Navigant Research Blog

A New Era of Demand Response

— November 9, 2015

Tightrope_webWhat does the future of demand response (DR) look like? Hawaii is now a test bed, guinea pig, and innovator, as you can hear during a free 30-minute discussion this Thursday.

The amount of DR capability in North America has grown considerably in the past 5 years, both at utilities and within competitive markets such as PJM. However, DR technologies and policies have generally relegated DR to a minor role as a last-called resource. DR has typically been slower to respond than combustion turbines, and the load relief it provides has been difficult to assess precisely (if at all) in the real-time operating environment in which control center staff operate. Furthermore, regulatory policies in support of DR have generally focused on the magnitude of megawatts achieved at the expense of the quality and usefulness of those megawatts. However, slowly but surely, this trend is changing.

The use of DR in grid planning and operations has solidified as utilities increasingly rely on DR to meet installed capacity requirements and sometimes even operating reserve requirements. Furthermore, independent system operators led by PJM have incorporated DR into procurement mechanisms for capacity, energy, and ancillary services. Industry acceptance of DR as an integral part of the future grid continues to grow, with states like California and New York rolling out major regulatory initiatives and utility Hawaiian Electric issuing a request for proposals to DR aggregators for the provision of grid services, including ancillary services, from demand-side resources. So which technologies and policies will drive DR into the future as a more integrated and valued resource?

The Peak Load Management Alliance (PLMA) is hosting a free webinar on November 12 at 12:30 EST to highlight the significant regulatory and utility strategy initiatives taking place in Hawaii, where massive customer investment in behind-the-meter PV is encouraging Hawaiian Electric to develop innovative uses for DR to help manage the grid in real time. This could be the future for many utilities that are only now seeing the first effects of customer investment in renewables, storage, and other distributed energy resources.

This is a follow-on discussion from a Power Engineering article by Navigant regarding how a new era of DR is blurring the lines between generation and demand-side resources in Hawaii and elsewhere. The article covered some of the emerging DR technologies that are allowing DR to be viewed more on par with generators and reviewed new applications that are raising DR’s prominence as a valued resource alternative for utilities and system operators. Looking ahead, emerging state policies and utility initiatives are driving DR to a heightened prominence that would have been difficult to envision just 5 years ago.


Opower Releases Behavioral Demand Response Results

— November 4, 2015

Opower, one of the largest providers of behavioral energy efficiency and demand response (DR) solutions to utilities, recently announced results from its latest behavioral DR (BDR) program this summer. The company reports that it deployed over 12 million personalized communications across 29 DR events, delivering 3% average peak reduction and over 5% savings for programs employing peak time rebate pricing plans. Utilities included Baltimore Gas and Electric, Commonwealth Edison, DTE Energy, Consumers Energy, Pacific Gas and Electric, and Hydro Ottawa.

This news underscores a growing trend of utilities looking to expand their demand-side management (DSM) programs through non-hardware-based methods in order to more cost-effectively engage a larger swath of their customer bases. With increased access to advanced metering infrastructure (AMI) smart meter data, electronic communication methods, and software-based tools, many companies are designing ways to use behavioral and analytical concepts in the energy industry that have been successfully implemented in other industry sectors.

Behavioral methodologies include ideas like home energy reports, which compare residential customers’ usage to their neighbors, and BDR, where customers get notifications when energy prices are high or when the grid is stressed. These methods rely on customer actions, as opposed to automated responses through hardware like thermostats or light bulbs. Such programs may capture less savings per customer than hardware, but due to a lower capital cost, they can be rolled out to many more customers to achieve a similar or greater aggregate impact.

Analytical tools like virtual energy audits and end-use disaggregation provide opportunities to greatly increase the effectiveness of DSM programs for commercial and industrial customers. As opposed to the standard practice of utilities sending energy engineers to do onsite audits of every building in order to determine energy savings potential, software programs can take in utility meter data and layer on facility characteristics and weather history to create an accurate picture of energy usage before stepping in the door. This allows for prioritization within a portfolio of buildings so that the highest-potential sites can be targeted first for further investigation, rather than random door-to-door approaches.

These types of programs are described in Navigant Research’s new report Behavioral and Analytical Demand-Side Management. The programs are still emerging, and there are barriers to overcome in order to reach large-scale deployment, but the path does appear favorable for success. Most of the activity currently comes from vendors and utilities in the United States, but it will soon spread to Europe, Asia, and beyond.


