Demand response and other incentive programs can be confusingly complex, but done right they can yield handsome returns with minimal risk.
Turn energy management into a payday
Demand response and other incentive programs can be confusingly complex, but done right they can yield handsome returns with minimal risk.
How demand response works
At a high level, demand response is simple: during times of peak grid load, utilities declare a demand response event. During events, you get paid for every kilowatt of demand you’re able to shed.
Simple enough, but the details vary widely. How are demand reductions measured? Are participants required to meet a minimum performance standard? How many events can be called during a season? What is the payout schedule?
These and other factors determine the balance of costs, payouts, effort, and risk involved in demand response. As a facility, the first question you should ask is whether it’s possible for your building to shed significant load during peak demand days. If the answer is yes, demand response could very well make sense for you.
How price response works
Price response programs go by different names, such as peak day pricing, critical peak pricing, etc. In all cases, the programs share a basic structure: participants receive a discount on their regular electricity rates in exchange for accepting much higher rates during price response events.
Like demand response, price response programs aim to reduce demand during periods of peak grid load. Demand response does so with direct payments for energy reductions. Price response takes the opposite tack, imposing penalties designed to motivate demand shifting.
Unfortunately, those penalties tend to scare away participants, many of whom would actually benefit handsomely from price response. Price response calibrate their rewards and penalties such that the large majority of participants come out ahead — and all the more so if they’re able to manage demand during price response events.
Like demand response programs, most price response programs are configurable in ways that increase their complexity but allow participants to better calibrate risks and rewards.