Energy demand management

Energy demand management, also known as demand side management (DSM), is the modification of consumer demand for energy through various methods such as financial incentives[1] and behavioral change through education. Usually, the goal of demand side management is to encourage the consumer to use less energy during peak hours, or to move the time of energy use to off-peak times such as nighttime and weekends.[2] Peak demand management does not necessarily decrease total energy consumption, but could be expected to reduce the need for investments in networks and/or power plants for meeting peak demands. An example is the use of energy storage units to store energy during off-peak hours and discharge them during peak hours.[3] A newer application for DSM is to aid grid operators in balancing intermittent generation from wind and solar units, particularly when the timing and magnitude of energy demand does not coincide with the renewable generation.[4]

The term DSM was coined following the time of the 1973 energy crisis and 1979 energy crisis.[5] Governments of many countries mandated performance of various programs for demand management. An early example is the National Energy Conservation Policy Act of 1978 in the U.S., preceded by similar actions in California and Wisconsin. Demand Side Management was introduced publicly by Electric Power Research Institute (EPRI) in the 1980s.[6] Nowadays, DSM technologies become increasingly feasible due to the integration of information and communications technology and the power system, resulting in a new term: smart grid.

Operation

Electricity use can vary dramatically on short and medium time frames, largely dependent on weather patterns. Generally the wholesale electricity system adjusts to changing demand by dispatching additional or less generation. However, during peak periods, the additional generation is usually supplied by less efficient ("peaking") sources. Unfortunately, the instantaneous financial and environmental cost of using these "peaking" sources is not necessarily reflected in the retail pricing system. In addition, the ability or willingness of electricity consumers to adjust to price signals by altering demand (elasticity of demand) may be low, particularly over short time frames. In many markets, consumers (particularly retail customers) do not face real-time pricing at all, but pay rates based on average annual costs or other constructed prices.

Energy demand management activities attempt to bring the electricity demand and supply closer to a perceived optimum, and helps give electricity end users more direct price signals to adjust their usage or automated signals to change load depending on system conditions. These system conditions could be peak times, or in areas with levels of variable renewable energy, during times when demand must be adjusted upward to avoid overgeneration or downward to help with ramping needs.

Adjustments to demand can occur in various ways: through responses to price signals, such as permanent differential rates for evening and day times or occasional highly priced usage days, behavioral changes achieved through home area networks, automated controls such as with remotely controlled air-conditioners, or with permanent load adjustments with energy efficient appliances.

Logical foundations

Demand for any commodity can be modified by actions of market players and government (regulation and taxation). Energy demand management implies actions that influence demand for energy. DSM is originally adopted in electricity, today DSM is applied widely to utility including water and gas as well.

Reducing energy demand is contrary to what both energy suppliers and governments have been doing during most of the modern industrial history. Whereas real prices of various energy forms have been decreasing during most of the industrial era, due to economies of scale and technology, the expectation for the future is the opposite. Previously, it was not unreasonable to promote energy use as more copious and cheaper energy sources could be anticipated in the future or the supplier had installed excess capacity that would be made more profitable by increased consumption.

In centrally planned economies subsidizing energy was one of the main economic development tools. Subsidies to the energy supply industry are still common in some countries.

Contrary to the historical situation, energy prices and availability are expected to deteriorate. Governments and other public actors, if not the energy suppliers themselves, are tending to employ energy demand measures that will increase the efficiency of energy consumption.

Types of energy demand management

Examples

Queensland, Australia

The government of the state of Queensland, Australia plans to have devices fitted onto certain household appliances such as air conditioners, pool pumps, and hot water systems. These devices would allow energy companies to remotely cycle the use of these items during peak hours. Their plan also includes improving the efficiency of energy-using items, encouraging the use of oil instead of electricity, and giving financial incentives to consumers who use electricity during off-peak hours, when it is less expensive for energy companies to produce.[11]

Toronto, Canada

In 2007, Toronto Hydro, the monopoly energy distributor of Ontario, had over 40,000 people signed up to have remote devices attached to air conditioners which energy companies use to offset spikes in demand. Spokeswoman Tanya Bruckmueller says that this program can reduce demand by 40 megawatts during emergency situations.[12]

California, USA

California has several demand side management programs, including automated and critical peak pricing demand response programs for commercial and industrial customers as well as residential consumers, energy efficiency rebates, non-event based time-of-use pricing, special electric vehicle charging rates, and distributed storage. Some of these programs are slated to be added into the wholesale electricity market to be bid as "supply side" resources that can be dispatched by the system operator. Demand side management in the state will be increasingly important as the level of renewable generation approaches 33% by 2020, and is expected to be increased beyond that level in the long-term.

Indiana, USA

The Aloca's Warrick Operation is participating in MISO as a qualified Demand Response Resource, which means it is providing demand response in terms of energy, spinning reserve, and regulation service.[13][14]

Brazil

Demand-side management can apply to electricity system based on thermal power plants or to systems where renewable energy, as hydroelectricity, is predominant but with a complementary thermal generation, for instance, in Brazil.

