Demand response programs are an incentive conducted by utilities to independent system operators (ISOs). The programs typically offer a financial incentive to customers who agree to reduce their electricity usage during specified periods of conservation.
What Are Demand Response Programs?
Demand response programs were developed to help electricity providers match the power needs of their clients without having to develop further infrastructure to support demand. Both utility companies and ISOs are required to provide power to their franchise-area customers at all times of the day. However, issues can occur when resources are stretched thin due to demand spikes, such as a hot summer day.
To ensure they don’t become overloaded in these circumstances, electricity providers offer demand response programs as an incentive for participants to limit their energy usage for short periods of time, to stretch the capacity of the grid. This helps to avoid interruptions to service for clients that rely on constantnt electricity, such as 24 hour manufacturing facilities.
Demand Response Programs in Action
During the summer of 2018, there were two demand response events that occurred in Boston, one was even on Labor Day. Induced by an outage at a natural-gas-fired power plant and higher-than-expected electricity use, the event successfully prevented service interruptions in the Boston area.
There are varying time frames for when Electricity providers will give notice that an event is going to take place. Sometimes, conservation periods can be anticipated, which gives customers notice a few days ahead of time. However, this is not always the case and “fast demand response” tactics may inform customers as little as 10 minutes in advance of the event taking place.
The diagram below breaks down the ways in which customers typically curtail their energy usage during an event:
The Financial Benefit
Customers who choose to join the programs typically receive compensation for their participation. The more a customer participates in an event, the higher the revenue they can earn. One Midwest industrial owner claims he received $1.4 million for taking part in a program. Although that kind of compensation is on the high end, there are significant earnings to be made for companies who are able to adjust their energy use patterns for the greater good.
At EnergyLink, we have ample experience in dealing with energy efficiency and helping a company audit their energy needs. Part of what we do for businesses focuses directly on analyzing the way a company uses energy. We can then use this information to help eligible companies participate in demand response programs.