How to Implement a Demand Response Plan

07/13/2011 | By Gary Fromer and Eric Woodroof

Today's demands on facility managers (FMs) are extreme.  Implementation of demand response can be instrumental in assisting with day-to-day energy management. Statistics from the International Facility Management Association reveal that 54% of FMs oversee greater than 500,000 total square feet.  With scope of responsibilities that typically include maintenance, leasing, financials, capital expense management and day-to-day operations, it is easy to understand how a FM could struggle with a critical responsibility – monitoring, managing and assessing power use. 

Eric A. Woodroof, Ph.D., is the Chairman of the Board for the Certified Carbon Reduction Manager (CRM) program and he has been a board member of the Certified Energy Manager (CEM) Program since 1999. His clients include government agencies, airports, utilities, cities, universities and foreign governments. Private clients include IBM, Pepsi, GM, Verizon, Hertz, Visteon, JP Morgan-Chase, and Lockheed Martin.

With the added impacts of a volatile economic environment, aging infrastructure, and growing overall stress on corporate sustainability, it has become necessary and more difficult for FMs to invest time, effort and capital toward energy management and efficiency.

Demand response – curtailing power use in response to the electric grid's changing stress levels – is an excellent entry vehicle for many FMs and their sites to engage in day-to-day energy management.  Demand response is the reduction of electrical consumption in response to high wholesale electricity prices, system resource capacity needs or system reliability events.

Participation in a demand response program can help generate revenues from energy markets to mitigate facility operating costs.   Gary Fromer, senior vice president of demand response at Constellation Energy, says there are three quick steps to evaluate if your facility is a good candidate for demand response program participation:

  1. Determine if your facility can reduce enough electricity usage to generate meaningful revenue:
    1. For commercial buildings, confirm the square footage of your facility – if it is at least 300,000 square feet it's probably a good candidate.  If it is a smaller site, but you have at least 100kW of connected non-life/safety generator loads, then you may still be a good candidate.

    2. For industrial facilities, is your annual energy spend at least $250,000 or is you your facility's peak kW from last year's utility bills at least 500kW?

    3. For commercial or institutional campuses or multi-site facilities, you are probably a good candidate for demand response – especially if you have centrally managed building automation systems.

  2. Confirm if the facility is located in an area where ISO/utility based demand response programs are currently being offered.  The most lucrative demand response programs are located in areas with high energy prices such as New England, New York, the Mid-Atlantic, Texas and California.  Please confirm with a CSP about availability of programs.

  3. Call your local utility, a CSP or your trusted energy advisor for more refined demand response estimates and developing a  robust curtailment strategy for participation.

Gary D. Fromer
Senior Vice President of
Demand Response Constellation Energy, Inc

A wide variety of demand response programs are in place across North America to help maintain electric system stability. These programs were developed by regional transmission organizations and utilities that operate the electric grid to help reduce the need for additional expensive peaking power plants to prevent blackouts.

Participation in demand response can be managed through a curtailment service provider (CSP).  A CSP may be a company that solely focuses on providing demand response capabilities, a local electricity utility, or an energy service company.

As part of its role, a CSP should identify demand response opportunities and work with customers to develop a variety of curtailment strategies, ranging from the simple use of back-up generators to more sophisticated load management initiatives.

 In order to qualify, commercial and industrial participants have to meet a minimum threshold for electricity usage, often 100 kilowatts or more, and are paid a monthly or quarterly dollar amount per kilowatt based on how much electric load they commit to curtail during a demand response event.

For facility managers, demand response serves as a way to help offset rising operating costs and a hedge against the volatile power markets by offering compensation for occasionally decreasing consumption. Revenue derived from demand response can be allocated to energy efficiency upgrades or other otherwise unfunded capital programs. Demand response can also help to serve as a tool for disaster preparedness, by pre-aligning alternative power resources in advance of grid instability.

Most exciting about the current demand response landscape, however, is how technology and integration are helping to propel the potential impact of demand response. With the use of easy-to-deploy energy management software, it is now easier to monitor and control overall energy use, by making scheduling load curtailments controllable, reliable and less-intrusive.

The concepts of demand response offer unique benefits – even at smaller, pilot levels of participation:

  • Reliability- The balancing of the supply and demand resources is critical for grid stability.  When electric demand increases at high rates, especially during hot summer days, grid loads can be balanced by demand response measures which prevents brownout and potential blackout situations or bringing on expensive peaking power plants.
  • Economics – With energy prices continually rising, demand response offers a means for generating payments that offset electricity costs,  and financial incentives to help reduce overall operational costs.  In most cases, there is little or no start-up capital required to participate.
  • Sustainability – In addition to energy efficiency measures and on-site renewable generation, demand response serves as critical alternative energy strategy for reducing power consumption from the grid.  In fact, the U.S. Green Building Council recently announced a pilot program that will allow commercial buildings to earn points towards LEED certification through participation in demand response programs.

Vornado/Charles E. Smith, based in the Washington D.C. region, uses an automated demand response system from Constellation Energy called VirtuWatt to manage its electricity use. By connecting to an organization's energy meter and building controls system, VirtuWatt allows users to better monitor and manage electricity use and maximize the financial benefits of demand response programs through minute-to-minute metering, real-time pricing information, marketplace bidding capabilities and automated energy curtailment strategies.

During last summer's severe heat, Vornado received a signal from the grid to participate in a demand response event and help avoid a potential blackout. With a few clicks of a mouse through an online dashboard, Vornado's facility managers were able to select the appropriate pre-determined curtailment strategies to create an automated load reduction in 27 buildings, without undue impact on tenant comfort.

Vornado is also able to use Virtuwatt for day-to-day energy use management and benchmarking of its different facilities for efficiency and energy use – creating a path toward other energy management projects and programs that benefit its stakeholders.

For facility managers who haven't yet considered taking advantage of demand response, it is a superb initial vehicle toward energy usage management.  The potential for how demand response can begin to impact an organization positively – economically, environmentally and socially – is tremendous relative to the effort and minimal investment. 

As energy costs continue to increase, facility managers will increasingly look to accelerate these strategies in order to establish a comprehensive structure for dynamic energy management.

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