New Chapter In The Journey of Grid Modernization & Energy Efficiency: Demand Side Management

Rebates, incentives, stimulus funds, custom programs… Electricity customers have never had all of these options for Demand Side Management (DSM) before. DSM is an important tool in terms of both energy efficiency and demand response for enduse customers. This is accomplished by implementing policies and measures which provide control, influence and reduce in electricity demand while preserving the same level of service and comfort. DSM programs shift customer demand during peak periods, reduce power losses in the grid, increase efficiency and save in electricity bills by reducing the maximum demand charges.

Genesis of DSM

*Figure 1. The effect of Demand Response Programs on Energy Consumption

Traditionally, planning of the power systems focused mainly on building large power plants and transmission systems. DSM was in the back seat. The concept of DSM first existed in California, U.S. in 1970s after the oil crisis. Before that time, it wasn’t argued that it would be more cost effective to reduce the demand for electricity rather than to increase supply by installing new power plants. Then, technical knowledge and coordinated activities related to load management have been started to develop.

Dave Hayward, Connecticut Energy Efficiency Fund program administrator at Connecticut Light and Power (CL&P) explains the situation with these words: “Here in New England, where we have high population, congestion charges and restrictions on building new capacity, we clearly need to reduce energy demand, and DSM definitely works. Every dollar invested in a Connecticut Energy Efficiency Fund program results in approximately three dollars in electric and gas system benefits.”

A Supportive Legislative Ecosystem

The past decade has witnessed efforts over the world aiming the deregulation of electricity markets. In that context, many opportunities showed up related to DSM programs. A good example of it comes from New England. Ancillary Services Market Project of New England ISO allow utilities to bid demand response capacity like generating capacity. This progression encourages utilities to pursue demand side management activities. We expect that smart grid networks will perform as open platforms for third-party development of energy management applications. And at this point, evaluation of big data comes into picture. A comprehensive information about how big data rules energy management systems is penned by our Building VP, Utku Simitli.(The Hidden Power Behind the Energy Performance of Commercial Buildings)

**Figure 3. Real-Time Data for Demand Response Programs

To a Successful DSM

In order to have a successful DSM application, there are several levers to be examined carefully; rates, incentives, customer engagement, utility control, education, etc. A series of pilots in Canada have shown that customer engagement in DSM programs with the help of providing real-time consumption data reduces the energy use. Because, customers are quite aggressive about their consumption while monitoring it online. Median impact of 7% reduction in consumption is recorded only by real-time access to energy usage.

The Federal Energy Regulatory Commission estimates that two-fifth of DSM opportunity, which is over 250,000 customers, is occupied by commercial and industrial ones. In such a crowded ecosystem, it is for sure that, development of a full service support is needed to navigate customers in decision-making activities in an increasingly complicated DSM programs.

As the grid grows smarter, new challenges accompany it. Penetration of intermittent renewable generation itself needs demand side management. Moreover, electric vehicle usage is becoming more popular and bringing the issue of charging concerns together. Time of use of electricity is becoming more and more important as it has been never before.

Long story short, smart grids are turning into an “energy consumption scheduling” game. A game that needs Internet of Things based management platforms to use your weapons, i.e. battery storages, HVAC equipment, renewable generation and wisdom. Utilities are the referees and customers are the players. Utility tariffs give signals when to use electricity and when to postpone energy consumption. Moreover, you are given incentives to subscribe to that game. Who wouldn’t want to play?

One more thing to keep in mind, every good game will converge to equilibrium for the prices.
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