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GreenGov Dialogue on Demand Response: the Future of Awesome?

I joined a conversation this week (on Feb 26) called the “GreenGov Dialogue on Demand Response” that was hosted by the White House Council on Environmental Quality (CEQ). It brought together leaders from government, the private sector, non-profits and academia to identify opportunities to reduce our nation’s periods of peak energy demand, promote a more stable electric grid, and help the Federal Government save energy and money in its operations. Among those who engaged in the dialogue were Terry Boston, the CEO of PJM Interconnection, which is a regional transmission company in Pennsylvania, New Jersey and several other states; and Doyle Beneby, the CEO of CPS Energy, which serves San Antonio, Texas.

But of course, when I told my family how I’d spent my morning the first question I got wasn’t “who did you see,” but rather “what’s demand/response???” I’ll try to answer that here and explain why it could become something that’s awesome.

To operators of the electric grid, “demand/response” is about making the huge, integrated electric system that delivers power to millions of consumers and businesses be more reliable and cost effective. To grid operators demand/response means that at any moment, in addition to turning on another power plant in order to avoid a system-wide failure, they also have the option of getting customers to cut back on power use. Operators have had this option for decades but it’s been crude, slow and reserved only for emergencies; it’s usually put into motion by the utility making a phone call to a factory owner who had agreed in advance to slow operations in the event of a crisis. In the last few years, however, grid operators have become excited by the possibility of fine-tuning the electric grid in real time, as 90 million U.S. households have subscribed to a fast broadband connection and things like smart, connected thermostats have been invented. Rather than something reserved for an emergency, demand/response using today’s advanced information and communications technology (ICT) can make day-in and day-out grid operations more efficient and resilient and can enable things like electric-vehicle charging stations and home solar panels to be connected to the grid without causing problems for the overall system.

But the reason customers might come to see demand/response as awesome is different. For customers, demand/response is about changing their relationship to how they use electricity. Now that they can “see” their thermostat on their smart phone, just like they can see their TV recordings on their DVR, customers have more control. They even can get paid for turning things off in their home or business if they do it at the right time, and if their grid operator has the right demand/response program available.

For instance, Terry Boston, the PJM CEO, shared how demand/response had unleashed creative thinking by some of his larger enterprise customers. Drexel University, in Philadelphia, has realized that it can use the millions of books in its campus library as a “thermal storage” device, which the university then has been able to use as an “asset” that generates revenue via payments from PJM.
Doyle Beneby, the CPS Energy CEO, shared how mass-market customers are beginning to engage differently with their electricity use because of CPS’ demand/response program. His company has found four different ways to group customers according to their interests. The largest group is customers who just want to save money without thinking about it. They want the demand/response process to be automated for them. Another category – the “survivalists” – is comprised of those who want to be left alone and put their highest value on the ability to control their use. A third segment is environmentally oriented and its members are very motivated to reduce their carbon footprint. The last group in San Antonio is comprised of technophiles who love their gadgets. But all of CPS’ customers – except, perhaps the survivalists – were most motivated by being able to compare their own use with what was the norm in their neighborhood.

How does this all tie back to why Federal agencies are interested? There are several ways. Agencies can take advantage of demand/response programs to not only become more efficient but also to be paid for cutting back on power use, just like Drexel University. This will help government budget issues, for sure, but it also will enable Federal agencies to “lead by example,” demonstrating and educating by their behavior how customers in the private sector can change how they use electricity. Also, Federal agencies, in their role as large “enterprise-scale” customers with a lot of buying power, can have an impact on electric utilities by demonstrating there is market demand for state-of-the-art demand/response programs. A demand/response program that routinely pays customers for cutting back on their power use at the right time is not yet available to most consumers. So it’s not really awesome, yet. Federal agencies might be able to change that simply by “leading by example.”
Finally, there also are policy changes that Federal policymakers might advocate, such as allowing utilities to provide modest, periodic payments to customers just for installing the sensors and communications equipment needed to participate in a demand/response program. In the terminology of the electric industry, this is called “paying for capacity,” and many state public utility commissions don’t allow for creation of a demand/response capacity market.

In short, the ability to use ICT to control and reduce household and commercial electric loads nearly instantaneously, on command, is changing the demand for electricity and creating a desire for more control and for the ability to participate in new ways in the electricity marketplace. Demand/response is one of the ways in which the electric industry is evolving in response. In time, it could be awesome!
Larry Plumb, Executive Director – Emerging Issues & Technology Policy, Verizon, and co-chair, DESSC

Public Policy Tags: Intelligent Efficiency