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What is Demand Response?

Demand response is a new way for utility companies and co-ops to deliver power to customers. It has the potential to significantly change the way customers and utilities work together. So what exactly is demand response? Pretty much what it sounds like!

What you need to know about demand response

Demand response is a way for utility companies and co-ops to more efficiently deliver electricity to homeowners, based on how much electricity is in demand at any given time. Peak demand in the home is in the morning, when we’re all getting ready for work and school, and in the evening, when we all come home to fix dinner, do our household chores, watch TV, or have the neighbors over for a visit.

It’s common sense: when we’re at home we demand more electricity from our utility. When we’re not at home, that level of demand drops. We might only have the HVAC system on, and the usual appliances and electronics humming along in the background. Demand response helps utilities balance that peak demand in the morning and evening with the lower demand in the afternoon and late at night, when we’re out of the house or asleep.

How you can take advantage of demand response

Demand response programs may be offered by your utility company or co-op. Check out those inserts in your next utility bill! You may be eligible for real savings every month, just by using your dishwasher and laundry machines in times of lower power demand. Your utility might also offer you “time-based rates” which can be more or less expensive, per kilowatt-hour, based on the time of day and the demand on the utility’s power generation capabilities. Most time-based rates (they’re also called “peak pricing,” “variable pricing,” “real time pricing,” or similar names) follow the basic law of supply and demand. When demand is high, in the morning and evening, prices are a little bit higher. When demand is low, in the afternoons and late at night, prices will be a little bit lower.

Utilities offer demand based rates to encourage you to use your major appliances, like your dishwasher and laundry machines, at the low-demand times of the day. This can be a win-win situation. Your utility wins, because they save wear and tear on their equipment. You win because you save money on your electricity costs by using your major appliances in those lower demand times of the day.

What’s next for demand response?

According to the Department of Energy,

The electric power industry considers demand response programs as an increasingly valuable resource option whose capabilities and potential impacts are expanded by grid modernization efforts. For example, sensors can perceive peak load problems and utilize automatic switching to divert or reduce power in strategic places, removing the chance of overload and the resulting power failure. Advanced metering infrastructure expands the range of time-based rate programs that can be offered to consumers and smart customer systems such as in-home displays or home-area-networks can make it easier for consumers to changes their behavior and reduce peak period consumption from information on their power consumption and costs.

Demand response programs are created and managed by utility companies and co-ops. But homeowners, renters, and landlords who choose to participate in utility programs will find real benefits, including saving money on their electricity bills every month.

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Home energy efficiency program success and challenges

Home energy efficiency program success and challenges

“City’s energy efficiency program falls short of goals.” A recent article in the Greensboro, NC News & Record by Amanda Lehmert observed the performance of Greensboro’s “Better Buildings” home energy efficiency program. Lehmert found that 1,280 homes owned by low income homeowners received benefits of $4.7 million: a energy audit and $2,000 to $3,000 worth of improvements to their home. That sounds like a pretty good success, but what happens when you look behind the numbers?

Greensboro’s Better Buildings home energy efficiency retrofit and upgrade work focused on the high impact, high return on investment areas of the home: air sealing, insulation, HVAC improvements. One homeowner saw an immediate savings of $50 on his heating fuel bill. He told all of his program-eligible family members. They applied to the program, and received the home energy audit and retrofit work. These families are saving money this heating season, and will for years to come, because of the program. What works?

  • Qualifying homeowners through an initial screening process
  • Hiring local home performance contractors to conduct whole house energy audits
  • Hiring those contractors to make effective repairs and upgrades to the building envelope
  • Using the homeowner’s heating fuel bill as quality assurance verification

These steps are replicable in home energy efficiency programs everywhere, and the homeowner’s immediate savings and word of mouth advertising prove that this approach works.

Residential energy efficiency programs create the market

Greensboro officials estimated that the average homeowner would see a 17 percent reduction in home energy consumption and a corresponding savings in home heating fuel costs. That’s a good deal for any homeowner. Demand was high. At the end of the program 400 low-income families were on a waiting list for 70 remaining contracts. That tells us that a market exists for “bundling” home energy audits and retrofit work.

But that market may be unsustainable. City officials reported that higher-income homeowners who were eligible for rebates and low-interest loans did not participate at the expected rate. 950 fewer households applied for the rebates. 600 homeowners qualified for program incentives but did not hire contractors to do the work. These homeowners were to subsidize part of the program. Their low participation put the program’s overall goals at risk.

Lehmert concludes that:

The lack of interest from homeowners who could pay their own way gets to the crux of Better Buildings’ shortfall in private investment and job creation.

Greensboro-area home performance contractors, on the other hand, suggested that a lack of awareness about the program among higher-income homeowners also played a role.

How a home energy efficiency program succeeds

Greensboro’s Better Buildings program did succeed in connecting home performance contractors and low-income homeowners. These homeowners received a energy audit, typically a $300-$800 expense, and up to $3,000 in home energy efficiency retrofit and upgrade work. These homeowners will receive long term heating energy cost savings. Additionally, they will find their homes are more comfortable and their families are healthier, thanks to air sealing and HVAC system improvements. All of these are quantifiable measures of the Greensboro Better Buildings program’s success.

Future programs should do a better job of marketing available incentives to higher-income homeowners. These homeowners may not know how to start a home energy efficiency project, but they have the means to undertake larger projects, and create local jobs.

Programs can use performance based home energy assessment tools to quickly qualify existing homes and prioritize projects based on the estimated return on investment. This also helps home performance contractors schedule their teams and equipment to work more efficiently.

Programs should devote resources to business development for home performance contractors. Public-private partnerships help create sustainable markets after program funds are exhausted.

It’s well known that once homeowners pick the low-hanging fruit of home energy efficiency they are likely to take additional steps, including major retrofit and upgrade work. Home performance contractors should look at program participants as future customers.

Home energy efficiency program success and challenges are a major part of our larger energy efficiency debate. We know there is strong demand for home energy efficiency, and that there are steps everyone can take to make their homes cheaper, healthier, and more comfortable. Greensboro’s program is a good case study for future programs and for industry professionals looking to grow their businesses.