I just finished reading a good article by Kate Rowland at Intelligent Utility about the future of Demand Response 2.0. Most agree that it is one of the keys to a smarter grid, but how to engage customers and drive adoption is still a work in progress.
As I have worked with clients and had discussions with others in the industry, this seems to be a question everyone is pondering. The answers are varied in approach and tone:
- Dynamic Pricing – Whether punitive or incentive-based, hitting the pocket book is almost always effective but can damage the relationship with consumers and make conversations with regulating bodies much more contentious.
- Conservation Programs – Educate the public on the high value of lower demand. Less fuel, less need for additional construction, less reliance on inefficient or dirty generation assets.
- Improved System Stability – DR can be used to avoid brown-outs and reduce the chance of over-capacity problems that plague many systems.
- Cost – Working with the utility to develop profiles that lower overall usage and reduce consumption at times of peak demand can reduce the $/kwh that utilities pass on.
Most utilities will ultimately need to take a little from each category to put together a message that works for their customers. Municipalities and Cooperatives face a slightly different challenge but also have one key advantage. Since they are not profit motivated, they are able to show a direct correlation between reduced demand and a reduction in the cost passed along to customers. By not purchasing peak power from the spot market during high demand periods, they are able to reduce their power cost significantly.
IOUs suffer from the opposite sentiment. Their customers assume any change they are asking for is profit related and can’t be in their best interest. Unfortunately, this has proved true often enough that customers must be cautious.IOUs will be forced to work doubly hard to communicate the benefits and sway public sentiment.
Ultimately, global realities may make the need to convince and cajole irrelevant. Fuel prices & availability, legislation forcing renewables or reduction in consumption (negawatts), and physical limitation on distribution systems could easily turn demand response into a mandate rather than just a good idea.
One thing is certain: Now is the time to get a strategy in place because the need for DR increases every day.
