October 2011

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Demand Response for Commercial Buildings is Coming of Age
A succession of important events and activities has occurred this year that will help propel the widespread adoption of demand response by the commercial sector.

Peter Weigand, Chairman & CEO
Laura Curran, Principal
Skipping Stone

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One could argue that this past summer demand response helped save the grid from rolling blackouts in several regions of the country. The ability by grid operators to call on commercial and industrial customers to reduce power consumption during peak hours has been a win-win for both the grid and the customers. 

For customers, they not only save on the electric bill by reducing usage, they get paid additional amounts based on how much they reduce during demand response events. Demand response isn’t new; it has been a fast growing subsector of the electric market for the past several years. The early adopters tended to be industrial customers with significant load. The commercial building sector is now hurrying to catch up and cash in on demand response opportunities. 

A succession of important events and activities has occurred this year that will help propel the widespread adoption of demand response by the commercial sector. Each event or activity addresses key barriers to commercial building participation. When viewed as a whole, these events and activities make a compelling case for the building community.

The first key event addresses the economic barrier to commercial building participation. In March 2011 the Federal Energy Regulatory Commission (FERC) passed Order 745.  FERC Order 745 is a victory for customers who participate in demand response programs. In a nutshell, Order 745 mandates that load shed by customers during demand response events has the same market value as generation does. This is significant because generation sold into wholesale markets can be worth 10 times more than a customer pays for it during peak demand hours. As a result, a building responding to a demand response event not only lowers the electric bill, but has the opportunity to get paid additional monies. 

The second key event addresses the confusion regarding how to implement demand response. In June 2011, the U.S. Green Building Council (USGBC) released a comprehensive LEED Demand Response Pilot Credit . USGBC’s Demand Response Pilot Credit establishes an implementation roadmap with documentation and reference materials that enable any building to participate in demand response programs.   

LEED Credit Slide
Source: USGBC

The three demand response implementation methods defined by USGBC include: Manual, Semi-Automatic and Automatic. LEED projects can satisfy the demand response credit requirements by demonstrating their ability to shift energy consumption during peak events by 10 percent of peak load demand, or a minimum of 20 kW. USGBC has weighted the three methods to award more points for the Semi and Automatic implementation approaches.

Demand Responsse Implementation Methods
Source: LBNL

The third key activity addresses where to find qualified demand response programs and who to call on for assistance.  In July 2012 the National DR Directory was launched.  Compiled in the National DR Directory are reports on over 1,300 demand response programs across the U.S.  Searchable by state, utility and program provider, this information tool enables commercial building energy managers to find and learn about demand response programs that in their markets.  In addition, the National DR Directory has listings of service providers that specialize in working with buildings on demand response.

National DR Directory
Source: National DR Directory

The fourth key activity addresses the technology required to manage and optimize demand response opportunities for commercial buildings. There are two important sides of the technology equation required to truly make demand response work. The easiest way to differentiate between the two sides is to view them as being either behind the meter and in the building or from the meter to the market. 

Source: Skipping Stone

From the meter to the market, several technologies-related initiatives will impact buildings, utilities and wholesale market operations. There is currently a rush by utilities to install new smart meters that measure consumption in 5 to 15 minute increments as well as providing two way communications between utilities and buildings. The meter installation push has been greatly assisted by the $3.4 billion dollars provided by the Department of Energy Smart Grid Investment Grant program. In addition, new technologies addressing substation automation, demand response transaction processing and automation of demand response event management have been gaining rapid adoption by utilities and wholesale market operators.

Reliable Controls The large building automation system companies have all been busy modifying their systems to enable buildings to respond to price signals and to automate demand response event management behind the meter. Thanks to venture capital investors, there are also numerous new technology firms offering a wide range of energy management, building automation and demand response enabling solutions. Many of these offerings utilize wireless controls with data and applications relying on cloud computing methods. For the building community this provides a myriad of technology choices unlike ever before.

The challenge for the building community is how to tie all these events and activities together in an actionable and profitable way. USGBC is taking a lead role to explore exactly that challenge. USGBC, in partnership with the Environmental Defense Fund, is now organizing a Demand Response Market Pilot Partnership Program to work with utilities, solution providers and buildings. The program will provide education and market feedback mechanisms to foster knowledge-sharing and measure the impact the building community can have on the grid and the environment.

About the Authors

Peter Weigand Peter Weigand is the Chairman & CEO of Skipping Stone, an energy market consulting company.  He has been a successful entrepreneur in the deregulated energy markets for over 25 years having held C level positions in several major energy companies.

Laura Curran

Laura Curran is a Principal at Skipping Stone and is an expert in demand response and energy management research, implementation requirements and business process design. She is a LEED Green Associate and adjunct professor at the University of California, Irvine.



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