As temperatures soared to over 90 degrees along the East coast in early June, air conditioners across the region were turned on full blast. Air conditioner usage during the hot summer months raise electricity demand and costs, making this season a particularly important time for utilities and energy consumers to focus on energy management opportunities in order to prevent rising costs and to maintain grid stability.
During the summer, air conditioning accounts for 60 to 80 percent of the typical peak demand. Peak energy demands occur for one to two percent of the entire year, yet electric providers must build generators sufficient to cover that peak, plus a reserve safety margin, even though they sit idle for 99 percent of the year. The cost of this generation resource is the highest of any resource.
In addition to the challenge of managing fluctuating energy demand from season to season, there is the larger issue of global energy consumption continuing to rise – the Department of Energy estimates that energy consumption is projected to rise by 50 percent over the next 25 years. This rising energy demand along with CO2 emission reduction goals is driving the need for greater energy efficiency. End-users, particularly large energy consumers such as commercial and industrial buildings, will play a significant role in creating a more sustainable and energy efficient world. The International Energy Agency forecasted that more than half of worldwide CO2 emission reductions will come from end-use efficiency.
Faced with this rising energy demand and the need to meet CO2 emission reductions, utilities and energy consumers have come to realize that they must work together to address our country’s energy challenges by changing our patterns of energy distribution and consumption. The smart grid will lay the groundwork to enable this changing relationship between utilities and end users.
In the past the U.S.’s electric grid sent energy down the line from where it was generated to where it would be used, with no way for end-users to return any unused power to the power plant or to generate and analyze data about usage patterns or problems. This results in a significant amount of energy waste.
Smart grid technologies enable real-time monitoring of energy usage and a bi-directional flow of energy and data between utilities and end users. This, in combination with new and pending legislation will provide end users with access to their energy usage data and enable them to monitor and control their energy consumption and costs while simultaneously helping utilities to maintain grid stability.
New opportunities to reduce energy costs continue to emerge as improvements in technology and increased consumer awareness of energy issues drive demand for intelligent energy management solutions. Demand Response (DR), for example offers financial incentives to energy consumers who agree to reduce their energy usage when energy demand is high. By working with utilities to balance energy demand, DR resources reduce the need for utilities to add expensive new generating capacity.
DR programs aimed at reducing peak load have proven to be particularly important during the summer when the grid is more likely to be overloaded due to increased energy demand. For instance, a 2005 study by the CUNY Institute for Urban Studies revealed that large multifamily residential peak limiting control programs in New York City was able to drop peak demand by 15 percent during critical peak demand times.
Technology improvements have enabled DR to evolve from an economic and reliability tool used in peak demand emergencies to a vehicle that allows utilities and end users to work together more consistently to maintain grid stability, reduce costs and drive greater energy efficiency.
As large energy consumers, the commercial and industrial sectors in particular stand to reap significant financial benefits by participating in DR activities. By participating in DR programs commercial and industrial customers can reduce their energy bills by cutting back on energy use during high peak, high cost times. Additionally, the Federal Energy Regulatory Commission (FERC) ruling 745 will require utilities and retail market operators to pay DR resources the market price for energy – this is a big step towards putting DR resources on par with traditional generation resources.
FERC ruling 745, along with the growing portfolio of intermittent renewable energy resources being added to the grid, are increasing the relevance of DR as a first-tier resource which will help drive greater participation in DR activities.
Demand response is continuing to evolve towards more real-time automation capabilities that will allow building management systems to communicate in real-time with the utility through electronic signals. Automated DR solutions and valuing demand side capacity on par with generation will be key factors in raising participation in DR programs, ensuring that utilities will be able to rely on tapping demand-side capacity, and that end-users will be motivated to effectively manage their consumption.
As energy demand fluctuates from season to season, DR resources provide a reliable solution which will bring significant benefits to both energy consumers and utilities including cost savings and power reliability, as well as energy efficiency improvements.
Written by Donald Rickey, Senior Vice President, Energy Business, Schneider Electric.