A growing number of incentives are heating up demand response (DR) adoption in the commercial building sector.
The commercial sector, faced with factors such as rising energy costs as well as new and pending federal building codes and standards, has placed a renewed focus on improving energy efficiency. According to the U.S. Green Buildings Council, buildings are one of the heaviest consumers of natural resources and account for a significant portion of the greenhouse gas emissions that affect climate change. In the U.S., buildings account for 38 percent of all CO2 emissions (1).
To address this escalating challenge, the Obama Administration has set a goal of making commercial buildings 20 percent more efficient within the next 10 years, which could reduce business owners’ energy bills by about $40 billion per year (2).
Demand Response stands to play an important role in meeting these energy efficiency goals.
Due to smart grid technologies which allow a bi-directional flow of information between end users and the electric utility, DR has evolved from a reliability tool used in peak emergencies to a solution for actively managing energy use. The latter is often referred to as DR 2.0 or demand management. Through actively managing energy use and participating in DR programs, commercial buildings can help mitigate the stress of new demands on the grid such as unpredictable renewable energy sources and electric vehicles.
However, until recently, DR has typically seen a higher success rate in the industrial sector, because many factories are already equipped with energy management and power systems that can be tapped to share power. In commercial building settings, there is often a lack of technology readily available to automate the DR process. Additionally, commercial buildings, such as offices or retail stores, have the added responsibility of addressing the needs of multiple tenants or shoppers before making an energy decision. For example, a retail store manager cannot simply turn down air conditioners during the heat of the summer or dim lights during store hours to meet DR requirements.
In order to expand DR participation in the commercial sector and reach DR’s maximum potential, technologies such as smart grid enabled building automation systems (BASs) have been growing in popularity. These systems allow facility managers to measure and control energy use across disparate building systems – from lighting to HVAC systems. BASs can communicate directly with the electric grid to provide facility managers with real-time information about the level of energy demand the utility is experiencing, and thus enables them to make more intelligent energy management decisions based on this insight. For instance, when energy demand and prices are high, facility managers can consult the BAS to determine where load can be shed, whether it should be turning down the air conditioning for a certain period of time or switching off lights in unoccupied rooms.
These practices will simultaneously cut buildings’ energy costs and reduce peak loads for utilities. Ultimately, this will reduce the overall carbon footprint associated with electricity generation by reducing the need to build more fossil-fuel burning power plants to meet the utilities’ peak load demand.
In addition to the environmental benefits and reduced energy bills that a commercial building can recoup by acting as a DR resource, recent legislation by the Federal Energy Regulatory Commission (FERC) has made large steps towards increasing the monetary value of demand-side resources. FERC ruling 745, which I discussed in more detail in an earlier Daily Energy Report column, requires wholesale market operators to pay the same price for DR resources as they would for traditional generation resources. As a result, it encourages building owners and managers across sectors to participate in DR programs by enabling them to generate a revenue stream through their participation.
Yet another move to encourage DR participation in the commercial sector came earlier this year, from The U.S. Green Building Council (USGBC), which has been studying ways it can count DR as part of its LEED rating system. The USGBC, in conjunction with Schneider Electric, Skipping Stone and Lawrence Berkley National Lab, announced plans to release a comprehensively updated LEED Demand Response Pilot Credit. Originally launched in 2010, the enhanced Demand Response Pilot Credit will establish guidelines anticipated to increase participation in automated DR programs.
As part of the credit, LEED projects that satisfy the requirements by demonstrating their ability to shift energy consumption during peak events by 10 percent of peak load demand will earn a point towards LEED certification when they participate in existing utility-sponsored DR programs that meet guidelines established in the pilot credit. Additional points are also available for projects that implement semi or fully automated DR programs in their buildings.
By tying building energy consumption into DR networks for more efficient power consumption, a number of benefits will be realized for commercial buildings, utilities, and the environment. Through these incentives and technology innovations, commercial building stakeholders should have more motivation (and the necessary tools at their disposal) to drive greater efficiencies in facilities today.
Written by Donald Rickey, Senior Vice President, Energy Business, Schneider Electric
- (1) U.S. Green Building Council: Energy Information Administration (2008). Assumptions to the Annual Energy Outlook.
- (2) U.S. Department of Energy. “QTR: Report on the First Quadrennial Review.” Energy.Gov. U.S. Department of Energy, Sept. 2011. Web. 29 Sept. 2011.