The power of integration

Energy efficiency/demand response coordination momentum grows

Published In: Intelligent Utility Magazine May/June 2011

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UTILITIES, THE U.S. GOVERNMENT AND other electricity industry stakeholders recognize energy efficiency and demand response programs as powerful tools to help customers reduce energy consumption and utility bills and assist utilities with curbing the ever-growing demand for power.

Despite the likeness of the two types of programs, utilities have been slow to tap into their synergies.

These are synergies, according to the Electric Power Research Institute (EPRI), that could dramatically curb the national demand for power. Over the next two decades, EPRI estimates that the integration of demand response and energy efficiency programs has the potential to reduce demand for electricity by 14 to 20 percent below projected levels during peak periods, when demand is highest.

Financing differences problematic

Despite the positive forecast, out of 2,016 U.S. and Canadian energy efficiency, demand response and load management programs identified in a 2009 report by the U.S. Department of Energy (DOE) and the Environmental Protection Agency (EPA), only 56 served both energy efficiency and demand response purposes.

According to the report, differences in how energy efficiency and demand response programs are financed and a lack of utility staff and contractors with expertise in both fields contribute to the lag.

Demand response mechanisms inhibiting?

The report also emphasizes a fear among energy efficiency managers that demand response mechanisms will inhibit them from meeting their ultimate goal of reducing energy in the long term. Energy efficiency guarantees energy savings over time, while demand response only encourages people to shift their use.

A disproportionate aversion among customers to demand response programs is also cited by the report. Whereas energy efficiency programs do not force customers to change the way they live, demand response programs call on customers to change their consumption patterns.

The DOE and the EPA list three elements with the potential to change the nature of demand response to bring it more in line with energy efficiency goals: smart grid technologies, widespread energy price and use information and dynamic rates.

SMUD melding both

The Sacramento Municipal Utility District (SMUD) is working with these elements in an attempt to better meld energy efficiency and demand response program goals.

Ed Hamzawi, SMUD’s customer applications coordinator, insists that the trick to integrating the two for small commercial and residential customers is simplicity.

“Our goal is to make the terms ‘energy efficiency’ and ‘demand response’ easy to understand,” said Hamzawi. “We need to get away from making distinctions [between the two] as much as possible.”

SMUD tested the integration of demand response and energy efficiency efforts in the summer of 2008 through a pilot project. The utility offered 78 of its small commercial customers programmable communicating thermostats—an energy efficiency technology—in exchange for their willingness to manually turn up their thermostats, or to have their thermostats automatically raised by 2 to 4 degrees on exceptionally hot days, when demand for power threatened the utility’s reliability as a provider.

Office buildings, retail outlets, and restaurants volunteered to participate, and agreed to one of these options in exchange for $120 and help from SMUD with making their buildings more efficient.

SMUD installed the communicating thermostats in participant premises, conducted energy audits, taught customers how to use the thermostats and informed them about the new rates that would be applied when demand was highest. Participants received notification of the 12 peak events that occurred during the life of the project one day prior to each event and, as result of thermostat adjustments, realized energy savings of 20 percent and bill savings of 20 to 30 percent.

According to an assessment of the project, about 80 percent of participants said that the program met or surpassed their expectations, and 75 percent said they would probably or definitely participate again without the small financial incentive. The assessment called the pilot “a threeway win” that benefited SMUD, participants and society at large through energy efficiency savings.

Embracing new technologies

Through SMUD’s smart grid project, the utility continues to explore new technologies that may further blur the line between the two. “We are looking at what technological offerings and pricing signals will make integration more feasible and interesting in the future,” said Hamzawi.

The Federal Energy Regulatory Commission, in its National Action Plan on Demand Response, forecasts that demand response technologies like these will enable customers to sustain energy reductions by allowing the utility or another third party to manage their appliances.

“The technology has to take care of it for the customer,” said Richard Oberg, SMUD’s supervising demand-side specialist, noting that new technologies, such as smart phone applications, have the potential to provide information about pricing so that customers can decide remotely whether they want their appliances to be directly regulated.

A growing trend

SMUD is just one of several utilities working toward integration, with a focus on technologies to better meet customer needs.

“We feel our focus on customer engagement is what has driven our success with our smart grid program, and that this same focus will drive our success with integrating energy efficiency and demand response,” said Craig Johnston, vice president of strategy and marketing for Oklahoma Gas & Electric (OGE) Corp. “In addition, the technology platform put in place to enable demand response can be leveraged to increase the effectiveness of energy efficiency programs.”

Like SMUD, OGE is still in the initial phases of integration, assessing the best way to make the merger.

Austin Energy, Duke Energy, Otter Tail Power, Xcel Energy, the New York State Energy Research and Development Authority and all of Texas’s electric utilities have also initiated the process by marketing energy efficiency and demand response together in an effort to focus on broad objectives that resonate with customers— saving energy and money, and helping the environment. Several of these utilities have also started to use the term ‘energy efficiency’ to describe the full breadth of their demand-side management programs.

California’s Energy Action Plan II, for instance, jointly issued by the California Energy Commission and the California Public Utilities Commission (CPUC), supports SMUD’s emphasis on integration, listing the combination of demand response and energy efficiency programs among its “key required actions.” And in 2007, the CPUC directed California’s three investor-owned utilities to include integration in a comprehensive, statewide long-term energy efficiency plan. Since 2007, the three utilities have proposed a number of pilot programs that would test the efficacy of integration.

Long-term cohesive vision

Historically, SMUD’s funding for energy efficiency programs has been tied to concrete goals for reducing demand, while demand response has only been included as an emergency reliability resource. The utility now has “planned targets for the amount of demand response we want to see over the next few years, so we can start to figure out where we need it, what it costs, and from that, how much it is worth spending,” said Olberg.

From there, he said, energy efficiency and demand response can be combined into a “cohesive plan for a longterm vision.”

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