Master the Fundamentals: Demand Side Response and Demand Management

Demand side response (sometimes called demand response) is a proven, dependable strategy for utilities and grid operators who need to maintain the important supply/demand balance.

As a resource, it has been around in many forms for decades, but is relatively new to the UK and Ireland markets, so we wanted to offer a quick primer on demand side response programmes that pay you for your flexibility, as well as demand management strategies that can help you cut your energy costs.

Get Paid for Participating in Demand Side Response

Demand side response is based on the fundamental truth that not all kilowatts are created equal.

One of the unique things about electricity is that supply and demand need to maintain a steady balance: too much demand = blackouts, too much supply = economic losses and a bunch of waste because electricity can’t be stored cost-effectively in large amounts. Because of the delicate balance, when you use energy represents both a value and a cost.

At the macro-level, when the grid starts buckling under increased demand (e.g., the third day of unseasonably hot or cold temperatures), utilities and grid operators have a few options: risk a blackout (not a popular option), buy electricity on the open markets at extremely high prices, fire up the next peaking power plant (if there is one that’s not already running), or dispatch demand side resources.

Today, demand side response programmes offer large energy users substantial payments in exchange for their “operational flexibility”, i.e. their willingness to use less energy in response to market signals—and has become a go-to energy management strategy for millions of large energy users worldwide.

Taking advantage of opportunities to participate in a demand side response programme is an effective way to create opportunity based on when you use energy. Demand side response turns your willingness to temporarily shut down or delay energy-intensive processes into a revenue stream.

See how The London Underground is using its backup power resources to capitalize on demand side response

Demand side response pays you to curtail your energy use or switch to backup generation at times when the grid is stressed, there is a shortage of available supply, or when real-time prices for electricity are skyrocketing. Energy intelligence software will support all types of demand side response and provide you with real-time visibility into your demand side response dispatch performance, including the financial impact of your participation.

When you’re enrolled in most types of demand side response programmes, you get paid in two ways: First, you get paid just for being on call—regardless of whether you’re called upon to reduce. Second, you get paid based on how much energy you don’t use during a demand side response dispatch. Demand side response providers like EnerNOC provide customers with real-time visibility into how much energy is being reduced during a dispatch, helping to ensure they hit their targets and maximise earnings.

Cut Your Peaks to Achieve Big Savings

In Ireland, most customers are on time-of-use tariffs, so peak demand charges don’t have a big impact on the typical monthly invoice. But for those in the UK, the story is a bit different. Peak demand charges, which appear on the bill as Triad charges, can make up greater than 15% of your overall amount due—a number that is expected to rise, making demand management even more critical to your long-term energy strategy.

So how do you tackle Triad charges? It starts by taking a proactive approach to how you buy energy, how much you use, and when you use it.

  • How You Buy It: Make sure you have full control of the type of contract you or your procurement agent is purchasing. You may not see a charge on your invoice, but I can assure you it’s there. Some suppliers will aggregate charges into a “simplified” single rate. That means the supplier has estimated your usage and probably added a small percentage to cover themselves.
  • How Much You Use: Take control of your invoices, monitor your usage, and understand where you are using your energy. Make sure you understand if energy use at your buildings is comparable to other similar buildings. If possible, use your data as a benchmark to ensure best use at that building.
  • When You Use It: Reducing your Triad charges is as simple as reducing your load during the three half-hourly periods when Triad charges are determined. To make those reductions, it’s essential to have easily accessible real-time data showing exactly what you are using at least every half hour. Good load management will help you shift energy usage to other periods, or even switch to onsite generation if this is available.

Managing your energy line item isn’t easy, but the goal of energy intelligence software is simple: to provide stakeholders throughout an organization—whether energy manager, chief engineer, or CFO—the visibility they need to understand what drives overall energy spend, the information they need to prioritise investments in improvements, and the data to validate that their investments are delivering the value they expected.

Learn more about how your business can participate in demand side response with this eBook.
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Authored By Sarah McAuley

Sarah's been bleeding EnerNOC blue since 2007 and currently serves as the Vice President of Marketing.

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