Utilities face a constant challenge of rising demand for electricity. As a result, they continue looking for strategies to reduce their need to invest in new power-generation facilities, as well as additional transmission and distribution capacity. The challenge is especially critical at periods of peak demand. As a result, utilities have introduced and fine-tuned programs that are designed to reduce power use in institutional and commercial facilities, particularly at peak.
The challenge for maintenance and engineering managers is understanding the way their facilities can benefit from incentives offered by utilities related to demand response.
Demand-response programs have evolved gradually as utilities tried various programs and strategies. Some incentive programs have a goal of persuading facilities to reduce their overall electricity use. Other types of incentives are tied to reductions in peak demand for power. The programs might not reduce a facility's total energy use.
Instead, they aim to help facilities curtail energy use during hours of peak demand or to shift this demand to hours at which the overall demand for electricity is lower, such as evenings, nights and weekends.
Traditionally, all but the largest utility customers paid for electricity at a rate based on average annual generation costs. This pricing scheme did not cover the cost to build and maintain the infrastructure needed to meet this demand, and it did not offer customers incentives to reduce their energy use during peak demand periods.
In response to these factors, utilities have developed a variety of programs focusing directly on reducing peak demand. For example, utilities offer lower, so-called interruptible rates to large facilities that agree to reduce electricity use upon request. But complications arose with these programs, prompting many utilities to convert them into demand-response programs.
The most common demand-response programs focus on a demand-response event. These events are occasions when the utility projects an increase in the demand for electricity to the point where they will have to make outside purchases of electricity or bring higher-cost peak generating equipment online in order to meet demand. A demand-response event also can be the result of equipment failure within the distribution system, which can result in an overload to a portion of the system.
Demand Response: Strategies for Success
Having Utility Program Important for Demand Response Plan
Involve All Relevant Parties in Demand-Response Program