September 2013 - Utilities are increasingly adopting advanced demand response (DR) programs—and that represents a growing opportunity for energy-intensive businesses to reduce their overall electricity costs while contributing to corporate sustainability efforts. According to the Navigant Research report Demand Response for Industrial Markets, a global market analysis and forecast released earlier this year, DR participants worldwide will earn almost $1.8 billion in incentive payments in 2013, increasing to about $4.3 billion in 2019. The lion’s share will go to businesses in North America because of its long history of DR and early adoption of automated DR (ADR).
The growth in DR programs, which pay electricity users to reduce consumption on demand, seems assured because its primary drivers are only growing in importance. The need to integrate intermittent renewable energy sources and electric vehicle charging stations into the grid becomes more urgent as these technologies gain market share. And public policies are swinging strongly in favor of using demand management to meet rising electricity demand and accommodate spikes, rather than building expensive new power plants and using wasteful “peaker plants” that run only when demand is high. Meeting these needs, however, requires more than traditional DR programs, which typically provide 24 hours’ notice and involve relatively infrequent but long-lasting events.
The most recent Assessment of Demand Response and Advanced Metering from the Federal Energy Regulatory Commission (FERC) projects the highest growth rate for advanced DR programs with far shorter response times. To participate successfully in these programs, energy-intensive businesses must have DR-ready automation. The good news: these programs typically are more remunerative—how much more depends on the program and the level of participation.
The New DR World
What are some of these programs? The following three types are getting the most market attention. Synchronous reserves (classified by FERC as a form of non-spinning reserves) programs allow utilities to avoid peaker plant use by having participants reduce their consumption on short notice to balance spikes in demand. These programs typically give 10 minutes’ notice for a 10- to 30-minute event. Events can occur several times monthly. FERC expects 500 percent growth in the number of non-spinning reserves programs from 2011 through 2016.
Frequency regulation programs help system operators meet their obligation to maintain a stable electric frequency. To do this, they need to continually balance electricity supply with load—a task complicated by the integration of intermittent energy sources such as wind and solar. Frequency regulation participants may be called upon to reduce or increase their load with seconds of notification, possibly throughout the day. The number of frequency regulation programs is likely to grow 150 percent, according to the FERC study. Dynamic pricing programs are different in that rather than making promised load curtailments in exchange for incentive payments, participants respond to frequently changing electricity rates by managing loads to match their highest demand peaks to the lowest rates.
Rate changes happen frequently and with notice ranging from just minutes to 24 hours. These programs include real-time pricing, critical peak pricing, peak-time rebate programs and other kinds of programs with a time- or market-sensitive price component. FERC data indicates that as a group, dynamic pricing programs will increase 63 percent.
Automation Essentials
While some facilities can manage traditional DR programs with limited automation and manual control, those methods are impractical—even impossible—with the newer short-notice programs. They don’t allow facilities to respond repeatedly and quickly enough, and because events occur frequently, shutting down production during each event is not an option. To maintain operations during the event while delivering the committed load shed (or avoiding peak prices), the facility manager must be able to precisely control how much load the facility is running versus shedding. An energy demand management system connected with (or embedded in) the facility’s equipment makes this relatively simple.
For example, one Northeast foundry operation we work with tried and failed to participate profitably in the regional grid operator’s synchronous reserves program without a demand management system in place; with one, the foundry is earning over $130,000 a year from two facilities’ participation. The process works like this: the plant manager loads a weekly schedule of when they’ve opted to participate in synchronous reserves, and at what level, into the demand management system. When an event occurs, automated notices go out to the plant manager and operators, but they don’t need to take any action. The demand management system turns loads down (but not off) by just the amount needed to hit the synchronous reserves commitment. The facilities report zero impact on overall output.
Another customer we work with is able to take advantage of the buffer in its manufacturing process and sell the available equipment load as capacity in a frequency regulation program. Plant managers can increase or decrease this load based on a signal from their curtailment service provider. The demand management system oversees the process, managing the amount of load available to ensure that production isn’t negatively affected. Key features to look for in a demand management system to enable advanced DR include:
- A smart grid connection to your electricity provider and aggregator or ISO to receive event notifications.
- The ability to set curtailment rules that are tailored to your equipment and that protect your production needs.
- The ability to take control of the loads—within parameters you set—so that no human intervention is required.
- Access to real-time data from your equipment to analyze and predict demand spikes.
- Insight into the facility’s full energy use, not just production loads.
- Support for OpenADR, the emerging communications standard.
About the Author
Patty Solberg is the director of product marketing at Powerit Solutions, a Seattle-based international technology company that focuses on advanced energy demand management. Powerit’s Spara technology lets industrial businesses control energy use for savings and sustainability—without compromising production or quality. Many of the most respected and innovative companies in the automation and energy fields, including Rockwell and Mitsubishi Electric Automation, are working with Powerit to extend the capabilities of their own equipment, automation, and services by seamlessly linking their customers to the smart grid.
