Demand Response Incentives: A Smart Way To Save Electricity

The climate is changing. With hotter summers, more storms, and rising sea levels, it’s going to take every tool in the book to adequately meet demand and avoid energy disasters. Businesses are working to increase energy efficiency, but from the supply side, more firms are offering demand response as yet another tool to change energy consumption. 

It’s not a radical idea. The demand on the grid isn’t static; every community sees peaks and valleys in energy consumption. As demand increases, the load on the grid gets heavy and less efficient. Throw in seasonal variables like heat, which can reduce the carrying capacity of the grid by 20%, and everyone loses; consumers pay more, supplies can’t meet demand and, in some places, we can even experience a blackout. 

Demand response offers a financial incentive to consumers to reduce their energy consumption during peak demand hours. This practice is vital in hot climates like the American South, where persistent temperatures can greatly reduce electrical supply. Here, communities dip into what is called a reserve margin, or an amount of electricity supply that is held back in case of a sharp rise in demand. Last summer, some places saw their reserve trick to just 3% in parts of Texas. That’s a razor-sharp margin, but the situation can be improved with demand response practices. 

Both residences and businesses can serve as partners in a demand response program. In fact, the larger the participating facility, the better; the more one participant can free up electrical supply, the more control an electrical company can have. Companies that participate often schedule production to fit around peak demand times. For instance, a manufacturer might not start its second shift until nine or ten at night. While it leaves a few extra hours of downtime, it does bring in some income from the power company. Instead of running the line, a manufacturer might schedule maintenance, cleaning, or staff education or meetings during peak demand instead of running equipment. 

There are some technological barriers to effectively implementing demand response programs. One of those barriers is response time. Experts believe that businesses need to be able to stop and start production, and their energy use as a result, in as little as five minutes. Many energy environments are too complicated to do this; it’s not quite as simple as flipping a switch. They can also incur more energy consumption upon startup, negating any benefits from the shut down in the first place. 

Another factor that is influencing implementation is calculating compensation for demand response participants. Not only do suppliers need to calculate the value of the electricity saved, but they also need to see it as energy produced, because the electricity ‘freed up’ counts as more supply. Participants also need to gauge the value of restructuring or rescheduling their workforce and production plans. Both consumer and supply need to make sure the demand response system is mutually beneficial. 

As tech catches up, we expect to see more and more companies find that these programs are a good investment. We help manufacturers crunch the numbers, forecast energy needs, and incorporate renewable energy and energy storage options that further their savings. 

Want to learn more? Contact Keen Technical Solutions today to set up a consultation.