Today, renewable energy makes up roughly 13% of U.S. electricity generation, with about half of that power coming from hydroelectric sources. This figure, however, doesn’t reveal much about the true opportunity and potential of non-hydroelectric renewable energy sources, like wind and solar power. Wind power is expected to grow to 87 gigawatts by 2040, surpassing hydroelectric by 2036. Likewise, solar power is expected to be the fastest growing renewable resource over this time period, increasing 7.5% each year. Significantly, solar energy growth will be driven not just by utilities, but also by customers installing solar panels in buildings and homes.
This rapid growth creates new opportunity and value for the electricity grid, the environment, and energy customers. But it also presents new challenges. Of these challenges, one in particular is often raised: what happens when the sun stops shining or the wind stops blowing? To overcome this, and make these renewable resources more predictable, grid operators are turning to demand response, a solution that pays people to conserve energy during periods of peak, or, high demand. Like solar power, demand response is a resource that can be provided by, and create significant value for, third parties like facility managers (fms).
Demand response is an invaluable component of the smart grid that helps those operating utilities, facilities, and homes financially benefit from conserving electricity. It relies on people, not power plants, to meet electrical demand. Here’s how it works: utilities reward people who use less electricity during times of peak, or high, energy demand, when power plants struggle to supply enough electricity. For example, an fm who turns off non-essential electric devices when demand is high (and in return, receives compensation) is providing demand response to the grid. These temporary reductions or shifts in energy use empower participants to lower electricity bills and enhance grid reliability.
Demand response can also help improve air quality by curbing peak energy use during the hottest and coldest months, offsetting the need for “peaker” plants that only operate for a few hours each year. A decade ago, the grid operator’s only option was to turn on another fossil fuel power plant to meet increased demand. With demand response, operators have another option.
In Utah, for example, around 100,000 citizens volunteered for the electric utility to cycle their air conditioning units on and off for 15 minute intervals during high stress times of the day through the “Cool Keeper” demand response program. This “saved” energy amounted to the combined output of about seven peaking power plants, including oil burning plants with some of the highest pollution rates in the state.
Actual mechanics vary region to region, but often, these programs, where available, allow end users to sign up with providers, who then make the demand response available to utilities or Independent System Operators (which manage electric power supply). As of 2012, nearly 72,000 megawatts of demand response—equivalent to the power generated by roughly 144 coal power plants—were active and online across the country.
Demand response has a pivotal role to play in integrating renewable energy onto the electric grid by helping match energy use to times when renewables are available and abundant. The reason: demand response can provide relief to the grid beyond reducing peak demand. Rather, the resource can help whenever an imbalance between electrical supply and demand exists. For instance, if an fm is able to provide extra electricity back to the grid in reaction to a cloudy hour or windless afternoon, that helps to stabilize the grid until those solar and wind energy resources are able to come back online. Those able to provide this service to utilities would be compensated.
As technology improves, so will the benefits that demand response can provide in supporting renewable energy. For example, automated demand response can cut down on response time by the end user. Likewise, smart meters can provide end users with the cost of electricity at a given time, prompting use behavior changes. These technologies help to increase response time and improve communication—both significant, as electrical supply and demand need to be balanced quickly and efficiently.
Demand response isn’t only helpful as a way to resolve challenges associated with sometimes unpredictable renewable resources like wind and solar. It provides value to the electric grid by reducing demand when supply is constrained or costly.
It provides value to the environment by deferring or avoiding the need to build new supply and transmission. It provides value to ratepayers through lower bills, and it provides value to those offering demand response, including utilities, aggregators, and fms, in the form of compensation for provided services.