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Working With a Demand-Response Provider
OTHER PARTS OF THIS ARTICLEPt. 1: The Need for Demand-Response ProgramsPt. 2: The History of Demand-ResponsePt. 3: How Demand-Response Programs Work TodayPt. 4: This PagePt. 5: Demand-Response ContractsPt. 6: Making Demand-Response WorkPt. 7: Finding Demand-Response Opportunities and Providers
While facility executives can enroll in a demand-response program by themselves, handle it on their own, and not share the benefits with anyone, many facility executives don’t have the time or expertise to make the most of this opportunity. Contracting with a demand-response provider may then be the next best option.
Facility executives typically sign a contract for a year or more, through which they agree to allow the demand-response provider access to the site and utility meter data to assess demand-response potential. The demand-response provider is given an exclusive opportunity to enroll the organization in an ISO/utility program and to handle all paperwork and communications on the matter. In exchange for a defined percentage of any demand-response benefits secured, the demand-response provider notifies the facility executive when a load cut is needed, usually through a pre-arranged method, and may remotely control the reduction via an automated system.
Verifying load reductions typically involves setting a baseline of peak demand as part of the enrollment process using past electric meter readings during a defined period. That baseline is important when a facility is called upon to cut load, usually a day or several hours in advance: The amount saved is the difference between actual demand seen on the meter during a reduction period and that baseline. Programs may involve both capacity — ongoing load that could be reduced at any time, for example — and energy in terms of kilowatt hours avoided or generated on-site.
In most cases, such arrangements have little downside. The easiest programs have no penalty for failing to reduce when called upon to do so. Most programs also offer options in which potential demand reductions may be bid in advance such that, when wholesale power prices approach the bid level, the customer or demand-response provider receives a call to cut load. Additional financial benefits result, but penalties may exist for a failure to respond, or for responding below a defined level.
Depending on how program rules are written, even a permanent demand reduction may result in a demand-response benefit. Suppose that a facility has an existing peak load of 2,000 kW but is planning to perform a lighting upgrade that saves 200 kW. Prior to doing so, it enrolls in a demand-response program, citing 2,000 kW as its baseline demand. It then installs the upgrade, dropping its demand to 1,800 kW. Under some programs, a facility could be reimbursed for that 200 kW on-call demand reduction until the baseline is adjusted to 1,800 kW. That benefit would be in addition to any standard utility or state rebates for the lighting work and any available federal tax credits. The demand-response provider handling that opportunity would then take a percentage of that benefit, as well.
Lindsay Audin is president of EnergyWiz, an energy consulting firm based in Croton, N.Y. He is a contributing editor for Building Operating Management.