Win-Win Energy Tactics

Facilities cash in on utility programs designed to cut peak demand without hurting business operations

By Lindsay Audin  

Consider this scenario: The local utility just asked all power customers to cut back on power usage. Hot weather, combined with an unexpected power plant outage, is resulting in too much demand chasing too little supply. System voltage is dropping, and unless usage is cut immediately, the utility will have to initiate a rolling blackout to restore balance to the system.

You’d love to help out, but your building just doesn’t have any load it can drop right now without interfering with operations.

Finding and controlling such temporarily expendable loads may be easier than initially thought. The trick is to know which electric loads in commercial and institutional facilities are open to load control on short notice if proper preparation is taken. What’s more, making certain loads “demand responsive” might be profitable while also making the organization a good corporate citizen.

In areas where peak electric demand and peak electric supply sometimes come dangerously close, local utilities and grid operators — including an Independent System Operator (ISO) — may offer programs under which they pay end-users to cut demand and turn on customer-owned generators to temporarily widen that margin. Calls for such reductions typically come the day before or the morning of a period when the local power grid expects to have trouble meeting its peak load. Those signed up to participate then receive payments via reductions in their power bills proportional to their temporary reduction in load. Any demand that is reduced in response to such a call is termed price-responsive load.

Commonly called demand-response programs, these options have been expanding in the wake of the California power debacle and high wholesale prices in the Northeast. They are being used to both improve system reliability and to cut wholesale peak power prices, which skyrocket when the supply and demand margin becomes too narrow. At such times, even a small drop in demand can yield a major drop in wholesale prices, which eventually trickles down to end-users’ power bills, cutting the cost of power for all customers.

Such options should not be confused with either demand-side management, which involves mostly permanent reductions in demand by replacing old building systems with new efficient ones, or interruptible electric rates, which offer permanent rate reductions for the utility’s right to interrupt a customer’s power usage. With interruptible-rate programs, failure to comply with a utility’s request to shut off power results in steep fines or forced service interruption. Demand-response programs, however, may offer high incentives at irregular intervals with little or no financial risk.

While no two programs are identical, most offer retail power customers several levels of response with varying degrees of risks and rewards. At one end of that spectrum are payments for reductions of use during a short, typically a 3- to 8-hour period on a given day, with no penalty for failure to reduce. At the other end is a customer commitment to cut demand by a defined amount, accompanied by a utility or ISO commitment to pay, regardless of whether the service provider requests the reduction. Failure to respond, however, may result in a hefty penalty. This option differs from many interruptible electric rates in that it does not involve any threat to interrupt service, and pays an amount proportional to a customer-determined, demand-reduction commitment.

In their 3-year history, demand-response programs have been successful to varying degrees. Greatest participation has been by industrial customers having discretionary loads that can be shifted in time to periods beyond the need for a demand response. In most cases, demand-response programs offer a minimum price ranging from 35 to 50 cents per avoided kilowatt hour. Usually, the payment more than covers any costs related to overtime caused by delaying production to a later shift. Some programs offer up to the wholesale zonal spot market price, which in summer may reach or exceed $1 per kwh. In extreme cases, such as those experienced by aluminum smelters in the Northwest, it may be economical to shut down entire plants because of brief high wholesale power pricing when the cost of power is worth more than the plant’s output.

Coming Soon To A Grid Near You?

Based on the success of such programs, the Federal Energy Regulatory Commission (FERC) is pushing adoption of demand-response programs as a general rule under its proposed Standard Market Design. If successful, that Standard Market Design will then shape how power is supplied in many areas that never heard of demand response.

Even without FERC’s direction, the meltdown of the wholesale merchant power industry has resulted in a severe cutback in expected power supply around the country. That may create, to varying degrees, the potential for tighter supply and demand margins than seen in several decades.

If the economy suddenly picks up before new generation is built, demand-response programs may appear as a short-term answer. Smart facility executives should be looking at their options for making parts of their loads profitably responsive to calls for reduced demand.

Shedding Fears about Dropping Load

While some industrial loads can be shifted without interfering with a firm’s operations, most facility executives operating commercial and institutional loads have avoided demand-response programs because of fears that any load cut could interfere with their business or that of their tenants. However, experience with such facilities has identified a variety of loads that may be interrupted or cycled to yield an overall demand reduction ranging from 5 to 20 percent.

