Making it pay (actual money) to use less energy with demand response

Dan Upham

Using energy-efficiency appliances and being mindful to turn off the lights is one way to reduce your energy consumption and an obvious way to save a little money. In markets all around the country, an innovative tool known as demand response (DR) has the potential to incentivize consumers to take energy and financial savings a big step further.

Basically, DR makes it pay to shift your energy use when the electric grid is suffering severe demand, wholesale electric rates are high and polluting power plants are ramped up.. The benefits of this technology are considerable:

  • It’s a low-cost, zero-fuel, zero-water resource
  • It provides capacity through conservation
  • It offers a direct financial benefit to participants

Read on for some success stories from around the country.

In the Mid-Atlantic

According to the mid-Atlantic grid operator PJM, DR lowers overall energy system costs by bringing more competitive resources into the market. During the summer of 2012, PJM estimates this effect saved all customers around $650 million.

In Texas

When consumers actively control their consumption, they eliminate the need to build more dirty fossil-fuel power plants. According to an EDF report on Texas’ “energy crunch”, the state could meet 15 percent of its peak energy needs through DR alone. It could also help push energy use to the evening hours, when Texas’ clean wind energy is blowing at its best.

Importantly, this hinges on the Electric Reliability Council of Texas (ERCOT, which operates the electric grid and manages the deregulated market for 75 percent of the state) getting serious about allowing residents and small businesses to participate in demand response programs that have historically been aimed at big industrial customers.

In California


“Recently, the California Energy Commission’s draft Integrated Energy Policy Report (IEPR) recognized DR as a technology with a high potential to maximize energy efficiency,” wrote Lauren Navarro, an attorney who leads our state smart grid regulatory efforts across the country, in a post on our California Dream 2.0 blog. “This report comes at an important time for the state, when greenhouse gas emissions from large facilities have increased in California after decreasing the previous years, in large part due to the closing of the San Onofre Nuclear Generating Station (SONGS) power plant.”

What’s Next for DR?

And in all markets, the potential of DR hinges on utilities finding creative ways to incentivize customers to participate.  In some markets, utilities have provided free programmable thermostats (including the Nest Learning Thermostat) to customers that agree to participate.  In Texas, for instance, Austin Energy has introduced a pilot “time of use” pricing program that increases electric rates in the afternoon, but makes it FREE after midnight.  So if drivers program their Volts or Teslas to charge while they’re asleep, they get to drive for free.

Whether DR is managed manually (you get a text when prices spike so you can choose to lower your AC) or automatically (your EV charger is programmed to delay charging), it empowers customers by putting energy control in their hands.  Customers can make decisions away from home and retain the ultimate authority to override demand response requests (i.e. participants can either adjust electric use by using set-it-and-forget it settings or they can decline the demand response event altogether).  In the end, customers gain energy independence and seamlessly earn money by shifting energy use to less expensive, non-peak times.   

There’s a lot to like about DR, which is why it’s an integral part of our multifaceted work on clean energy