Demand Response: Let's Just Do It
Paper tigers eventually fold.
And I think we're seeing this in the smart grid sector.
Dan Delurey, the Demand Response Coordinating Committee's executive director, told me yesterday that he detected a shift this year from past National Town Hall Meetings on Demand Response.(More coverage of this year's meeting: carbon pricing and demand response.)
"There wasn't a lot of discussion of barriers, it's more about doing it now," Delurey said. "This is not about the future. It's time to actually do things. Now we have to implement FERC's [Federal Energy Regulatory Commission] National Action Plan - it exists. The current effort is about setting priorities."
In the case of demand response, FERC's National Action Plan calls for a national coalition to achieve its three main goals: technical assistance to states, a national communications platform for local shaping and implementation and tools for utilities and regulators.
The DRCC will lead a coalition of coalitions until this beast determines its own hierarchical structure, according to Delurey.
"FERC has encouraged us to begin our work," he said.
Meanwhile, FERC must return to Congress by year's end, probably with a request for funding to achieve the three goals cited above.
"This is about peak load management - only the surface has been scratched," Delurey continued. "The idea is that all customers need to be involved."
Delurey pointed out that a relatively recent McKinsey & Co. report identified residential demand response as holding the biggest promise, with the caveat that it involves 130 million decision makers whose potential response is, in DR parlance, "disaggregated."
If utilities can formulate a real value proposition and communicate with the right message, voluntary DR will fly, Delurey said, echoing what attendees said last week.
"No one is talking about mandatory demand response," Delurey said. "Homeowners don't have to do it. There'll be more than one flavor. Choices are an area we heard emphasized at the town hall meeting. One size doesn't fit all - no one markets anything that way, certainly not Proctor & Gamble."
"The only barrier is education," Delurey said. "Like any other product being introduced, people want information. Electricity is an area up there with air and water - it's taken for granted. But these are hurdles, not barriers This is not the first part of people's lives to be impacted by technological developments. In fact, it may be one of the last."
As we saw in earlier coverage of this meeting in the nation's capital, formulating an attractive value proposition and developing a message that makes sense to consumers, may be a bigger challenge than it sounds at first blush.
Some of the concepts bandied about touched on "transparency," "payback," "consumer empowerment," "setting expectations" and the ultimate goal, "changing behavior." Delurey himself asked whether "energy efficiency" - which seems to be understood and attractive to homeowners - would perhaps serve. Jamie Wimberly, CEO of EcoAlign, half-jestingly asked whether peak load electricity should be marketed as "crazy expensive minutes" - rather than, say, a "demand response event." (Now we're talking, people!)
Of course, this is a top-down, general discussion in an industry consisting of thousands of players, some of whom have already crafted a value proposition and a message to convey it. Contradictions abound. PG&E, which unfortunately has become a poster child for how not to rollout smart meters has nonetheless found success with customers signing up for its "SmartRate Summer Pricing Plan" program, as my colleague Kate Rowland discussed earlier this week.
So the DRCC's efforts to lead a "coalition of coalitions" may well provide some very useful tools to the industry. What the thousands of utilities in the U.S. electric power industry do with those tools is another story, yet to be written. That's the vision-to-reality transformation we're always talking about here at Intelligent Utility Daily.
What's next on Delurey's radar?
"Let's just do it," he said. "Now there's a support network for doers to do it."
Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757
Comments
Fresh Summer Fruit and Electricity
Peaches, apricots, cherries, nectarines and other seasonal summer fruits are now available in stores and farmers markets. The price will vary by availability. During the period of peak supply, consumers will buy more because it will be cheap. Just before and after that time, fruit will be more expensive and I suspect folks will buy less.
Sound familiar Mr. Delurey?
Having customers adjust their buying habits around supply and demand conditions (aka dynamic pricing) has been a common feature of markets for a long time. It happens with seasonal produce and no one complains. It happens with airline tickets and consumers have benefitted enormously from long stretches of low-priced air fares that have caused an explosion in air trave. The only time there's been even the slightest debate is with electricity. That's got to change.
In California, load factors are forecast to fall below 60% as air conditioning penetration increases. That means on average, the fleet capacity factor will fall below 50%. As more energy is supplied by renewables, that fraction will fall further, to somewhere below 40%. In most industries, utilization factors that low are a formula for bankruptcy. That's got to change too.
Jack Ellis, Tahoe City, CA (reporting from Iowa City, IA)
411 on Dan
By the way, Dan is President of the Demand Response and Smart Grid Coalition (DRSG), the trade association for the smart grid industry. That doesn't make him the devil incarnate...but it does make me question the motives behind his enthusiasm.
Dan, Dan the Snake Oil Man
"No one is talking about mandatory demand response," Delurey said. "Homeowners don't have to do it. There'll be more than one flavor. Choices are an area we heard emphasized at the town hall meeting. One size doesn't fit all - no one markets anything that way, certainly not Proctor & Gamble."
Here comes energetic Dan, ready to start the Next Big Thing while PG&E, Oncor and other utilities are in the midst of suffering their initial Smart Meter skull fracture. Meanwhile, the DOE's Smart Grid Information Clearinghouse website remains in "beta" till the fall of 2010...about the time the initial EPRI "demonstration projects" will be wrapping up.
The notion of "hurry up" is always pushed by the big idea crowd. Frankly, we're overrun with big idea guys...from Congress to the DOE to my PUC and local co-op. I swear to Pete not a single one could complete the formula for Ohm's Law if you spotted them the E, the I and the equal sign...much less do the hard work needed to justify these horriffic expendatures of public money. Junk science is junk science till it's not.
Demand Response - Just Do It.
Dan makes some good points, however education is not the only missing ingredient standing in the way of demand response. There are several other key problems.
First, demand response under a smart grid is much more than peak load management. Demand response can provide year round applications to address T&D congestion management, integration of renewables, and real-time ancillary services. The peak load model won't work for this expanded vision.
Second, utilities have to reexamine their need to own everything. The non-utility market can do a much better, much less costly job of providing the technology and education to support demand response. Utility and regulatory models need to be updated to facilitate open market participation.
Third, utilities need to seriously reexamine the command-and-control architecture they keep applying to demand response. Command-and-control is fine for power plants, but to accomplish the National Action Plan objectives will require a model driven by prices not control signals.
Finally, the most obvious. Demand response won't expand and won't begin to achieve its potential until utilities, regulators, and consumer advocates figure out how to introduce dynamic pricing. No dynamic pricing = No Smart Grid.