The Potential for Residential Demand Response on Transmission and Distribution Assets

12.29.06   Rick Boland, CEO and President, e-Radio USA, Inc.

The power grid has evolved over the last century to meet the demands of many different customers. From REA’s and co-ops to industrials, grid connections have been engineered to deliver during peak consumption periods over their projected lifespan. Designing for the lifespan of transmission and distribution decades ago would have used a percentage estimate for increase in annual demand, as no other options were possible. Without load shedding, shifting and demand response (DR) technologies of the last decade, design would have been an open-ended exercise – the engineers would have chosen a number they thought appropriate and designed accordingly. And this still may have been design practice today.

As the grid has matured, load has increased. The increase in load may have matched the original design estimates, but in many cases unanticipated increases happened. Costs to construct new T&D escalated along with the value of the power it carries, and efforts to reduce stress on the system during peak times have been successful. Getting the most bang for each dollar invested in load shifting, shedding and demand side management systems meant going working with large industrials and commercials whose power use could justify the expense of additional communications and equipment. Along with their substantial power use came predictability and the ability to measure changes directly at the power buyers’ meter. Savings and ROI could be calculated. All of these efforts reduced peak load on the grid and extended the lifespan of T&D assets.

With a good percentage of “shift-able” and “shed-able” loads now “responding” in some form, peak loads on the grid are still approaching the T&D capacity of the infrastructure in many areas. While numbers vary, 60 percent of peak load could be coming from residential customer demands – but residential customers don’t know it. To residential customers the grid is a black box – energy magically comes out. A window from each residence into that black box is the final frontier for DR tools that could again extend the life span and improve utilization of T&D assets.

Current Solutions are “Meter-Centric”

It has taken some crises to bring T&D issues to public attention, but what seems to be an obvious remedy – mass residential DR – is still elusive. Why? DR strategies to date are “meter-centric,” meaning the meter has to be changed as a first step to DR and automating homes. That could take years. Savings to small power users may not justify the cost. Predicting the “respons-ability” is a guess too, but, remember the grid is a black box that customers have never had information from before. These high costs and unpredictable effectiveness issues have stalled previous efforts. “Response-abling” messages need to come from the grid. Communications equipment must, at a minimum, make people aware of grid situations so that they have something to respond to. But communication has its price. The lower the cost, the better the coverage and the more likely it would reach every customer. A message datacast that could be seen and heard in residences would give the ability and awareness of when to respond. How much response comes back will be directly related to the number of customers getting the message – particularly for people without automated equipment who are likely 95 percent of the residential market. The most reliable responses are automated, but without new grid-aware appliances, an electrician is needed to wire the home – either way it costs, and the penetration of DR into the residential customer base will depend directly on the cost of the system to make it work.

The reality of residential customers -- whether they know it or not -- is that they are daily buyers in an energy market. Every time a light or air conditioner turns on, a “buy” is done. Until power prices skyrocketed and large-scale blackouts happened in areas of the continent, the impact on customers’ wallets wasn’t big enough to get a response. An even harsher reality is most customers are resigned to paying their bills because they can’t do anything about them. There is no way to know if buying in the future will be cheaper than buying now or if buying now will cause an outage and stop the entire market.

Engaging Customers to Make Informed Decisions

If an inexpensive way could be found to reach residential customers, then DR that makes residential customers “response-able” for that 60 percent of peak T&D load could become much more likely. With that comes the potential to add value to both existing and future T&D through improved utilization and usable life. If datacast messages could go out within seconds to millions of homes, it could even be used as a “shedding on demand” system. If messages could target specific areas, it could be used to localize outages and reduce their potential to spread without concerning other customers. Recent efforts in California like the Statewide Pricing Pilot have shown that residential customers want some kind of market interface, but the options available at that time had some DR proponents looking to a billion dollar government investment or unappealing increases of rate base to cover the costs of changing meters – the mete- centric first step.

Residential DR that would benefit T&D operations is faced with the classic challenge of finding lower cost-per-residence alternatives to get them “response-able,” or continuing to seek increasing prices to customers for the meter-centric technology. The separation of generation from distribution companies, the creation of the ISOs and electric service providers, makes investment justifications even more complex.

But it is in all stakeholders’ interests to keep T&D operating as efficiently and effectively as possible -- the power market stops without it. For residential customers to be “response-able” -- changing their demand to keep the grid operating -- they all need just a bit of information at just the right time.

A residential DR market has value to T&D operations. Does it take a new meter on every home for their combined response to make a difference at the T&D level? Existing substation automation could see combined responses easily at the feeder and substation. Getting a DR system that can deliver messages to residences at the same substation and feeder resolution providing local price changes and local operation information, while minimizing operational impact -- its value may be higher than current predictions.