The cost-effectiveness of making such loads demand-responsive will vary greatly with the level of incentives, if any, offered and the equipment and installation costs involved. Sufficient demand was usually found to merit an investigation of demand-response potential in buildings having at least 100,000 square feet of conditioned floor space. Where a reasonably sophisticated energy or building management system (EMS/BMS) exists and power-line carrier technology may be successfully applied, cost may be greatly reduced.

Several states presently offer partial funding to cover costs to make loads responsive. Where deregulation has occurred, many customers have been paying a small fee through their electric bills to fund a variety of programs that often include grants for energy efficiency projects. Called a universal service fee or system benefit charge, such funding is available to cover the costs of design, equipment, programming, new meters and other improvements needed to make loads demand-responsive and comply with program requirements.

In most areas where demand-response programs are active, an interval meter is also required. Large buildings might already operate under time-of-use rates that utilize such meters. Of paramount importance, however, is the communication link between the utility or ISO and the personnel responsible for effecting the response. Without a multilevel process — pager, phone call, fax — to ensure the demand call is received, processed and quickly acted upon, such investment could be worthless.

Coordination with tenants and occupants is needed to address any complaints and to provide advance notice that some change in building services may occur for a few hours. Even in supply-constrained areas such as New York City, demand response calls have not exceeded 50 to 80 hours per summer, so complying with such short-term calls has not been a problem, as occurred with interruptible rates in California.

What — and When — to Cut

Following is a list of loads that may be made demand responsive if incentives are sufficient to justify the expenditure. While cycling one or two loads may not be worth the effort or save much money, doing so for a variety of sequenced loads may cut peak-energy use without causing any interruption of business or major complaints. In some cases, just one summer of demand responses might cover much of the installation cost of needed technology, such as programming, relays and powerline carrier communication devices.


