They simply don't exist.

6. Risks/Issues
  • Industry Structure Will Change - Demand response companies could face pressure from providers of technology that lets utilities turn down peak power use by themselves. Or those demand response aggregators could take over that market.

    The longer-term promise of two-way communicating smart meters to could replace demand response systems from aggregators like EnerNOC and Comverge with hardware and software the utilities can own and operate on their own. And if two-way networks that allow customers – particularly homeowners – to play a part in deciding when their air conditioners power down become more widespread, that could pose a serious threat to demand response aggregators middleman role.

  • Unproven Benefits - The Demand Response cost savings that are included in advanced metering rate cases are still mostly theoretical. We don’t know for sure if demand response will be critical to making Smart Grid cost effective. Customers are being paid cash for lowering peak usage against a baseline that, of course, by definition is unobserved. So it has to be estimated and there you have a lot of statistical methodology questions.

  • Dispatchability - Smart meter-enabled systems for turning down customers' power use may spread in the coming years and decades, but that they could continue to suffer from the potential for customers to opt out. That would make their negawatts a bit less like the firm generation resources like coal-fired power plants, and more like solar power – a fair-weather resource, so to speak, that can be relied on only when the sun is shining, or in this case, when those CFO-less and CIO-less homes are willing to agree to turn down their power use.

    Today close to 80% of the demand response in California is only available in an emergency. About 1700 megawatts, that's a significant resource, only available in emergencies. Because it is intended for emergencies, the ISO cannot plan around or even consider DR.

  • Complex Information Exchange - Demand Response is characterized by interactions between the actors that must traverse many domains in order to function. Information is exchanged between devices of varied complexity, ownership, and access rights.

  • High Cost - Current Cost to install DR is too high. First cost and on-going operations/maintenance cost make few DR programs economic.
    • DR Hardware $100 to $200 per Appliance 100% Un-needed/un-wanted
    • Installation $150 to $200 Includes Labor, Permit, & Project Management
    • Marketing $50 to $100 Cause it’s a Hard [Utility] Sell
    • $500 per installed DR point
    • Benefit: 0.6kW (WH); 1.0 (A/C); 2.0 (Elec. Ht)
    • $/kW= $833 (ugh); $500 (marginal); $250 (ok) respectively

  • Hard Consumer Sell - The value proposition of demand response to customers may be nebulous. A bonded electrician drills; installs ugly equipment; cleans up (usually) and the customer saves And YOU save $2 to $5 per month (but like the drippy faucet, it adds up) As a result:
    • 80% Can’t follow offer, or fail to see value proposition
    • 60% Say No when installation described
    • 10% Change mind, say No when electrician arrives
    • Target device in 10% of homes doesn’t meet code
    • 5% of spouses not on enrollment call cancel service within 1 month
    • Bottom line: only 6% of target audience get an install

  • Communications. Demand response creates new communications needs. At a minimum it will be necessary to communicate real-time prices and/or interruption signals. But the Internet creates the possibility of a much richer dialogue between end-users and the system operator. In addition to prices, the kinds of information that may be communicated include total end-user loads, end-user loads available for interruption, billing information, and forecast of weather and prices. A variety of issues need to be addressed including communication protocols, security and reliability.

  • Controls - A key to more successful demand response programs, especially in buildings, will be the availability of control systems that can respond automatically to price and interruption signals. Existing control systems for buildings have a number of deficiencies and R&D efforts are required to overcome these deficiencies.

  • Institutional issues - Some observers argue that the most important impediments to successful demand response programs are institutional (as opposed to technical). While there are a few successful RTP programs in the US, there have also been a number of failures.

  • Use of Backup Diesel Generators for DR - On May 22, 2012, the EPA signed proposed amendments to the  National Emission Standards for Hazardous Air Pollutants for stationary reciprocating internal combustion engines (NESHAP RICE). The proposed rule changes do not become effective until EPA issues a final regulation including any final changes.

    Opponents including the Sierra Club want to see backup diesel generators restricted to true emergencies, where they have always been exempt from pollution controls.

    The EPA’s proposed rule restricts operation for emergency DR to the lesser of program requirements (which is 60 hours in PJM) and 100 hours per year. The EPA has always allowed up to 100 hours per year for non-emergency use, which includes testing and maintenance, and a subset of those hours for emergency DR. The EPA is  proposing more flexible as to how those hours can be used in order to maintain last line of defense emergency resources to help prevent blackouts. It’s important to keep in mind that these generators – at hospitals, wastewater treatment plants, and other mission critical facilities – must run periodically for testing and maintenance, and existing permitting rules limit such operation to 100 hours per year. DR event hours can and are used as substitutes for normal testing and maintenance.

