Demand Response: why it is important and how it works

Q: How does Demand Response work?

A Demand Response event will involve the following steps: 1. The grid operator predicts a grid stability problem and sends a balance notification to the aggregator 2. The aggregator uses special algorithms to optimize the distribution of the request between the clients in its portfolio to reduce or increase their energy consumption 3. The designated client modulates their consumption/generation level 4. The load modulation is made available to the grid operator 5. Following verification that the service has been correctly provided, the client receives payment as agreed under contract.

In order to function, electricity grids must continually maintain a perfect real-time equilibrium between supply and demand. A sudden spike in demand, or drop in supply, risks throwing the grid off-kilter and can result in a power outage. Fortunately, technology offers new tools that help smooth out any imbalances that can unexpectedly threaten the grid’s normal functioning.

What is Demand Response (DR)? Through Demand Response programs, utilities or grid operators pay commercial and industrial consumers to modulate their energy consumption in response to peaks in electricity demand.

How to Access a DR Program

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Therefore, a DR program benefits both the utility and user. The utility avoids the cost of having to build new plants to cope with peak demand. And users benefit by turning their flexibility into a new revenue stream, as well as from lower energy costs when they use the grid during off-peak hours.

Which are the steps of Demand Response?

Generally speaking, a Demand Response event will involve the following steps:
1. The grid operator predicts a grid stability problem and sends a balance notification to the aggregator
2. The aggregator receives the balance order and uses special algorithms to optimize the distribution of the request between the clients in its portfolio to reduce or increase their energy consumption
3. The designated client modulates their consumption/generation level (this can be done either automatically or manually)
4. The load modulation is made available to the grid operator
5. Following verification that the service has been correctly provided, the client receives payment as agreed under contract.

Why is Demand Response becoming more important?

What is useful to know about the importance of Demand Response and the advantages of using Demand Response system? Until recently, grid operators relied completely on traditional power stations to meet fluctuations in demand. When demand increases, in order to avoid the risk of a blackout, utilities and grid operators must boost their energy supply by acquiring it on the market, or fire up a “spare” power plant built to meet these demand peaks.

However, the climate crisis and the resulting need to decarbonize the economy means that by 2050, 79% of energy produced is expected to come from renewables, which by their very nature produce an unpredictable energy supply that cannot be turned “on and off.” On top of that, global demand for electricity will rise an estimated 60% by 2040.

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Therefore, Demand Response is becoming more important because programs allow utilities and grid operators to adapt to this new energy scenario by enabling them to offer incentives to companies to be more flexible in their energy demands. In other words, Demand Response programs, which provide financial payments to companies who agree to modulate their energy consumption in response to grid signals, are the tool used to improve grid stability while making it possible to integrate renewable energy into the grid. It’s a win-win solution for companies looking to boost their bottom line, and for grid operators seeking to avoid significant capital expenditures on new capacity.

Demand Response: an opportunity for businesses

10 reasons to participate in DR programs

There are plenty of good reasons why companies should consider taking part in demand response programs

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Why Demand Response for businesses represent an opportunity for growth? There are many Demand Response benefits for companies, and several types of Demand Response programs for businesses are available. These programs offer an opportunity for companies, schools, offices, factories, commercial property and retail malls to tackle high energy costs because they create a valuable revenue stream that can be reinvested to deliver even greater savings.

In addition to a new revenue stream that can be reinvested, or simply bolter your bottom line, Demand Response programs work by offering the opportunity to save on energy costs by shifting consumption to less-expensive off-peak hours when feasible.

Another advantage to joining a Demand Response program is that participants get advance notice of power outages. This allows energy managers to schedule their operations around any potential disruption and act to protect their facilities from the potential damage that an outage may cause. Along with a fatter revenue stream, companies taking part in a Demand Response program are making progress on their own sustainability targets, which are increasingly mandated by governments around the world, by improving their energy management. By contributing to a more flexible electricity grid, they are helping speed the transition to renewable energy, one that is moving us all toward a greener, more sustainable future.