Weekly Q & A: An Introduction to Demand Response

demand-response-questionsI sat down with Jim Korczykowski, President and CEO of Energy Curtailment Specialists, Inc. With over fifteen years experience in the energy industry, Jim offers his valuable knowledge on the topic of demand response.

You will find the transcript of the Q & A session below.

Sarah Battaglia (SB): Most large commercial users of power have at least heard of demand response, but not everyone may completely understand it. Could you provide me with a brief explanation of what demand response actually is?

Jim Korczykowski (JK): Demand response is actually a pretty simple concept/program to understand. At certain times of the year, there is an especially high demand for electricity. We typically see this during the summer months when people are trying to stay cool and air conditioners are being used to the extreme. With so much demand for electricity, the grid becomes strained and utilities may not be able to meet this demand. To relieve some of this pressure and keep the electric grid in balance, utilities can either deploy old, polluting power plants, or they can call on demand response participants to relieve pressure on the grid. By virtue of the fact that demand response participants will be reducing their energy consumption, it is the cleaner and less expensive option. Through this program, participants volunteer to temporarily reduce their electricity consumption during these peak hours in order to avoid wide-spread blackouts or brownouts. In addition to the financial benefit they get from not using power at times of high usage when power prices are typically high, they also receive financial compensation in the form of cash payments for their contribution.

SB: Can anyone participate in demand response?

JK: Unfortunately not everyone, but any business that consumes a considerable amount of electricity can participate in a demand response program. Typically, we have found that the most successful participants are schools and universities, manufacturing facilities, hospitals and healthcare facilities, commercial properties, data centers, hotels, and shopping centers.

SB: Why is demand response a viable, effective and preferred option for grid stability?

JK: Utilities have few options to meet electricity demand during peak hours. They can start up “stand-by” power plants, which are typically outdated and polluting to the environment. They can purchase some electricity from outside the region, but transmitting electricity great distances is also expensive and can actually increase rates for customers. Demand response is the most economical and effective option out of the three. Not only does it safely stabilize the grid, but it also provides a secondary income for participants.

SB: You mentioned blackouts and brownouts earlier. Can you elaborate on what those are and why it is so important to prevent these from occurring?

JK: Absolutely. Simply put, a blackout is complete loss of power. Manufacturers will not be able to maintain production, hospitals will be unable to provide necessary care to patients, and hotels will be left in absolute darkness. In contrast, a brownout is partial reduction in power; a situation wherein voltage is reduced to “ration” the limited power available. In an attempt to stabilize the grid and prevent a full blackout, utilities will cut voltage until reserves of power build up again. Similar to what homeowners experience when there is a surge in power caused by lightning. Fluctuations in voltage can be dangerous to businesses, causing severe harm to a facility’s equipment. Replacing damaged equipment can cost thousands of dollars, so for these reasons, it’s very important to avoid both situations.

SB: So we want to avoid grid instability; but how exactly will participants successfully reduce their electricity usage?

JK: Different organizations will have different methods of reduction. Some of the popular methods include adjusting the thermostat to reduce air conditioning usage, running on-site generators, and turning off lights. Manufacturers will shift production to later hours; hospitals will turn off a portion of their elevators; and hotels will shut down ovens, dishwashers, and laundry facilities. These are only a few examples; there are a myriad of strategies available. When an organization registers for a demand response program, a personalized action plan will be developed so they won’t be left in the dark, no pun intended.

SB: Final question. You described the main benefits of demand response, but could you give a concrete example of how the participants of the program will profit? It seems like this could be an imposition to certain organizations. What will encourage them to participate?

JK: Participating in a demand response program does require some effort, but if an organization is serious about their participation, it will definitely be worth it. Aside from the prevention of blackouts, the participant will benefit financially. Here is an example; a certain plastics manufacturer develops a strategy and reduces 1,500 KW when called upon. For this successful effort, they received a cash payment of roughly $65,000. Sounds pretty good, right?

Whether you’re a demand response newbie or an old pro, Jim’s insights on the world of emergency energy reduction are certainly beneficial. I would like to thank Jim for agreeing to our weekly Q & A sessions. Come back next week when we discuss the controversial topic of smart meters.

Sarah Battaglia
Energy Curtailment Specialists Inc.

Sarah can be found on LinkedIn and Google+.

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