    Also, EPA is proposing to tighten the trigger for when emergency DR events can be called (i.e., at NERC EEA Level 2 - Issued when a Control Area “foresees or has implemented procedures up to but excluding interruption of firm load commitments” and voltage reductions only); thus, emergency DR is very rarely called. The last, and only time, emergency engines have been used by ISO New England for emergency DR, for example, was on August 2, 2006 for a total of 3.75 hours. If emergency DR was not available that day, the grid most likely would have failed; and if that happened, every generator, whether properly permitted or not, would have operated for hours or days before the electric grid was restored.

  • Falling Prices - Traditional business models for demand response are facing pressure, with prices on a slow but steady decline in key markets like the one operated by mid-Atlantic grid operator PJM. In one sense, that’s a function of the industry’s success -- as more and more megawatts of demand-side management come on-line at increasingly competitive prices, the overall effect will be to lower the cost of serving those peak demand moments on the grid, and thus lower the payments that providers can earn.

  • Unstable Demand Response Revenue - From a business-model standpoint, EnerNOC aims to diversify away from its hugely seasonal business (100 percent of EBITDA and 70 of percent revenue come in Q3) with increased software sales and non-Q3 DR revenue.

7. Success Criteria
  • Simple, stable program rules
  • Enhance customer program choices
  • Educate customers about economic and environmental benefits of DR
  • Develop segment-based marketing tools to promote Energy Efficiency, Demand Response & Solar programs
  • Encourage installation of enabling technology

8. Companies
  1. Constellation Energy - (former NYSE ticker symbol CEG), headquartered in Baltimore, Maryland, was an energy producer, trader, and distributor. The company operated over 35 power plants in 11 states. In March 2012, Constellation merged with Exelon, with Constellation Energy taking the Exelon name and the corporate headquarters moving to Exelon in Chicago, Illinois.

    Constellation has been in the commercial demand response business since 2006, bought CPower in 2010 to roughly double its megawatts under management, and has since added new customers and new technology to support its growth. Last year it managed more than 1,300 megawatts of dispatchable load capacity in the NYISO, ISO-NE, PJM, CAISO and ERCOT market

  2. Comverge  Norcross, GA- With over 500 U.S. utility clients and 4.5 million devices installed, Comverge "smart megawatts" technology is widespread and in use across the nation. Their "pay-for-performance" programs provide capacity that can reduce emissions, eliminate line losses, increase reliability, and defer generation and transmission acquisition.

    The company operates in two segments, Residential Business and Commercial and Industrial Business. The Residential Business segment offers IEM solutions for residential and small commercial end-use participants. Its solutions include IntelliSOURCE software that provides demand management functionality enabling control of various end-use devices and systems, integration into the utility customer’s back office operational systems, and inter-operability with advanced metering infrastructure, as well as offers a two-way real-time communication link to residential customers; a suite of intelligent hardware comprising one-way load control switches, smart thermostats, and in-home displays; and services, including installation, marketing, and program management.

    In April 2007, Comverge (COMV) became one of the first publicly traded companies that could be described as a pure-play smart grid company.  In March 2012, Comverge ended that experiment on the public markets with a sale to H.I.G. Capital for $49 millionon, a fraction of the market value it commanded just 18 months before.

    Comverge has worked with hundreds of electric utilities to deploy nearly six million energy management devices and enroll more than two million residential customers into mass-market demand management programs.

    According to a July 2015 Leaderboard Report from Navigant Research, Comverge and EnerNOC now lead the DR provider market in terms of strategy and execution.


  3. CPower - Baltimore, MD - In October 2014,  Constellation Energy and Comverge announced they’re forming a new company that will combine their nationwide portfolios of C&I demand response. Constellation holds a minority stake in the new company, while H.I.G. Capital, the company that took Comverge private for $49 million in 2010 and has run it since then, will hold a majority stake.

    The combined business operates as a new standalone company, independent from Comverge and Constellation.   CPower specializes in delivering a full spectrum of demand response offerings to commercial and industrial customers across the United States. The the combined forces have more than 2,269 MW under management at more than 1,700 C&I customers at 7,700 sites nationwide .

  4. Eaton Corp, Houston, TX - In May, 2012, Eaton Corp., the power and control systems giant, announced that it would acquireCooper Industries, catapulting the 90-year-old Eaton into a new class of smart grid competition.; Cooper Industries engineers and manufactures medium- and high-voltage electrical equipment, components, and systems that deliver reliable electric power to homes, industries, businesses, and institutions worldwide. Through their Energy Automation Solutions group, which includes Cannon Technologies and Cybectec Inc. they are also a leader in providing software, communications and integration solutions that enable customers to increase productivity, improve system reliability, and reduce costs.

