Get Paid for Saving Energy with Demand Response

Get Paid for Saving Energy with Demand Response

Storms such as the recent Hurricane Sandy tend to get your attention focused on how much we rely on electricity – and the problems we suffer when it’s not available.

But as any good data center operator knows, hurricanes are just one of many threats to the availability of electricity. These days, utilities struggle to keep infrastructure from buckling under ever-increasing customer demand, not always successfully.

Demand response programs are one way to help utilities deal with the situation, usually to the benefit of customers who participate. In essence, demand response programs provide a way for facility managers to get paid for reducing energy consumption when the power grid is stressed. In effect, they return capacity to the grid – and get paid for it.

Demand response works in a similar fashion to when airlines overbook a flight. Say an airline has 110 people booked on a flight that only has room for 100. That’s when you’ll hear offers of vouchers for free travel for any customer willing to take a later flight. In the case of demand response, the power company is likewise willing to pay you to reduce your consumption and lighten the load on the grid.

If a utility (or, more likely, a third party company) can get enough customers to participate, demand response provides a way to avoid building infrastructure to handle peak periods. In the summer, for example, customers in many areas increase their electricity consumption to power air conditioners – perhaps dramatically so on extremely hot days. That means the power supplier has to build enough infrastructure to handle that peak demand, even though at least some of it goes unused most of the time. Typically that means installing powerful natural gas combustion turbines that can power on at a moment’s notice, but that cost about $800/kW to build – a cost that gets passed on to customers.

With demand response, customers sign a contract with a company known as an Independent System Operator that outlines the details of the arrangement. In some cases, customers have the option to refuse any request to curtail energy usage, in others it’s mandatory – with the compensation adjusted accordingly.

Data centers, of course, are major consumers of electricity and many may be in a good position to take advantage of demand response programs. Say your company operates multiple data centers in different regions. Perhaps you can shift load in response to a demand response request from the data center where power is in high demand to another where it’s not. With today’s virtualization technology, that’s a fairly simple matter.

Another strategy is to use backup generators to power some equipment during the curtailment period, thus reducing the load from the utility. So long as the reward exceeds the cost of running the generator, it would make sense. You could also factor in the need to periodically run backup generators as part of routine maintenance to help make the case.

The savings with demand response can be significant, from 5% to 25% of your annual energy costs. The figures vary widely based on speed, location, and willingness to participate. Manhattan, for example, will give a much greater return that any other city.

To learn more about demand response and how it works, check out the course, Demand Response and the Smart Grid, part of the Schneider Electric free online education program Energy University.  You’ll find this course, along with many others, in the college of Energy Efficiency on the Energy University site. To register for free, simply visit the Energy University site and click the  “Join” link.