Demand response isn’t a topic that comes to mind for most people when they think of energy conservation. When the summer sun is beating down, it’s stifling hot, and the air-conditioners are on full blast, we’ve all heard the requests from our local utilities to save electricity as electric power supplies get tight so, we voluntarily conserve energy, individually, to prevent power shortages.
Back in the “old days” — 10 years ago — companies participating in the early demand response programs did it the old-fashioned way, literally going around and turning off lights and equipment to consume less electricity, helping out their local utility to reduce their electricity consumption and prevent potential brownouts and rolling blackouts.
Very sophisticated, automation technologies — some introducing technology imported from Europe — are now being promoted by a number of companies, including Powerit Solutions. These technological advancements allow computers to make “intelligent” decisions for each individual industrial facility using demand response technology, carefully “shedding,” in progressive stages, the electrical requirements for each company. By acting in this “intelligent” manner, production is minimally affected until the energy squeeze crisis passes.
Demand response has proven tremendously successful for the utilities and big, electrical-grid operators in managing an impending, peak-power crisis. Though the technology is growing quickly in popularity with systems installed in more and more industrial companies, there is still a great deal of potential in the management of even more fundamental industrial energy loads.
To reach that potential, companies such as Powerit Solutions work in tandem with both end-user industrial facilities and utility companies, providing the proven technology for “intelligent” demand response to each company while encouraging stronger support from the utilities to finance these installations – and to encourage even greater incentives from the utility to each company to enhance the benefits of their voluntary participation.
How do utilities define a successful demand response program? Foremost, financially.
PJM, the regional transmission operator, credits demand response with saving its customers $650 million in one season, $230 million in single day.
How can a day of conservation produce savings of $230 million? Economics provide an explanation: Wholesale power prices have the inconvenient habit of rising in unison with demand, just as a utility’s generation reaches its capacity. A utility must either meet peak demand by buying high-priced power, or flatten the peak by initiating conservation among its customers.
By reducing overall customer loads by just one or two percent for a few hours, utilities can avoid buying market power at peak prices. Long term, utilities that don’t control peak demand will have no choice but to build more generating capacity. In terms of cost per megawatt, conservation is by far the most attractive option.
Progress Energy Florida has used demand response to manage customer loads, reducing them by as much as 2,000 megawatts (MW). That’s equal to 50 solar power plants the size of Waldpolenz, slated to be the world’s largest photovoltaic plant.
When a grid operator in the Midwest achieved a 3,000 MW reduction — 75 Waldpolenzes — it avoided a spike of $200 per MW in its overall power cost.
With rising energy demand, and in the absence of other means to continue to avoid blackouts, demand response will play a growing role. Utilities are expanding demand response programs and launching new ones. But scaling up demand response will not be as easy as it might seem.
Utilities naturally began by skimming the cream — enrolling the most knowledgeable, willing customers who offered the easiest loads to shed. Curtailing the next, deeper layer of loads will face two main challenges: enrolling new customer segments, and replacing generic demand response with automation intelligence.
Most of the customers who participate in demand response are commercial building occupants who respond manually to demand response calls. Manual demand response means someone must go around the office and turn off loads. That restricts the scope and types of loads that can be shed, which limits the amount of conservation available. When customers can’t shed large amounts of power, their payments are low, which undermines their incentive to continue to take part in the utility’s program.
Intelligent demand response, solves the manual reaction problem by implementing automation, but creates another. In view of the capital cost per installation, utilities are best advised to invest in a few customers with the largest loads. Unfortunately, commercial office buildings enrolled today can’t typically provide the amount of kilowatt (kW) shedding necessary for facilities to reap worthwhile financial benefits.
Powerit Solutions helps utilities reach the true potential of demand response by tapping into resources from the largest electric end-use sector: industrial loads. Industrial facilities are often the largest single-site user and therefore offer the most load shedding potential. Industrial facilities today consume 26% of all the electricity sold in the United States. Yet, the adoption rates for demand response in the industrial sector remain very low.
A major reason for the low adoption rates is that the largest manufacturing loads are fundamental to operations: productivity may be jeopardized when plant managers shed loads such as refrigeration systems and industrial furnaces. Manufacturers, being understandably cautious, have either limited or forbidden shedding of these fundamental loads.
The next level of demand response must expand participation of fundamental loads if it is to reach its full potential. Powerit Solutions provides the technology that can get them across the fundamental load barrier.
Intelligent demand response is the basis of that technology. It uses state-of-the-art demand management automation with specific functionality to overcome the limitations of manual methods or generic system control. It increases the potential reward of expanded participation, while controlling risk to industrial customers.
Intelligent demand response is the logical evolution for managing peak demand. And it’s possible with systems available today.
Industrial users already install factory automation to be more efficient or trim production costs. Intelligent demand response is an extension of automation, enabling participants to connect many loads and then quickly decide which subset will make up each response, based on preset rules.
Intelligent demand response provides tools for tracking and controlling the productivity impact of conservation. That reduces the risks, but manufacturers still face an up-front investment. Equipment incentives will be needed for intelligent demand response to be most effective. Utilities are in the best position to offer financial support.
Trojan Battery wanted to participate in a demand response program with Southern California Edison. The cost of the intelligent demand response systems would be $500,000 or more.
Trojan implemented an intelligent demand response system from Powerit Solutions, and at the same time centralized the control of sensitive manufacturing processes. That allows Trojan to shed as much as 85% of their average total load — and offset part of their multi-million-dollar energy bill.
Southern California Edison paid most of the cost of the technology through an incentive program. As for the remaining cost, Trojan expects a financial payback in six to twelve months, in part because SCE pays Trojan Battery around $10,000 per demand response call.
There is a deep well of energy resources waiting to be tapped. Technology is reducing the risks; utilities can and should provide incentives to implement it.
Bob Zack is CEO of Powerit Solutions.