    Terms of the transaction set a value of $72 per share of Cooper stock in cash and shares in the new company, for an equity value of $11.8 billion, one of the biggest M&A deals of the year so far. Eaton has secured a $6.75 billion bridge financing commitment from Morgan Stanley and Citibank to finance the cash portion of the acquisition.

    The combined companies had a collective $21.5 billion in 2011 revenues, The deal, closed in the second half of 2012, created a company headquartered in Ireland and tentatively titled “Eaton Global Corporation Plc

  5. EnerNOC (NASDAQ: ENOC) Boston MA - A leading demand response and energy management solutions provider for commercial, institutional, and industrial customers, as well as electric power grid operators and utilities. EnerNOC, the country’s biggest ;DR provider, has between 24,000 and 27,000 megawatts of peak load under management, according to its website.

    In 2011, EnerNOC bought Australia and New Zealand demand response provider Energy Response for $27.9 million, added 150 megawatts of automated demand response for Alberta, Canada’s grid operator, launched fast demand response in Texas and the U.K., and continued work on a DOE-funded wind power-balancing project with the Bonneville Power Administration.

    Enernoc has built a large network of customers who would adjust demand by turning down air conditioners or lighting when EnerNOC asked them to, and EnerNOC would then bid that potential energy savings into competitive wholesale markets, primarily PJM.

    In October 2014, , Constellation Energy and Comverge announced they’re forming a new company that will combine their nationwide portfolios of C&I demand response. Constellation holds a minority stake in the new company, while H.I.G. Capital, the company that took Comverge private for $49 million in 2010 and has run it since then, will hold a majority stake. The commercial and industrial customers making up Comverge’s portion in the new business come from the portfolio of Enerwise Global Services, acquired by Comverge in 2007.

    Meanwhile, Comverge itself will retain its residential and small commercial demand response business, which it does as a turnkey service or under contract to utilities.  That part of Comverge’s business accounted for about three-fifths of its revenues when H.I.G. took it private in 2012, though the company hasn't disclosed any details on its market share or split between business units since then.

    EnerNOC reported record revenues of $471.9 million for 2014, up 23 percent from the previous year, largely driven by growth in its mainline demand response business in markets from mid-Atlantic grid operator PJM to Australia and Europe. Profit shrank on a non-GAAP basis to $36.3 million or $1.26 per share in 2014, down 19 percent from $44.9 million and $1.55 per share in 2013.

    The business has grown rapidly as it built out demand capacity, but the court battle leading up to this ruling took its toll on the company. If the Supreme Court had ruled the other way, it could have undermined EnerNOC's entire demand response business by stripping FERC's power.

  6. NRG Energy, the generation and retail energy giant, has also been making moves into demand response, buying Energy Curtailment Specialists in 2014  to bring more than 2,000 megawatts of C&I load under its control.

8. Links
  1. FERC - 2009 ASSESSMENT OF DEMAND RESPONSE AND ADVANCED METERING - This report fulfills a requirement of the Energy Policy Act of 2005 (EPAct 2005) section 1252(e)(3)1 that the Federal Energy Regulatory Commission (FERC or Commission) prepare and publish an annual report, by appropriate region, that assesses electricity demand response resources.

  2. Demand Response and Smart Metering Policy Actions Since the Energy Policy Act of 2005: A Summary for State Officials (National Council on Electricity Policy, Fall 2008) (PDF 980KB)

  3. FERC Report: Demand Response Could Cut U.S. Peak Power Demand by 20% - The FERC report also includes a state-by-state breakdown of four scenarios, providing a guide for legislators and utility commissioners as they evaluate their policy options for demand response. See the FERC overviewand the full report

  4. EnergyDSM.com - This website was created so people can come discuss and learn about energy demand side management.

  5. Research Into Action, Inc., - 2008 Process Evaluation of California Statewide Aggregator Demand Response Programs - This process evaluation is Volume 3 of a three-part project focused on aggregator-driven demand response programs operating in California in 2008. This evaluation investigated three demand response programs operating in the territories of California's three IOUs: PG&E, SCE, and SDG&E.The three demand response programs include:

    1. CBP - Capacity Bidding Program - a statewide program operating in the territories of all three IOUs.
    2. AMP - Aggregator Managed Portfolio - offered by PG&E.
    3. DRC - Demand Response Resource Contracts - offered by SCE.