With most commodities, value is determined by two key factors: price and quantity. But when it comes to energy, a third component—time—plays a big role. When you use energy is just as important as the price you pay for it and how much you use. Ultimately, a facility’s ability to be flexible about when they use energy represents both a value and a cost. Utility and grid-sponsored demand response (DR) programs allow you to monetize that flexibility.
Demand response, which provides financial payments to facilities who agree to reduce energy in response to grid signals, is gaining traction as a go-to energy management best practice for facilities across the globe—and if you look at the benefits, it’s easy to see why. Through DR, facilities can earn substantial payments for being on call to reduce nonessential energy use when the electric grid needs support—a win-win for both facilities looking to boost their bottom-line, and the communities they serve. The payments earned from these programs can then be reinvested into better energy management software tools and services designed to reduce costs and improve operational performance.
This brochure is designed to help you understand exactly what DR is, how it works, and what benefits it delivers for both energy consumers and the electric grid serving their communities.
What is Demand Response?
Practically speaking, electricity cannot be easily stored on a large scale. As a result, supply and demand for electricity must remain in a balance. When demand goes up (e.g., due to an increase in energy usage during a heat wave, or due to a decrease in supply when a transmission line goes down) utilities and grid operators have a few options:
- Risk a blackout (not a popular option)
- Buy electricity on the open markets (expensive)
- Fire up the next peaking power plant (if there is one that’s not already running)
- Dispatch a demand response network
Instead of adding more generation to the system, demand response pays large energy users to reduce consumption to help maintain the balance.