How Energy Demand Response Programs Reduce Consumption and Lower Costs

As energy prices continue to rise, companies are finding other ways to reduce energy consumption and lower costs: Energy Demand Response programs.

Currently, about 30% of utility companies have some type of Energy Demand Response program in place. The other 70% are implementing a program or considering the benefits of a program, such as reducing the burden on their infrastructure and providing key consumers of energy a way to save money.1

Energy Demand Response programs allow consumers to reduce their energy use or shift their energy use during peak energy consumption periods, resulting in lower costs and financial incentives like credits on energy bills for those who choose to participate.

Recently, Load Response and Price Response programs were introduced in an effort to bring down costs and reduce energy consumption in the US. Each program includes unique sub-programs that offer relief to the soaring costs of an organization’s energy consumption.

Load Response Programs

Sponsored by utility companies, Load Response programs focus on reducing energy consumption. There are three types of Load Response programs:

1. Direct Load-Control Program. Common for residential and small commercial facilities equipment, such as HVAC units, that can be turned off for periods of time to reduce unnecessary energy consumption (e.g., when no one is present).
2. Curtailable Load Program. Large commercial and industrial facilities benefit from this program as it helps restrict a portion of energy consumption to a specific minimum range. The customer is given a 30-minute to 2-hour warning before energy restriction begins.
3. Interruptible Program. Industrial operations have the option of reducing either all or a majority of their energy consumption for a period of time. Commercial facilities are also welcome to participate in this program, though it is advisable for them to have backup generators that can host a large portion of their energy.

Price Response Programs

Typically not sponsored by utility companies, Price Response programs focus on reducing energy consumption based on financial savings or rewards. There are three types of Price Response programs2:

1. Economic Program. Large commercial and industrial facilities that can sustain a minimum reduction in energy consumption benefit from gaining valuable insight into when peak energy consumption occurs and when a reduction in their energy consumption is available. Real-time, hourly, and day-ahead markets provide insight to large commercial and industrial facilities that can sustain a minimum reduction in energy consumption (e.g., 150kW per event). When a peak event occurs, participants can choose to reduce their consumption during this timeframe. A bid by the participant in this program is based on the day-ahead market. The bid must be accepted by the buyer for day-head programs before payment can be made.
2. Time-of-Use Program. Available for both residential and business participants who are eligible, this program works by installing special meters to monitor energy consumption throughout the day and year. Energy rates are fixed, so participants should not have spikes in energy rates. However, depending on the region, this program may be mandatory for all residential and business customers.
3. Real-Time Pricing Program. Primarily for commercial and industrial facilities that can sustain a shifted or reduced energy consumption rate, real-time pricing monitors real-time energy use for participants and upcoming anticipated pricing for that energy use (some programs include hourly prices for the following day). Historical data, weather conditions, and operational changes are all used to determine the baseline for discounted and premium energy use. Additionally, if participants do not want to determine a baseline estimate, they can base their costs on hourly rates or market clearing spot prices.

Impact

Using an Energy Demand Response program can have a significant impact on an organization’s bottom line. By implementing one of these programs, participants can see an energy savings of between 10-66%.3

Per kW of reduced energy used, utilities often offer a payment range average of $125-$400 to participants. The return on investment averages 2-4 years, with very little additional oversight or maintenance needed by employees. With this kind of ROI, it’s easy to see why these programs have become so popular. To make these programs even more tempting, up to 100% of participants’ program equipment expenses can be covered (dependent on the program in your area).

Accruent offers the ability to utilize these energy demand response programs through a customizable rules engine in our energy management software. With our remote monitoring and IoT solution, large consumers of energy can respond strategically to changes in consumption costs that can play a significant role in your cost-reduction strategies. This insight allows you to move peak energy usage hours and save money during these costly energy hours by turning off key pieces of equipment, dropping setpoint changes on temperature-sensitive equipment, and cycling HVAC systems.

For example, you can anticipate paying an increase for using electricity between 5pm and 7pm. To minimize the cost incurred during this timeframe, Accruent’s solution creates a demand response program strategy to drive down chiller and freezer temperatures in the 30 minutes prior to the electricity cost increase window.

Minutes before the increase window, Accruent’s energy management software can:

• Increase the temperature setpoint of any cooler and freezer
• Raise refrigeration alarm setpoints to prevent false alarms
• Disable electric refrigeration defrosts
• Switch various services to generators
• Reduce store lighting levels by 20%
• Reduce store heating or cooling demand

Once the electricity cost increase window has closed, Accruent’s solution automatically returns all parameters to their default state, and provides automatic compliance and audit reports of changes. The cumulative effect of these minor changes, especially at the enterprise level, can produce annualized savings in the millions of dollars.

Energy consumption and the costs associated with it, have a significant impact on your organization’s bottom line. Investing in a software that can help you take advantage of an energy demand response program can unlock savings for your organization.

Ready to learn more? Contact Accruent today to reduce your energy consumption and spend!

1. Forbes
2. The Energy Grid
3. USGBC
4. US Dept of Energy