Navigant Research Blog

Demand Response & Efficiency: Why Can’t They Get Along?

— April 3, 2012

It seems only logical that demand response and energy efficiency should go hand-in-hand.  Both spring from concerns about energy usage and aim to accomplish the same outcome, i.e., energy reduction.  But reality doesn’t always follow logic.

Instead, often the two concepts are pursued by different departments and individuals within a utility.  What’s worse, the two organizations in some cases do not even speak to each other. Although demand response contributes to lower energy use, its main goal is not to achieve energy efficiency.  Rather, it aims to reduce the use of electricity on a temporary basis at a specific time (i.e., in times of peak demand, typically within hours or minutes) in order to balance the grid to avoid power shortages.  By contrast, the main objective of energy efficiency or conservation programs is to reduce electricity consumption on a long-term basis with the help of various energy efficiency measures.

Still, there is a strong interrelationship between demand response and energy efficiency.  In the residential sector, demand response is typically a standalone program that aims to achieve 1 kilowatt (kW) and perhaps up to 2.5 kW of energy reduction from the average household – sometimes through a smart thermostat or a load-control switch on an air-conditioning system.  This often requires incentives from the utility.  But when demand response is integrated with behavioral-based energy efficiency programs to raise customers’ awareness about energy conservation, interest in participating in demand response programs improves significantly.  According to Tendril, “When the ground is first seeded with behavioral-based efficiency programs that begin the energy awareness cycle of consumers – by delivering personalized, relevant information about energy use, the ability for them to set an energy savings goal and measure their progress towards that goal in an active learning environment – consumers can then opt in to more complicated energy management programs that include demand response.”

It is quite possible that the demand response and energy efficiency departments have more in common than they realize or are willing to admit.  Better-informed customers may be the link to integrate the two energy efficiency and demand response camps together.  By educating consumers about the benefits of participation and improving their access to detailed data about their energy use and performance, both groups will essentially seek to achieve the same goal – an educated, well-informed and motivated energy consumer.  Indeed, some utilities have already begun to take steps to bring the two initiatives closer together.  For example, industry sources tell me that some have recently appointed a director to head both the demand response and energy efficiency programs in order to coordinate efforts to benefit both and to leverage each other’s skills and know-how.  Instead of working at cross purposes, utilities should make every effort to create synergies between the two organizations so that they can truly work in unison to achieve new and improved energy efficiency and demand response behaviors.


AGA’s McCurdy on the Future of NGVs

— April 2, 2012

Last week, doing some reporting on the economic benefits of abundant, cheap natural gas from shale deposits in the United States, I spoke to Dave McCurdy, the president of the American Gas Association. A seven-term Democratic congressman from Oklahoma, McCurdy headed the Alliance of Automobile Manufacturers before joining the AGA in February, 2011.  His experience in Congress and in the two trade groups gives him a unique view on the spread of natural gas as a replacement fuel, particularly for transportation, so I asked him if the “100-year supply” of low-cost natural gas is driving growth in the natural-gas vehicle market.

“Absolutely,” McCurdy replied.  “It’s starting at the bottom of the pyramid, as a foundational part of the market, with heavy transport. Then it’s moving on to fleet vehicles, school buses, garbage trucks, FedEx vans – these kinds of commercial fleets are tailor made for natural gas.”

That accords with the findings of Pike Research’s 2011 report, Natural Gas Vehicles.  There are currently about 12.6 million natural gas vehicles (NGVs) in use worldwide, the majority of them in Latin America, the Middle East, and Africa.  Worldwide sales of natural gas vehicles are expected to grow rapidly over the next five years, to 3.2 million units annually by 2016 from 1.9 million in 2010, with three-quarters of the increase coming in corporate and government sales.  While senior analyst Dave Hurst foresees the lack of convenient refueling stations continuing to inhibit demand for consumer NGVs, McCurdy, not surprisingly, is more optimistic: “We’re now seeing major manufacturers directly building assembly-type production for engines.  They’re moving toward light duty trucks, and we’ll see a number of autos in the not too distant future.”

AGA’s utility members, McCurdy told me, are making investments to build refueling stations and “fill that infrastructure need,” first along interstate highways, then around commercial fleet routes.

“I was at the Tampa airport the other day, and they’ve opened a natural gas fueling facility. The average price of gasoline is about $3.85 a gallon, and the gallon of gas equivalent in natural gas was less than a dollar. The market is riding that difference.”

The debate over whether cheap domestic natural gas will be the economic panacea its supporters predict is unsettled, and the AGA is, naturally, a biased source.  If 50% of McCurdy’s predictions come true, though, the ripple effects for U.S. motorists, automakers, and conventional oil producers will be profound.

“Seventy-eight percent of all oil imports go to transportation, and we have the ability to reduce that by 50%,” he stated.  “We have an opportunity we’ve not had in my adult lifetime, to truly break our dependence on foreign oil.”


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