5 Ways Utilities Can Benefit From Demand Response
In response to new technologies and regulations, as network design and operating systems evolve, the US utility industry is facing the implementation of Demand Response (DR) on a massive scale. The development strategies of many utilities include various smart grid initiatives, of which a primary element is DR.
Within every utility, there are several stakeholders. Each of these stakeholders consider the ways they can benefit from DR innovations and activities to sufficiently cope with emerging network architecture and operational challenges.
DR acts as a response to any stimulus that changes the demand for energy within a market. The reaction to the stimulus attempts to achieve a range of effects that are associated and advantageous. This includes improving the stability of the power grid, ensuring that consumption does not exceed supply, and flattening the curves of demand by redistributing consumption from peak hours to off-peak hours.
Which factors are behind the transition to DR?
1. THE ELECTRICITY GRID'S NEEDS
The first concern is the demand on electricity grids, as well as the rise in electricity production: Distributed Generation (DG), which is comprised of contingency generation, biofuels, combined heat and power co-generation, and renewable energy.
Renewable energy sources of wind and solar, once integrated into the grid, pose major obstacles for grid operators. The unpredictable nature of these sources, as well as their increasing contribution to electricity production, require the implementation of DR control processes. Utilities must have versatile equipment that will adapt quickly to significant and unexpected scenarios. Demand response between other business and commercial users is also the most prudent economic instrument utilities should use to align their portfolios.
In addition to uncertainty, various perimeters face the issue of renewable overproduction, subjecting the grid to more electricity than it is built to accommodate. Excess capacity adds to grid restrictions, which can also affect economies. Potential economic implications of overproduction can lead to negative rates due to too much electricity available within the market.
2. CONSUMER DEMANDS
This is a basic, however essential factor, as energy consumers automatically follow suppliers that provide the lowest rates for a completely reliable supply. Strong and increasing competition between energy providers is pushing the need for utilities to provide more supplies at even lower prices. DR programs trigger prices to increase, as end-uses earn substantial new profits through the monetization of their load, either for reduction or for stimulation of usage.
Offering DR services is becoming an essential and inevitable option for utilities to current users and potential, who usually hope to benefit from these services.
There exists a significant policy and legislative drive for the implementation and use of DR technologies and service, and by no way can it be deemed a minor contributor. A need has been identified for national regulatory bodies to promote demand-side capital, such as Demand Response, alongside supply in retail and wholesale markets.
Ways Utilities Can Benefit from Demand Response
Utilities may benefit from the implementation of DR technologies and techniques in several aspects. Each part of business profits in a specific way.
1. SALE OF PRODUCTS
The distribution part of an organization will use DR to extend its range of energy services to consumers. This will help them gain an advantage on their competition in an increasingly relentless industry.
Ensuring customer loyalty through creative services and tools, some of which can lead to substantial net reductions in energy bills, results in increased customer engagement and more stable sales sources. DR is a crucial argument and a good commercial lever for the sales operations of a utility.
2.TRADE AND OPTIMIZATION
The section of a company which refers to trading and optimization benefits from innovative and competitive products that limit risk and maximize the position of its portfolio. When considering the trading techniques, various players are experimenting with a range of uncertainty and pricing strategies, however, when DR is involved, it offers certainty and benefits to services.
For instance, the disproportion between supply and demand within the periphery of a utility can turn out high-priced, as market owners have the authority to charge high prices. A typical solution in these cases is to transition to a balancing market, which can be of last resort but is able to bear high costs.
On the other hand, DR can prove effective to utilities who want to prevent these types of circumstances by providing flexible technologies for managing consumption and availability, in conditions such as periods with extremely high grid restrictions, DR can be a successful solution to conventional balancing mechanisms.
Another aspect where DR can prove valuable to trading and optimization is that it can help the company handle its power charges and reserve responsibilities, which can lead to large gains through optimization – using DR for reserves and ancillary resources frees up valuable assets to concentrate on energy sales.
3. DISTRIBUTION OF PRODUCTS
DR provides an alternative to heavy investment in high voltage/ medium voltage grid reinforcement for Distribution System Operators. This is attributed to a lower need for transmission infrastructure. Distributors may also gain congestion management support, as well as prevent high fines at peak hours where the contracted power levels are exceeded.
DR can aid in the improvement of the average usage rate of power plants by stimulating energy consumption throughout off-peak times and flattening the demand curve. In addition, as a form of stand-by generation system, DR helps the generation portfolio to devote increased volumes of energy without taking any additional contractual risk.
However, it can be desirable for generators to maximize demand at some hours of the day for ensuring profitability for instance.
It is expected that DR can significantly promote the distribution of ancillary services wherever each stakeholder must use part of its generation assets to supply reserves – not because they produce energy, but because DR helps utilities to free up other generation sources and direct their supplies to other places, where they are more valuable.
A great number of US utilities have set smart grid initiatives at the core of their development strategy, and Demand response is the main component of smart grid technology.
Lone Star Demand Response is at your service any time you wish to gain a better knowledge of the importance of DR in current markets.
Contact one of our specialists today at (972) 877-1691 whenever you are ready to start a triumphant business strategy.