Ecova’s Retroficiency Acquisition Spurs DSM Momentum

— October 30, 2015

Data analytics for energy efficiency and demand-side management (DSM) programs is a relatively new trend in the energy industry. Data analytics can be used in residential DSM programs to teach consumers how their home is using energy (by appliance level in some cases) and in commercial and industrial (C&I) DSM programs to help find opportunities for energy savings in large buildings. Data analytics can even be used in retail, restaurant chains, or in other small and medium businesses in order to make operations more efficient, as has been seen in the work done by PlotWatt.

Many of the companies that have been advocating data analytics for energy efficiency are either startups (working on a handful of small deployments) or pilots or large companies with the resources to dabble in energy management, such as Apple with HomeKit. Because of this, data analytics as a solution for DSM programs is still in the early stages of market adoption

Acquisition Makes for New Player

That is, until October 14, 2015 when Ecova announced its acquisition of Retroficiency. A building efficiency analytics startup founded 6 years ago, Retroficiency initially worked at streamlining onsite audits, which quickly evolved into its current Building Efficiency Intelligence software platform to enable utility-scale customer targeting and engagement. Ecova, a large provider of energy and sustainability management services, has a behind-the-scenes style platform that helps utilities manage DSM programs. In addition to developing joint solutions for utility customers, Ecova will be able to use Retroficiency’s data analytics capabilities to provide its C&I clients—which collectively have more than 700,000 sites in North America—with better information on where they can save energy, where to prioritize efficiency investments, and how to manage energy costs.

Ecova’s acquisition of Retroficiency sends an important message to other players in the energy industry that there is value in data analytics for energy efficiency, which means even more when considering that Ecova has the backing of a larger energy efficiency company. In 2014, Ecova itself was acquired by Cofely USA, a subsidiary of French utility company Engie (GDF Suez). The depth of experience, geographic reach, and expanse of resources that a company like Engie can bring to the data analytics market through subsidiaries like Ecova can mean real growth and development in a very similar way to what the home energy management market saw when Google acquired Nest.

Furthermore, Engie also happens to be an investor in Tendril, a Boulder, Colorado-based startup offering a cloud-based energy services management platform for helping energy providers better engage residential customers. With Ecova’s acquisition of Retroficiency, the company now has the resources to offer a combined residential and C&I platform to utilities that can counter Opower and Firstfuel’s new platform. The newly joined forces of Ecova and Retroficiency not only signal to others the value of data analytics, but also bring to the market a big name in energy and increased competition, which could give the data analytics market the momentum it needs to take off and become a vital part of energy efficiency.


Do Energy Efficiency Investments Deliver? Yes!

— July 13, 2015

A new paper from the University of California, Berkeley and the University of Chicago garnered a little press this week and deserves a deeper dive. The paper makes a broad claim about demand-side management (DSM) program impacts based on a comprehensive study of program performance, with one hitch—the focus is exclusively low-income weatherization. One Forbes perspective came to the conclusion that “the study shatters a central orthodoxy in the rarified realm of energy and environmental policy. It suggests that energy efficiency is not necessarily a win-win solution for the environment and the economy. That suggestion is likely to influence future political debates over federal subsidies for energy efficiency.”

The authors have made a dramatic claim that falls short of the bigger picture on DSM program impacts. The paper states that “even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.” Low-income programs have long had a special place in utility DSM projects as a public benefit and have been accepted as a part of the broader portfolio approach to energy efficiency by passing less stringent cost-effectiveness tests than other program types.

In fact, in an American Council for an Energy-Efficiency Economy (ACEEE) paper from 2014, this very issue was fleshed out. Low-income programs have faced distinct challenges from other energy efficiency programs but do not represent the overall cost and benefits of DSM as a whole. Let’s take a deeper look at recent utility program performance. 

Here are the results from the most recent Energy Efficiency Evaluation Report for the state of California:

California Energy Savings for Statewide 2010-2012 Portfolio

Casey Chart

 (Source: California Public Utility Commission)

The report also states that the portfolio of energy efficiency activities for 2010-2012 was cost-effective, with every dollar invested in non-codes and standards energy efficiency returning $1.04.

Extrapolating the performance of one category of a utility energy efficiency program, in one state, from one study can mislead the public in understanding the macro-level impacts of energy efficiency as a whole. Maybe even more problematic is the threat of using this kind of academic assessment as fodder for the heating politics of energy policy in the United States. Let’s keep an honest focus on the big picture.


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