With summer fast approaching, utilities are preparing to dispatch demand response to avoid power outages and ensure grid reliability. To see how demand response is impacting the grid, Utility Dive spoke with Dan Delurey, executive director of the Association for Demand Response and Smart Grid (ADS), a non-profit association for smart grid and demand response organizations.
A former utility executive and current energy policy advocate, Delurey created the National Town Meeting on Demand Response to give demand response and smart grid professionals the tools needed to do their jobs. The Town Meeting, which takes place July 9-11 in Washington, D.C., brings together utility and smart grid leaders to share best practices and case studies during one day of roundtable discussions and one day of panel sessions.
Delurey shared a sneak peek at what's going to be discussed at the conference along with his insights into what the future of grid efficiency might look like. Here's what he had to say:
UTILITY DIVE: How would you define demand response (DR)?
DAN DELUREY: Some people would define DR by talking about the peak, which is still probably its foremost purpose. By that I mean, reducing peak electricity demand and, in some cases, shifting it to a non-peak period.
But the true definition of demand response goes beyond just peak management. Demand response is a case of providing price and/or information signals to electricity users that causes them to modify their use in a way that’s good for them but also good for the electricity system.
It’s really a case of optimization. It’s a case of having all of the information all the time and the controls all the time, such that you’re always making the right choice in how electricity is distributed and consumed. That’s where it’s going. It’s inevitable.
What impact could demand response have on electric utilities?
DELUREY: Utilities have lived for decades in a world where customers were not used to getting a lot of information about any of their purchases. Now they get a lot. And yet in the utility world they still don’t. So now, from a defensive posture, utilities need to meet customer expectations. From a standpoint of seizing opportunity, they now have all these new ways to get engaged with their customers, communicate with their customers and make their customers happy. I see no reason why that can’t be a positive impact on utilities if they embrace it and don’t wait.
Are consumers aware of demand response?
DELUREY: No one expects for consumers ever to hear the word demand response. There’s no need to introduce that as a term. So if I’m a utility talking to a customer, it’s simply another energy efficiency program.
Now, having said that, the thing that customers are beginning to understand, and is really of the utmost importance for introducing time-based pricing, is for consumers to understand that even though they pay a uniform price for electricity around the clock, that it doesn’t cost the same to produce it and deliver it. That’s one of the biggest problems in our electricity system right now. Consumers have no disincentive to not use air conditioning on a hot day when the system is threatened and about to go down. They might respond to a public appeal over the radio, but there’s no monetary incentive for them to do that.
So one of the biggest educational hurdles – and it’s happening slowly but surely, but it’s got to happen a lot more – is for consumers or electricity customers to really understand the electricity system and the fact that we should have time-based pricing.
What are regulators' attitudes to demand response?
DELUREY: It’s hard because regulators can’t be treated as uniform. Having said that, I think most of them understand what demand response is as exemplified by the virtual power plant, time-based pricing, a smart thermostat and some other things. So I think they get that.
But I think they are in the tough position that they’ve always been in—a lot of people think of regulators as being against the utilities. They’re really not. They’re just a judge, an arbiter between the consumer and the utility. Regulators have a natural conservatism towards change because it can cost a lot when we’re talking about capital investments. At this point, regulators are doing less on demand response than they need to.
And I know this from being an electric utility exec, but electricity is a highly charged political issue. Take time-based pricing. The evidence is in now that a certain section of consumers love it. They’d like to have it. You run these pilots and you put in a smart thermostat and then the pilot's over and they don’t want to give it up. They really like it. There’s a hundred different points of evidence—actually there’s some new data from the West Coast that were going to be revealing on time-based pricing that’s even more going to make the point that you shouldn’t be afraid of it from the standpoint of the customers.
If the evidence is there, and if the meters are there, which they are in large part, then if I'm a regulator, ball's kind of in my court. The evidence is there, the meters are there—so am I going to approve time-based pricing and have to explain and educate? Take New Jersey now, which is facing big grid replacement costs from Hurricane Sandy. If I’m the regulator, it’s my name on the order that raises rates to pay for that stuff. So we need a lot of political courage around the country right now to take smart grid and demand response to the next level.
Where do you see demand response going in the future?
DELUREY: If you take the expansive definition of demand response, I think it will be ubiquitous. It will just be embedded in the way we build and operate our buildings. It’s just going to be part of what everyone does. Now, a lot of it is going to be automated because people don’t want to have to worry about energy every second.
And just like with traditional energy efficiency, there’s no better way to get it institutionalized than through a building code or design. Because then it’s in. You don’t have to fight about a retrofit. It’s in. Those are parts of DR 2.0. There are cases of where DR has been used not because of power plant avoidance or because of something like that, but where it has been used in lieu of building a new transmission line. DR can be extremely targeted. You can do DR in a neighborhood in order to avoid having to expand a substation. I think DR being used more widely and broadly is part of DR 2.0.
We’re hearing a lot of chatter about this new concept called ‘transactive energy'—what is it?
DELUREY: Transactive energy is this optimization above the individual building or home. It’s the utility optimizing some level of its operation or system. It might be at a substation or a distribution network node, but the concept is still the same. It’s the idea that you’ve got more options than just the power plant now.
There have been various reasons utilities have not always been warm towards traditional energy efficiency, but one is that it wasn’t controllable or dispatchable. You couldn’t count on it exactly when you needed it—and that’s not what demand response is. Demand response is just like a power plant. So now with demand response and dynamic storage and all these things, a utility has other options and transactive refers to the different set of inputs and outputs of a utility system.
And how do you see the smart grid evolving as part of that?
DELUREY: The smart grid is going to have to be more flexible and dynamic. There’s no better example of what the smart grid can be than a smart meter. Remember the smart meter is part of the smart grid, I talk about it as the lower-end but it’s still part of the utility system.
Prior to having a smart meter in place, a utility doesn’t know whether an individual customer is out of power or not. When a storm blows through, and this phrase has leaked out in the past few years, they ‘roll a truck.’ One metric for a utility has been how many 'truck rolls' they do as part of their outage restoration. Now, a smart meter sends out a last-gasp signal before it goes out. So a utility in their control room knows who’s out and who’s not. That’s just a micro-example of what the grid is going to be once you get the sensors and control points in there.
What is your vision of what the grid is going to be 10-20 years from now?
DELUREY: I fall back on the idea of a dynamic, living organism. Think of a factory these days and the idea of manufacturing just-in-time. The electricity system will be like that. There will be more options. They will be managed dynamically. The result should be a more reliable, stronger, but also less costly, electric grid.
What do you think utilities need to do to stay ahead of the curve?
DELUREY: That’s the big question. This gets back to the disruption issue. Utilities, I think they understand this based on a lot of the comments being made right now—they have to examine their business models. They’ve got to look at which models or changes they can incorporate. And where they can’t incorporate it, how do they best partner? Not an easy task.
Having come from the utility world, it’s just not something that has had to be dealt with like this before. Energy efficiency was just not this kind of thing. Independent power, the rise of co-generation and renewable projects, that was important. Deregulation was important, but that was state-by-state and you were basically taking generation and putting it over there.
But you weren’t running this change agent through the entire utility and everything that it does. Those are the kind of things that face utilities today. But I don’t see why utilities can’t adapt. Utilities, from my vantage point, are bringing in new people and they’re trying new things and I think they can do OK—but they’re going to have to pedal fast to introduce change.
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