Power Connect Newsletter

Demand Response (DR) or Demand Side Response (DSR) programs reduce demand on the utility supply in the event of a utility grid emergency. They do this by allowing the local electric utility — typically an Independent System Operator (ISO) or regional electric utility company — to automatically and remotely use an organization’s on-site generators, transferring some or all of a facility’s load from the grid to the generator. They also trigger load reduction through commercial and industrial building automation systems that act on lighting, HVAC and other mechanical loads.

While DR participants are only called upon to use their gen-sets up to four times per summer for about four hours per event, DR programs provide a no-risk, no-cost opportunity for organizations to help offset the capital and operational cost of a stationary generator set. Participants can earn money, save on energy costs and help maintain reliable electricity throughout their city, thereby avoiding blackouts or brownouts.

DR is most viable for natural gas generators rather than diesel generators, as the costs for achieving diesel emissions compliance in a nonemergency application often exceed the potential benefits of participating in a DR program. For example, in 2013 the U.S. Environmental Protection Agency (EPA) put forth rules to allow diesel generators to operate for 100 hours per year for DR purposes. A group of environmental regulators and advocates along with centralized generation interests appealed the rule to the U.S. Court of Appeals, which overturned the 100-hour limit in 2015. As a result, diesel generators must undergo costly upgrades to meet the emissions standards to run in DR applications.

DR program participants receive recurring capacity payments for agreeing to allow their local utility to curtail their utility power consumption in response to abnormally high electricity demand. They also receive additional energy payments based on their performance during dispatches.

Financial incentives vary, but DR can significantly offset the capex and opex of a generator system that would otherwise be viewed as just an insurance policy. For example, a 300 kW natural gas generator with approximately 200 kW of “enrolled load” would earn the customer $4000 at enrollment and up to $3000 per year for the peak energy generated.

Additionally, program participants usually pay less for electricity, whether they sign up for mandatory, voluntary or price-responsive programs. Rates may include a combination of credits, penalties or time-of-use charges, but they are generally lower overall for program participants.  Two kinds of DR programs exist: those that are reliability-based and those that are economic-based.

Reliability-based programs pay you for load reduction when the electrical grid is stressed, such as during unplanned events like extreme heat, inclement weather and transmission outages. These programs are further categorized as either an Installed Capacity – Special Case Resource (ICAP-SCR) program or an Emergency Demand Response Program (EDRP).

The economic-based demand response programs give you the opportunity to offer load reduction into the electricity markets at any time, regardless of a reliability need. The economic-based DR programs are the Day-Ahead Demand Response Program (DADRP) and the Demand-Side Ancillary Services Program (DSASP).

  In order to participate in the ICAP-SCR and EDRP programs, you must be able to reduce your load by at least 100 kW, unless you participate as part of a group of participants, in which case group must collectively meet the minimum 100 kW requirement. For these programs, the utility will send a notification a day before the event and on the day of the event, typically two hours prior to the load reduction period.

As an ICAP-SCR participant, performance is mandatory when notifications occur, and you will be obligated to reduce load for a minimum of four hours during the event. For EDRP programs, however, load reduction during any event is voluntary.

Participation in the DADRP and DSASP programs require you to reduce your load by at least 1 MW unless — as with the reliability-based programs — you participate as part of a group of participants, in which case the group must meet the minimum 1 MW requirement.

In the DADRP program, if you offer to reduce load and the offer is accepted and scheduled, then you are obligated to perform the load reduction as scheduled. In the DSASP program, participation is scheduled in the energy market and you are obligated to respond to real-time instructions to change load per directives. Real-time instructions for DSASP participants occur through continuous real-time communication.

In the Northeast, ISO New England, NYISO and Pennsylvania, New Jersey, Maryland Interconnect (PJM) typically manage the call for DR. However, utilities are increasingly outsourcing the monitoring and dispatch of assets to a third party, especially for commercial and industrial customers and generation.

Companies like CPOWER, EnerNOC, and IPKeys are commonly referred to as Energy Services Companies (ESCo). The ESCo will deploy an Energy Management System (EMS) to a client’s location for recording load, dispatching power generation assets and managing load. Working with an ESCo is often simpler for a commercial or industrial client, as the ESCo will understand the variable incentives offered by the ISO and the local utilities and help the client to maximize the economic benefit from their generator assets.

For more information about how you can participate in DR programs, contact your local utility, ISO or ESCo.