Industry Insights
Technologies You Can Rely On: The Importance of a Pay-for-Performance Approach to Demand Response
January 07, 2015
This blog was originally posted on Comverge.com. Itron acquired Comverge on June 1, 2017, and all future demand response blogs will be posted here.
Last year, I wrote a blog post highlighting the differences between demand response (DR) and home energy reporting, and how to deliver real value to demand response owners and participants. Real and sustained value is top of mind for me as we work with several utilities on pay-per-performance demand response opportunities.
In order for utilities to avoid expensive investments in generation, transmission or localized distribution upgrades, they need confidence that load reduction resources will be available to them on demand, and on a long-term basis. Based on our experience, this is best delivered through a pay-for-performance or fully outsourced model that transfers delivery risk to a qualified demand response vendor. This reduces the utility resources involved in deploying a demand response program, lowers the up-front investment, and most importantly, leverages a vendor's best practices across all facets of a load control program, gathered from years of experience deploying similar programs.
For demand response to operationally and economically compete with generation, vendors must be willing and able to make long-term commitments based on their track record and the confidence they have in their solutions. These types of programs should also have the following characteristics:
- Predictability and reliability: Requires automation to ensure the resource responds when dispatched and processes to accurately predict the available load at any point in time.
- Responsiveness: Fast responding and flexible load shape enables high-quality outcomes. For example, in order for a demand response program to provide synchronized reserve services (Ex: PJM requires a ten-minute response time), qualify to meet resource adequacy requirements, or assist in managing through renewable intermittency, it must be capable of quickly and accurately responding to real-time dispatch instructions.
- Quality load shape: Optimization engines need precise and direct device control to optimize load shape while delivering a stellar customer experience. For instance, it should have the ability to do variable and innovative cycling, not just relying on temperature offset or customer behavior. This is especially important for delivering on a bring your own device (BYOD) program that leverages the potential of third-party devices, which often come with constraints that can impact a capacity event. For more information on these topics, below are links to Comverge white papers:
Thermostat Cycling vs. Temperature Offset How "Bring Your Own Device" Is Changing the Demand Response Model
- Persistence: To forgo investments in generation, transmission, or distribution infrastructure, utilities must be confident in the long-term viability of their demand response resources.
Demand response provides utilities with a tremendous resource to ensure grid reliability and dramatically reduce energy costs. With communicating thermostats, we're extending our demand response programs to engage customers and deliver measurable energy savings. As we evaluate our solution roadmap, we use the above framework to ensure Comverge delivers the highest-value outcomes for our utility partners. By working with an experienced vendor under a pay-for-performance agreement, utilities can be confident that their demand response resource will cost-effectively deliver all the megawatts they require, as quickly, reliably, and predictably as a traditional peaking generation resource.
Last year, I wrote a blog post highlighting the differences between demand response (DR) and home energy reporting, and how to deliver real value to demand response owners and participants. Real and sustained value is top of mind for me as we work with several utilities on pay-per-performance demand response opportunities.
In order for utilities to avoid expensive investments in generation, transmission or localized distribution upgrades, they need confidence that load reduction resources will be available to them on demand, and on a long-term basis. Based on our experience, this is best delivered through a pay-for-performance or fully outsourced model that transfers delivery risk to a qualified demand response vendor. This reduces the utility resources involved in deploying a demand response program, lowers the up-front investment, and most importantly, leverages a vendor's best practices across all facets of a load control program, gathered from years of experience deploying similar programs.
For demand response to operationally and economically compete with generation, vendors must be willing and able to make long-term commitments based on their track record and the confidence they have in their solutions. These types of programs should also have the following characteristics:
- Predictability and reliability: Requires automation to ensure the resource responds when dispatched and processes to accurately predict the available load at any point in time.
- Responsiveness: Fast responding and flexible load shape enables high-quality outcomes. For example, in order for a demand response program to provide synchronized reserve services (Ex: PJM requires a ten-minute response time), qualify to meet resource adequacy requirements, or assist in managing through renewable intermittency, it must be capable of quickly and accurately responding to real-time dispatch instructions.
- Quality load shape: Optimization engines need precise and direct device control to optimize load shape while delivering a stellar customer experience. For instance, it should have the ability to do variable and innovative cycling, not just relying on temperature offset or customer behavior. This is especially important for delivering on a bring your own device (BYOD) program that leverages the potential of third-party devices, which often come with constraints that can impact a capacity event. For more information on these topics, below are links to Comverge white papers:
Thermostat Cycling vs. Temperature Offset How "Bring Your Own Device" Is Changing the Demand Response Model
- Persistence: To forgo investments in generation, transmission, or distribution infrastructure, utilities must be confident in the long-term viability of their demand response resources.
Demand response provides utilities with a tremendous resource to ensure grid reliability and dramatically reduce energy costs. With communicating thermostats, we're extending our demand response programs to engage customers and deliver measurable energy savings. As we evaluate our solution roadmap, we use the above framework to ensure Comverge delivers the highest-value outcomes for our utility partners. By working with an experienced vendor under a pay-for-performance agreement, utilities can be confident that their demand response resource will cost-effectively deliver all the megawatts they require, as quickly, reliably, and predictably as a traditional peaking generation resource.