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Moving beyond Demand Response:
Every smart energy plan acknowledges that DR is a short-lived
transition strategy. It is fundamentally uneconomic. It addresses only
power, and ignores most sources of grid instability. It ignores the
physical limits on distribution. It does not acknowledge distributed
Consumer power markets use an inefficient model made stranger by Demand Response. Consider today’s power markets as a buffet, where the price is only calculated by weight as you leave. The ingredients may be rare or common, but the price by weight is the same; unsophisticated diners pay the same price for less. The proprietor keeps a close watch on the ingredients and occasionally pays customers not to take too much from certain bowls.
We would recognize this as a strange market. The economic value of power changes over the day, market supply and demand change by the minute, but the power is not priced accordingly. Consumers pay based on bulk metering at the end of the month. Demand response sometimes makes out-of-market deals with the more sophisticated consumers. We use this odd market because utilities do not have customers, they have load.
As the operating margin on grids are reduced, the economic cost of non-load characteristics grows. Variability of load is more expensive and predictability of load becomes more valuable. A single node with an unbalanced power factor causes more problems to other nodes on the same circuit. The value of a node that not only maintains a good volt-var, but can compensate for adjacent nodes is greater.
With variable loads and storage, variable prices can influence the aggregate load of a set of nodes to one larger than the local circuits can sustain; local capacity markets, even single transformer capacity markets, may be essential to minimize capital costs and improve stability.
Demand Response is a strategy to reduce capital costs by avoiding the need for new generating capacity. It works in parallel with and reinforces reductions in operating margin. At a reduced operating margin, all ancillary services become more valuable, and more local. As market mechanisms for allocating grid resources and services over time become more automated and standard, the scope of what is so allocatable extends down to smaller and smaller assets. Such assets may be less expensive, but there are many more of them, and the aggregate savings may be larger even than those achieved by avoiding a large peaker generating plant.
This is the problem set of OASIS Energy Interoperation. The event-based interactions of OpenADR are a critical but small part of the whole. The messages and interactions in OpenADR 2.0 are consistent with those used throughout Energy Interoperation; experience coding for OpenADR 2.0 is experience coding for all of Energy Interoperation.
The short term economic opportunity for smart energy in buildings is in the profiles developed by the OpenADR alliance. Profile A is similar to the older OpenADR 1.0 and there are few barriers to rapid implementation of this open specification. In the mid-term, the models of Profile A will be unable to keep up with the growing complexity of distributed energy resources. Programmers used to parsing Profile A messages will be ready to start using Profile B. A critical barrier will be the initial lack of VENs able to handle service oriented energy.
With the growth of distributed energy, we must anticipate a model in which there are multiple source of energy, and multiple flows of energy, in multiple directions. Capacity markets for major nodes and local systems may be more valuable than for simple power. Under this model, all shortages are local, all surpluses are local, and all prices must be local.
Service oriented energy foresees very small markets that cost almost nothing to implement. Structured energy also foresees that these markets may operate independently of the larger markets, based on local energy sources and local capacity. It is an interesting question whether the algorithms developed today for OpenADR Profile B can become standard enough and small enough to be implemented in ASICS, and incorporated into nano-markets for devices, which are then able to operate nano-grids through transactions.
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