In Brazil’s case, despite the generation of hydroelectric power corresponds to more than 80% of the total, to achieve a practical balance in the generation system, the energy generated by hydroelectric plants supplies the consumption below the peak demand. Peak generation is supplied by the use of fossil-fuel power plants. In 2008, Brazilian consumers paid more than U$1 billion[15] for complementary thermoelectric generation not previously programmed.

In Brazil, the consumer pays for all the investment to provide energy, even if a plant sits idle. For most fossil-fuel thermal plants, the consumers pay for the "fuels" and others operation costs only when these plants generate energy. The energy, per unit generated, is more expensive from thermal plants than from hydroelectric. Only a few of the Brazilian's thermoelectric plants use natural gas, so they pollute significantly more. The power generated to meet the peak demand has higher costs—both investment and operating costs—and the pollution has a significant environmental cost and potentially, financial and social liability for its use. Thus, the expansion and the operation of the current system is not as efficient as it could be using demand side management. The consequence of this inefficiency is an increase in energy tariffs ... passed on to the consumers.

Moreover, because electric energy is generated and consumed almost instantaneously, all the facilities, as transmission lines and distribution nets, are built for peak consumption. During the non-peak periods their full capacity is not utilized.

The reduction of peak consumption can benefit the efficiency of the electric systems, like the Brazilian system, in some senses: as deferring new investments in distribution and transmission networks, and reducing the necessity of complementary thermal power operation during peak periods, which can diminish both the payment for investment in new power plants to supply only during the peak period and the environmental impact associated with greenhouse gas emission.

Problems with DSM

Some people argue that demand-side management has been ineffective because it has often resulted in higher utility costs for consumers and less profit for utilities.[16]

One of the main goals of demand side management is to be able to charge the consumer based on the true price of the utilities at that time. If consumers could be charged less for using electricity during off-peak hours, and more during peak hours, then supply and demand would theoretically encourage the consumer to use less electricity during peak hours, thus achieving the main goal of demand side management.

Another problem of DSM is privacy: The consumers have to provide some information about their usage of electricity to their electricity company. This is less of a problem now as people are used to suppliers noting purchasing patterns through mechanisms such as "loyalty cards".

See also

Notes

  1. ↑ Wei-Yu Chiu; Hongjian Sun; H.V. Poor (June 2013). "Energy Imbalance Management Using a Robust Pricing Scheme". IEEE Transactions on Smart Grid 4 (2): 896–904. doi:10.1109/TSG.2012.2216554. ISSN 1949-3053.
  2. ↑ "Demand Management". Office of Energy. Government of Western Australia. Retrieved 30 November 2010.
  3. ↑ Wei-Yu Chiu; Hongjian Sun; H.V. Poor (November 2012). "Demand-side energy storage system management in smart grid". 2012 IEEE Third International Conference on Smart Grid Communications (SmartGridComm): 73, 78, 5–8. doi:10.1109/SmartGridComm.2012.6485962.
  4. ↑ Jeffery Greenblatt; Jane Long (September 2012). "California’s Energy Future: Portraits of Energy Systems for Meeting Greenhouse Gas Reduction Targets" (PDF). California Council on Science and Technology: 46–47.
  5. ↑ Torriti, Jacopo (2016). Peak energy demand and Demand Side Response. Routledge. ISBN 9781138016255.
  6. ↑ Balijepalli, Murthy; Pradhan, Khaparde (2011). "Review of Demand Response under Smart Grid Paradigm". IEEE PES Innovative Smart Grid Technologies.
  7. ↑ Sila Kiliccote; Pamela Sporborg; Imran Sheikh; Erich Huffaker; and Mary Ann Piette; "Integrating Renewable Resources in California and the Role of Automated Demand Response," Lawrence Berkeley National Lab (Environmental Energy Technologies Division), Nov. 2010
  8. ↑ Albadi, M. H.; E. F. El-Saadany (2007). "Demand Response in Electricity Markets: An Overview". IEEE.
  9. ↑ Torriti; et al. (2010). "Demand response experience in Europe: policies, programmes and implementation". Energy 35 (4): 1575–1583. doi:10.1016/j.energy.2009.05.021.
  10. ↑ US-Patent No. 4,317,049: Frequency adaptive, power-energy re-scheduler
  11. ↑ "Energy Conservation and Demand Management Program." Queensland Government. Queensland Government, n.d. Web. 2 Dec 2010.
  12. ↑ Bradbury, Danny. "Volatile energy prices demand new form of management." businessGreen. Association of Online Publishers, 05 Nov 2007. Web. 2 Dec 2010.
  13. ↑ "Providing Reliability Services through Demand Response: A Preliminary Evaluation of the Demand Response Capabilities of Alcoa Inc." (PDF).
  14. ↑ Zhang, X.; Hug, G. (2015-02-01). "Bidding strategy in energy and spinning reserve markets for aluminum smelters' demand response". Innovative Smart Grid Technologies Conference (ISGT), 2015 IEEE Power Energy Society: 1–5. doi:10.1109/ISGT.2015.7131854.
  15. ↑ CCEE (2008). "Relatório de Informações ao Público" (PDF). Análise Anual.
  16. ↑ Katz, Myron. "Demand Side Management: Reflections of an Irreverent Regulator." ScienceDirect. Oregon Public Utility Commission, 01 Apr 2002. Web. 3 Dec 2010.

References

Works cited

External links

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