Five Hurdles to Broadening Demand Response Programs (And How to Overcome Them)

The average U.S. demand response customer is an industrial one looking for a financial incentive to curtail energy use. The pitch to an industrial customer is relatively easy. Clearly understood utility or independent system operator (ISO) rate and tariff options are available, and customers often can engage onsite generating equipment or adjust shift work in response to advance notification of a called demand response event.

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By George Plattenburg, Servidyne

The average U.S. demand response customer is an industrial one looking for a financial incentive to curtail energy use. The pitch to an industrial customer is relatively easy. Clearly understood utility or independent system operator (ISO) rate and tariff options are available, and customers often can engage onsite generating equipment or adjust shift work in response to advance notification of a called demand response event. For these customers, occupant comfort isn’t a direct influence on the bottom line as much as it is in a hotel, office building or shopping mall.

For utilities and ISOs, though, the promise of demand response won’t be realized until owners and operators of other complex commercial buildings begin to participate fully. Hotels, resorts, hospitals and large commercial office buildings often have peak demands measured in megawatts. Their contributions could be significant, but utilities must overcome some challenging obstacles to ensure their buy in. Although a 2009 Electric Power Research Institute research paper on U.S. energy efficiency and demand response programs suggests that in the coming decades demand response solutions likely will be split evenly among industrial, residential and commercial customers, utilities should broaden their base of commercial demand response customers to get the most from their current programs.

This brings obstacles. In an office, retail or hospitality situation, for example, occupant comfort is paramount. The thought of curtailing energy use with regard to air conditioning or display lighting has been an automatic no-go for some users. Obstacles must be overcome to help customers understand they can participate effectively.

1. Lack of Education

Customer education is the first obstacle to overcome for utilities that target commercial customers. The misguided but common belief held by commercial facility staff and management is that demand response participation will be challenging, expensive, time-consuming, and it might result in occupant dissatisfaction.

Few commercial buildings have the onsite expertise or corporate staff to evaluate and design an effective demand response plan for a building. For these complex buildings, no one-size-fits-all demand response plan exists. Buildings have different energy control systems, HVAC systems, lighting and scheduling needs. Once a good demand response plan is designed, however, it likely will work for many years with only minor modifications.

Showcasing examples that address these concerns is paramount to surmounting this obstacle. Often utilities approach commercial customers with the same information as they would approach industrial customers, and that doesn’t work.

2. Lack of Communication

This obstacle runs a close second to education. Once commercial property decision-makers consider demand response, they must understand how the building will be affected. A demand response audit with detailed suggestions and onsite examples of how the demand response events would work is critical to commercial customers’ decisions. The audit should provide a complete list of demand response measures, detailing actions that can be taken and resulting load reductions. Address and dispel miscommunication about how demand response will change existing systems. Audits also help vet new ways to reduce energy and understand how it affects bottom lines. Because these customers frequently lack large maintenance staffs, change intimidates them more.

3. Inability to Measure

Measurement is critical to maintaining open dialogues with commercial customers and to providing evidence of successful demand response programs. A utility’s partnering with the right demand response provider enables easy proving that actions were taken to shed load during a demand response event, based on engineering estimates developed during the demand response audit. It should be simple to convert those actions into kilowatt reductions. Matching those actions up against the meter to measure actual program load shed is more difficult. For example, in the case of a hotel, load shapes vary somewhat based on independent variables including weather, occupancy, meals served and conferences or special events (see sidebar). The same is true to a slightly lesser extent for commercial office buildings. Regularly measuring, analyzing and reporting success back to customers is important. The approach a utility uses to develop its baseline calculations is important, and customers must understand their baselines and measure performance against them.

4. Lack of Incentives

Another way to attract commercial customers to demand response is to tailor incentive options that address their specific energy use. Increasing per-kilowatt incentives during peak use helps mitigate concerns. Another important factor is the length of called events. Many customers can participate fully for two to three hours, but not for eight hours. If the utility has a needle or limited-length peak, the demand response incentive should be designed to reflect that peak to encourage maximum participation. Richer incentives work. The savings generated from demand response participation fall straight to the bottom line during a challenging economy, making them valuable opportunities for large commercial customers.

5. Lack of Notification

The time and notice provided before calling an event is different for a commercial customer relative to residential or industrial sites. In general, correlation exists between event notification periods and participation. The more in advance an event can be called, the greater the likelihood of participation of some measures. Staffs can prepare longer and can incorporate demand response measure tasks into their plans for the day. Similarly, long lead times often allow more load to be reduced.

Appealing to the commercial market is a different, but not difficult, way to increase demand response acceptance. There is a huge, untapped market for utilities and owners and operators of these complex buildings in demand response participation. Understanding how commercial customers make decisions and tailoring your approach to address their challenges will get more commercial facilities involved in demand response programs. Adjust your approach now as demand response benefits are better proven and the contributions of your participants are of greater value.

George Plattenburg is senior vice president of sales and marketing at Servidyne, a company that offers demand response solutions to U.S. utilities via its Fifth Fuel Management solution. The majority of Fifth Fuel’s newest demand response customers through major-market utilities are commercial facilities in retail and hospitality industries.


Demand Response Case Study: Hyatt Hotels

Partners: CPS Energy in San Antonio, Servidyne

Program: CPS’ Save for Tomorrow Energy Plan (STEP) demand response program using Servidyne’s Fifth Fuel Management solution

Pilot Locations: Hyatt Hill Country Resort & Spa and Hyatt Regency San Antonio Riverwalk

Implementation

Fifth Fuel Management is backed by Servidyne’s iTendant platform, a Web-based, computerized maintenance management system (CMMS), hosted in a Tier I data center that provides the communication and tracking platform needed for demand response.

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Hyatt already was using its own software for curtailment. As part of the pilot, an additional demand response module was provided.

Before initiating demand response events, each property had to be audited to determine the amount of load that could be called upon. The audits generated a list of proposed demand response measures capable of delivering a certain amount of curtailable load.

Each accepted demand response measure was assessed using actual amperage readings when available obtained with metering equipment in real time. Those readings then were converted to estimated peak kilowatt contributions. The audits determined that the Hyatt Regency Hill Country facility had an estimated 154.9 kilowatt load, and Hyatt Regency San Antonio Riverwalk had an estimated 84 kilowatt load. This totaled 238.9 kilowatts, 19.5 percent more than the 200-kilowatt minimum required by CPS.

How it Worked

With each demand response measure identified, Servidyne created a specific task in iTendant that included detailed information on location, task duration, default resources, detailed procedures and estimated kilowatts saved. These tasks were added to the Hyatt work sites list and mapped to CPS. The mapping operation, enabled by the two-way communication opened up by the new user interface, allowed Servidyne to enter demand response events and demand response measures from a single source for both facilities.

This system was then used to transition an e-mail from CPS into a call for action. Staff at each property received notification that an event was planned along with each event’s time. Using their mobile devices, building personnel accepted or rejected each specific demand response measure, providing advance notification to CPS.

Results

At its conclusion, the pilot resulted in an average 236 kW of demand response across eight demand response events in four weeks. This savings was 99 percent of the 238.9 kW that CPS identified as available to be curtailed or shifted during that time.

This amounted to savings of roughly $450 a day, or $4,300 to $4,500 a month, for the hotels.

Servidyne has since secured a two-year exclusive contract to provide demand response services to other CPS commercial customers, including having worked with 20 to 25 facilities participating in the program during 2010.

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