Beyond the meter
Exploring the Middle Kingdom of demand response
Published In: Intelligent Utility Magazine May/June 2010
WITH PRESSURES ON UTILITIES TO reduce peak loads and integrate variable renewables, third-party demand-response (DR) solution providers are playing an important role as a bridge between the power supplier and commercial, industrial and institutional customers to manage peak demand. Whether utilities see third parties as competitors or helpmates, they are an expedient route to getting DR quickly and cost efficiently. Over the past decade, as a consequence of providing a much needed service, they are an industry force forging partnerships with utilities around the world.
''It's fair to say that some utilities see us as a competitor. The fundamental reason is because every utility I have ever met cares very deeply about its customer relationship, and some may be reluctant to have a third party between them and their customers,'' said Gregg Dixon, senior vice president of marketing for EnerNOC. His company is a third-party DR provider with more than 35,000 MW under management for more than 100 utilities serving over 6,500 commercial, industrial and institutional consumers in the United States, Canada and the U.K.
Partners in savings
Al Grinnell, manager of commercial and industrial customer service for Tampa Electric Company (TEC) sees it this way: ''I do not consider third-party DR providers as a competitor to utilities. We don't consider them a vendor either, rather as a partner because they are providing a service with specific expertise that we don't have in-house.''
Cutting peak demand drove TEC to seek a third-party solution. TEC is the principal subsidiary of TECO Energy Inc. and serves over 670,000 customers in a 2,000-square-mile area in west-central Florida.
In 2006, TEC began exploring the possibility of adding DR to its demand-side management portfolio, which already included interruptible rates, residential direct load control and other offerings. After researching several solution providers, TEC made its choice in 2007 and worked with its third-party DR provider over six months to enroll nearly 100 commercial and industrial customers to participate in the first test. ''Their enrollment checklist walked us through the whole process. Their people were incredibly helpful and answered all our questions,'' said Robert Garcia, vice president of new business development for Ybor City District Cooling. His plant has a 2,450-ton chilled water system that supplies more than 800,000 square feet of Tampa buildings including a college campus, office and retail complexes, a cinema center and a hotel.
Before TEC could proceed with the program, however, it had to get approval from the Florida Public Service Commission. The commissioners were concerned about turning over DR to a third party, getting capacity when needed and if a third-party could provide reliable performance. The program underwent strict regulatory scrutiny and was approved in late 2007.
DR performance favorable
In October 2008, a two-hour test was run from the DR solution provider's network operations center in Boston. During the event, customers more than delivered their contracted reduction targets and dropped nearly 32 MW from the grid. ''I went to the network operations center in Boston and sat in the control room. When we hit the button I was tied into my dispatch center in Tampa and I could see real-time load on the system and what we were dropping. I needed to understand everything to protect my customers and make sure we are offering a superior level of service,'' Grinnell said.
To participate, the nearly 100 customers in the program agreed to trim a minimum of 100 kW between 7 a.m. and 7 p.m. Some curtail several megawatts. The program runs year-round with an event notification of 30 minutes and duration anywhere from one to eight hours. The DR solutions provider's network operations center is used to control the end-use customers' load for those customers who have signed on. Some loads are curtailed automatically and remotely. Others are done manually based on automated communications to the customer. And customers use a Web browser to access their data.
Grinnell characterized DR performance as very favorable. Customer survey results and feedback have been very strong. Customers get a quarterly check from the third-party DR solutions provider in exchange for curtailing their load. ''With checks ranging from $1,000 to nearly $100,000 in an economy like this they are very happy about that,'' Grinnell said.
''Our customers perceive the program as a partnership. Tampa Electric has an offering, but [the DR solutions provider] runs the program. They know that if there is ever any issue whatsoever, my account-management team is only a phone call away, day or night. But we have never had any issues. It's mutually beneficial to all stakeholders,'' Grinnell added.
Sales are easy when you have a good product that everyone wants. That is apparently the case with third-party demand response. The third-party DR solutions provider brings a value proposition to a customer that is simple and, in this example, installed the technology for free, simplifying what would otherwise be very complex for a customer do. There is zero risk. If a customer does not perform during a DR event they are not penalized. The DR solutions provider works as a partner between the utility and the customer to make it work and ensure the maximum amount of DR is obtained out of a particular territory.
All in all, DR makes a solid case for being a much cheaper, faster, reliable and environmentally friendly resource than peaking power plants.