  • Sequence HVAC-related fans. Fans can be cycled in sequence so that no fan is off — or slowed down, if equipped with a variable speed drive — for more than a 10-to-15-minute period. By spreading such an interruption among several locations over time, effects at any one location are often minimal, thanks to building thermal inertia. With variable speed drives, a 20 percent speed reduction may yield nearly a 50 percent decrease in power demand.
  • Raise space temperatures. Consider raising temperature by 2 to 4 degrees in sequenced zones of the building for 10- to 15-minute periods to take advantage of thermal inertia.
  • Reduce outside air intake. During periods of high fuel pricing, building operators were known to block off intakes of cold outside air to cut fuel use. While potentially a code violation when done continuously, brief periods of outside air reduction are not likely to cause a problem. Outside air flow is typically based on a conservative estimate of building population, which is likely to be higher than the actual population, especially during summer vacation periods. Reductions for a few hours on only a few summer days can significantly reduce cooling demand because both latent and sensible loads are cut when entry of moist hot air into a building is cut.
  • Cycle window, packaged and split air-conditioning units. Simultaneously running many small air-conditioning units may greatly increase summer peak demand because of their relatively low efficiency. Cycling such systems where they serve people, not temperature-sensitive equipment, in groups so that each group is off for 10 to 15 minutes at a time will not harm their compressors. At worst, doing so might cause brief discomfort for some occupants on a few days a year.
  • Switch chillers in hybrid plants to nonelectric units. Some cooling plants include both electric and steam-driven or gas-fired chillers. If capacity exists in the nonelectric unit, it should be run up to full output and the electric unit’s output lowered even if the average price for cooling is lower for the electric unit. The incremental cost for power during a demand-response period will briefly make running the nonelectric chiller more cost effective.
  • Switch boiler auxiliaries to nonelectric options. Some large central boiler plants are equipped with auxiliary systems, such as forced- or induced-draft fans and fuel and condensate pumps, that can run on electricity or boiler steam. Depending on routine demand charges, it may already be cost-effective to ramp up boiler output to provide the extra steam needed to use steam-powered auxiliaries and shut off electric-powered fans and pumps. If not, doing that switch during a demand-response period will typically make money, regardless of the incremental cost of extra boiler fuel consumed for that purpose.
  • Use on-site backup and emergency generators. While seemingly obvious, many buildings are only able to use such generators during blackouts. If set up to supply dedicated loads, such as HVAC fans, that can be briefly interrupted during a switch from utility power, running such generators during a demand-response period may be quite profitable. There are, however, several important caveats. EMS/BMS programming is needed to automatically transfer generator output back to emergency loads during an actual blackout. Automatic transfer systems acceptable to the utility may be needed to avoid accidentally feeding into the utility grid. Emissions permits may also need amendment to allow such operation.
  • Reduce hallway lighting. Some dimmable or multilevel electronic ballasts may be activated by PLC signals to cut lighting levels to minimally acceptable levels. In some cases, fixtures may already be wired so that a portion of fixtures are on an emergency circuit that could be used to power them during a demand-response call. If properly designed for sufficient illumination during emergency egress, no problem should occur with hallway usage during the response call.
  • Cut stairwell lighting. Many stairwells, rarely used in buildings equipped with elevators, are overlit such that a portion of their fixtures — down to the emergency lighting level — may be temporarily shut off or dimmed. Care is needed not to create dark spots or hazardous locations. If an emergency evacuation of the building should become necessary during a demand-response period, full light level should be automatically restored as part of the EMS/BMS programming.
  • Reduce outdoor lighting, signage and window display lighting. Although typically small loads, such lighting adds up, especially when incandescent lamps are involved. Agreement with the tenant or sales departments operating such loads will be needed, but any loss of business during the hottest part of an extremely hot day — with the possible exception of ice cream parlors — is likely to be quite small.
  • Reduce public space lighting and ventilation. Where lobbies, cafeterias, and concourses receive a significant amount of natural light, much of their electric lighting may be briefly turned off without impact. Likewise, air curtains and ventilation in such spaces may also be cycled without causing much discomfort. The same steps should be considered for access and service tunnel lighting and ventilation, especially if lighting is incandescent, which simplifies dimming.
  • Shut off public TV monitors. Where not essential, shut off monitors commensurate with prior agreement of any vendors involved.
  • Shut off electric reheat coils. Typically used to raise the temperature of overly cold air coming from chilled water or refrigeration coils, such reheat coils may be shut off with the only complaint likely being that a space is too cold. Ideally, chilled water temperatures have already been raised to the highest comfortable level in the warmest zone before this action has been taken to minimize electric demand by the electric chiller plant.
  • Cycle electric-resistance humidifiers. Although unlikely to be used in summer, some spaces with tight humidity control, such as computer rooms, may use such systems to add back moisture taken out of air from dehumidification occurring at cooling coils. Care is needed not to exceed room specifications, but cycling of such humidifiers may allow significant reductions in demand due to their typically high wattage.
  • Shut off a portion of elevators. Many elevator systems are designed to handle traffic during the rush hours of a building, with little need to maintain all of them in standby operation at other times. Where modern electronic control systems are in place, savings created by cycling or bank shutdown may be minimal. But where old-style motor-generator sets that consume 20 percent of their peak energy use while idling exist, significant savings may be had through such action.
  • Shut off vending machines. Such machines typically each pull 400 or more watts of power. If the space in which the machines are located is already cooled, shutting them off will usually not affect the packaged food inside, unless it is ice cream or prepared foods, such as sandwiches. It will, however, save electricity and reduce the building’s cooling load.
  • Shut off or cycle bathroom hand dryers, exhaust fans, water heaters and domestic hot water circulation pumps. Facility restrooms might be a treasure trove of nonessential electric loads. Only minor, if any, inconvenience will be perceived if the hot water is not as warm as usual because of cycling or shutting down direct electric water heaters below sinks, central electric hot water heaters or the pumps circulating hot water from them. Cycling hand dryers, some of which draw a kilowatt of power, and exhaust fans can also temporarily cut loads without causing harm.
  • Cycle large electric appliances. With a little coordination, clothes dryers, washers and dishwashers may be interrupted for short periods without interfering or significantly delaying operations. Coordinating with operators and avoiding interruptions during peak-use periods, is essential to minimize complaints. In apartment laundries, posting of signs regarding possible temporary appliance shutdowns can forestall complaints and unnecessary repair calls.

The least-cost way to make loads demand- and price-responsive is to design this capability into new construction and major renovations. At that point, the incremental cost to do so is typically much lower than retrofitting. That means writing and using specs options in the initial design that call for such things as multilevel or dimmable ballasts in new lighting systems, extra control point capability in the EMS/BMS, hybrid chiller plant options, flexibility in on-site generator use and probably some submetering of responsive loads. Even if demand-response programs are never needed, having those capabilities will allow easier peak-demand management that can help control power bills.

Lindsay Audin is president of Energywiz Inc., a New York-based energy consulting firm.

Additional Information

Facility executives interested in learning more about demand-response programs and how to maximize their benefits should visit the following Web sites:

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  posted on 3/1/2003   Article Use Policy

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