The clean energy evolution has seen concerted efforts from utilities and customers alike clamoring for more renewable energy generation to be built in an effort to move away from climate-changing and polluting fossil fuel generation. One of the difficulties in shifting away from fuel sources like coal or natural gas is that they are reliable at providing power during hours of peak demand. Peak demand typically occurs during the early evening hours, when families return home from work or school and start plugging in and engaging in their most energy-intensive activities, such as cooking, running the washer and dryer, turning on all the lights in the house, and cranking up the heater. When the customer base in aggregate increases their energy use somewhat simultaneously, the demand for electricity hits its daily peak, meaning more energy generation is needed at that moment. While clean energy sources might be enough to cover much of the power needs during the daytime hours, fossil fuel sources tend to be more needed during these times to ensure utilities pump out the supply to meet the peak demand, particularly as intermittent renewables like solar are unable to contribute direct generation during these evening hours.
An increasingly common strategy by utility companies in the United States and across the globe has become demand response programs. Demand response, as defined by the Federal Energy Regulatory Commission, is as follows:
Changes in electric usage by demand-side resources from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized.
In layman’s terms, demand response is any sort of strategy by a power provider that encourages or incentives customers to shift their typical energy usage from periods of peak demand to times where it will be easier for the grid to handle so supply can more easily meet demand. As the definition notes, a common demand response strategy is for the power company to send price signals to the customers. These price signals can be standing ‘time-of-use’ rates where electricity during typical peak hours costs more so people will know to plan their energy-intensive activities for alternative times, or the price signals can take the form of ‘variable pricing’ where utilities have the ability to change prices as demand ramps up and the grid gets strained and sends a live update to customers that an increase in power prices is imminent so they can and should unplug or turn off devices they are not using.
Both demand response pricing strategies effectively use the compelling argument of trying to save money to shift customer behavior, and customers actually win in the end too because studies show that a majority of customers end up saving money on their power bills because they’re able to be flexible. Utilities benefit greatly because the cost to implement demand response pricing is a massively more affordable approach to dealing with peak demand issues than the alternative, which would typically be to build out new (likely fossil-fueled) generation or preserve existing (again, fossil-fueled) generation beyond their planned or necessary lifetime.
These basic demand response strategies are just part of the battle, as the technology to enable more advanced and effective demand response methods is now starting to catch up and take over. In particular, the perfect storm of solar panels on rooftops, energy storage, and the advent of smart technologies are paving the way. Here’s how it works:
- Households that install solar panels on their household are able to generate power on their own localized system. The peak hours during which to generation solar power, of course, come during the afternoon when the sun’s rays are the strongest, but the times of peak demand coming in the evening when solar is of little or no assistance. While solar can be used during periods of generation to meet current demand in the household or even sold back onto the grid, a new trend is emerging in…
- Energy storage comes in as the second part of the equation. If solar generation on a household exceeds the amount of electricity being actively consumed inside the building, then newly effective, efficient, and affordable battery technologies installed in the home are able to absorb the excess energy. This energy can then be apportioned out at the appropriate time thanks to…
- Smart technology, and in particular smart meters, are able to communicate with the utility with regards to the demand response needs. If the utility sends the smart meter and renewable energy technology at the household that resources are strained and energy supply is struggling to keep up with demand, the smart technologies can be relied upon to either offset active energy use in the household using the solar-generated energy stored within the household battery or to offload the stored energy back onto the grid to ensure that it’s being used where it’s needed. This strategy takes demand response from simply adjusting the price charged to customers based on how strained the grid is to even paying households higher prices for their on-site generated solar electricity.
Demand response programs had at one point been restricted to commercial and industrial customers, not worthwhile for utilities to implement in the residential sector because the actions of individual customers were seen as too small to make a needed impact. As such, you may have not been approached yet by your energy provider about the possibility of time-of-use pricing, variable pricing, or any other demand response programs. However the advent of innovations like the combination of solar, storage, and smart technologies are making the actions easier to aggregate and scale and thus are gaining more utilities’ attention. As the industry seeks to adapt to the changing times, increase resilience and flexibility, and find new ways to provide clean energy to its consumers at an affordable price, you will start to hear much more about demand response. Solar power, energy storage, and smart technologies are being installed widely day after day, as the utility-system of the future is upon us– get ready!