Demand Response 101: Efficiency Pools of Power

An Example Load Curve

Above you’ll see a fairly typical demand curve for electricity over the course of a day, in this case for a room in a Japanese building. What drives utility planners nuts is the fact that energy production is very hard to change quickly, but energy demand fluctuates wildly during the day. The result is overbuilding and overconsumption of resources in order to support the peaks, along with the greater pollution that comes with such a buildout.

Demand response is a neat technology solution that uses the market to flatten those peaks into a smooth curve compatible with electrical generation assets. Behold two typically elegant sentences from the recent DOE report (pdf) on demand response.

Most electricity customers see electricity rates that are based on average electricity costs and bear little relation to the true production costs of electricity as they vary over time. Demand response is a tariff or program established to motivate changes in electric use by end-use customers in response to changes in the price of electricity over time, or to give incentive payments designed to induce lower electricity use at times of high market prices or when grid reliability is jeopardized.

Sounds like a great way to avoid unnecessary investments in generation and transmission infrastructure, right?

The bad news: use of demand reponse is down 41% in the last 10 years, mainly due to a combination of botched deregulation or re-regulation and poor marketplace understanding and incentives.

We were therefore intrigued by a recent proposal from our friends at EnerNOC — why not create a Demand-Response Portfolio Standard (DRPS)? Following the theory that the most environmentally-friendly kilowatt is one never generated, this standard might ensure that demand response pools get adopted in the market and help accelerate their adoption by less than scrappy utility companies.

Taking the idea a little further, we could use a similar structure currently implemented in the RPS markets, and separate the actual electricity from the attributes (e.g., “dark tags”). Perhaps even more funding could be generated by these pools of power by allowing environmental attributes to be captured in the price separately from the electrical attributes.

How about it, Trader Joe’s? Why not one-up Whole Foods by switching to 100% Demand Response power?

PS: For brits on the list, you’ll recall the UK implementing night storage heaters as a way to shift power demand.

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