Navigant Research Blog

Natural Gas Demand Response – Exploring Opportunities: Part 4

Paul Moran — August 24, 2017

Coauthored by Brett Feldman

As discussed in earlier blogs (parts 1, 2, and 3), demand response (DR) has been less prevalent in the natural gas industry than in electricity markets due to the lack of clear market signals that would otherwise enable market participants to put a price on deferred natural gas consumption. However, changing market factors are leading to increased interest in the practice. In this blog, we discuss how one company, National Grid, is participating in innovative natural gas DR programs to discern the value of DR to alleviate distribution system constraints.

Getting with the Program: EnerNOC and National Grid Partnership

From 2012 to March 2017, National Grid offered a fuel switching tariff, known as the Temperature Controlled (TC) rate, to industrial, commercial, and institutional customers in Brooklyn and Queens in New York. National Grid partnered with EnerNOC to manage natural gas consumption at approximately 4,000 customer sites in Brooklyn and Queens. EnerNOC provided National Grid with wireless hardware that enabled automated fuel switching at enrolled customer sites. When onsite sensors detect that outdoor temperatures have dropped below a predefined level, the devices automatically shift fuel sources, optimizing fuel use based on weather and availability.

National Grid is now interested in developing a scalable offering that does not require or incentivize the use of backup fuels. It is exploring opportunities to apply targeted DR to understand how such an offering could alleviate physical delivery constraints on its natural gas distribution system. As part of a pilot program in its downstate New York service territory, National Grid is investigating customer willingness to reduce natural gas demand for a specific 3-hour block of time, 6:00 a.m. to 9:00 a.m., during peak morning usage. Unlike the TC, this pilot will not require customers to have a backup system and will not rely on fuel switching to achieve demand reductions. Instead, National Grid will work with customers to understand how they use gas and what usage can be shifted, earlier or later, or reduced to minimize demand during the peak period.

National Grid hopes to learn how reducing demand during periods of peak usage can serve as an alternative to system expansions. It also wants to gain insights into customer willingness to participate in incentivized natural gas demand reduction programs, similar to its electric DR offerings.

“National Grid knows how valuable [DR] can be based on our experience with electric [DR]. We are hopeful that this pilot will demonstrate that same sort of benefits can be achieved for our gas system while offering our customers a new revenue stream and a program that works for how they do business,” says Owen Brady, New Energy Solutions program manager. “National Grid is always seeking innovative ways to optimize operational performance. Unlike the traditional utility business model of installing pipes to address system needs, we see gas [DR] as a non-pipe alternative that will help us make possible the energy systems of tomorrow.”

In Massachusetts, National Grid is implementing a similar pilot program that is focused on conducting market research to ascertain the appetite of firm and commercial customers for natural gas DR. This program is funded by the Massachusetts Department of Energy Resources (DOER) via a grant to the Fraunhofer Center for Sustainable Energy.

Reducing Costs

The absence of a clear price signal is a significant impediment to the adoption of natural gas DR. Yet, these innovative programs demonstrate that natural gas utilities have a strong interest in exploring the promise of natural gas DR to provide a potentially less expensive means of alleviating pipeline constraints at the distribution level.

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