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Demand Response is Evolving. Again.

These days, everyone knows that a smartphone is a digital Swiss Army knife. It can do many things—from texting to photography to GPS navigation—not to mention useful for running diverse apps for everything from ordering a meal to checking the weather to boarding an airplane. But before it evolved from a humble communications device with only a single purpose—making phone calls—few could have seen that radical evolution coming.

Today, traditional demand response (DR) may be reaching the early stages of a similarly radical evolution. And like the rapid rise of the App Store when Apple first launched the iPhone (and the proliferation of Android apps on Google Play after that), this evolution is happening quickly.

The next phase of demand response is here

The next phase of demand response’s evolution is upon us. SEPA’s 2018 Utility Demand Response Market Snapshot, published in September, gave us the first glimpse. Yet the landscape is already shifting further, requiring a refreshed interpretation of key trends highlighted in a report that’s barely nine months old. But don’t fret. For utilities, demand response aggregators, and DR market participants, these are decidedly exciting times.

In short, traditional demand response—which engaged large C&I customers a few times per year—is quickly becoming the equivalent of Henry Ford’s Model T: the thing that established a new class of product or service, but which has become eclipsed by time and technological advancement. Today’s multi-faceted demand response is more akin to a Tesla Model 3: modern, automated, efficient, and packed with features. It’s not the only car on the road, and it’s not the most popular car (yet). But it’s undoubtedly the future, and that future has arrived.

As the SEPA report noted in its foreword, “Collectively, the industry has opened up the possibility—or at least a line of sight—into active market participation of demand-side energy, whether it be for delivering non-wires alternatives, integrating variable-generation renewable energy sources, operating virtual power plants, or delivering resilience benefits at the distribution system level.”

Here’s what we see in our crystal ball for where DR can—and, we’d argue, should—go next:

The rise of demand response as an environmental tool

Ask a typical DR program manager what their program is for, and most answer one of two ways: a) grid reliability (such as when peak demand threatens brown outs), or reducing locational marginal price (such as via time-sensitive pricing that ‘encourages’ customers to shift loads via price signals).

But ask a typical DR customer why they participate, and you often hear a very different answer. WattTime A/B testing and ratepayer interviews consistently find that climate, air quality, environmental justice, and other green motivations are important—sometimes even the most important motivator—among residential and C&I customers who participate in DR.

In 2016 ComEd, Environmental Defense Fund, and Citizens Utility Board launched the first program to quantify the exact environmental impact of DR programs. This opened an intriguing new frontier: emissions-based demand response. With smart devices controlling an ever-greater portion of electricity loads, WattTime and others are beginning to deploy powerful software solutions that allow customers to modulate their electricity use to greatly reduce emissions and costs. Much like running two apps on the same iPhone, this will open up an entirely new frontier in the value that DR programs bring to their users.

Renewable-responsive programs shift load, reduce curtailment and aid wind and solar grid integration

Part of demand response program messaging has focused on environmental benefits: the argument that reducing demand during peak times can reduce emissions at peak plants. However, far larger emissions reductions are available, and with far less consumer pain, by counterintuitively increasing demand at opportune times. These “reverse DR” programs, such as PG&E’s Excess Supply Pilot administered by Olivine, ramp up demand when variable renewable generation has capacity available.

In places where excess renewable generation is at risk of curtailment, such programs present an immediate opportunity for renewable-responsive DR to use that surplus. Today, pilots such as PG&E’s focus on increasing demand when prices are very low. As more of the U.S. power grid depends on variable renewables, this type of DR can become a powerful resource for the grid’s delicate supply-demand balance.

Infrequent demand response evolves to continuous, flexible demand response and “micro DR”

According to the SEPA report, most demand response in the U.S. is activated infrequently at best. In the residential (i.e., mass market) DR space, that equates to an average of 7 to 9 true DR activations per year. This makes sense in a world of traditional demand response, where the fundamental idea is that consumers are giving up something in exchange for an incentive. If participating in a DR event means using less energy for hours at a stretch and experiencing an uncomfortable home as a result, it makes sense to do this rarely. But does it have to be this way?

An intriguing feature of environmentally based DR is that emissions can swing very rapidly—sometimes even more so than Locational Marginal Pricing (LMP)! Data from the California Independent System Operator (CAISO), which has begun tracking rising renewable energy curtailment, shows that emissions can often drop to zero for as little as five minutes, then increase abruptly. Thus a micro-DR event, while currently too short-lived to monetize in a capacity market, can have big impacts environmentally. Think about it: when the grid has so much wind power that brief gusts impact grid balance, so too can brief bursts of energy demand from slight tweaks in the timing of smart devices.

However, if all the environment needs is to shift energy around a few minutes, the question quickly becomes: why not just do it all the time? After all, if your smart thermostat delayed your energy consumption for five minutes, could you even tell? This opens up the possibility of an entirely different type of DR: essentially 24/7/365 continuous environmental DR.

Although this vision may sound futuristic to some, it’s actually already happening. Companies like EMotorWerks are already doing continuous emissions-based optimization with the JuiceBox Green electric vehicle charger. Can utility DR programs be next?

“Set it and forget it” automation takes over

Continuous 24/7/365 optimization would be a big leap for people still manually using DR. Despite growing automation in others part of life, many DR programs remain surprisingly manual. They rely upon various combinations of customer-facing dashboards, behavioral signals and notifications, etc. In other words, they require people to respond, not just the electricity loads.

Why? It can’t be due to the lack of customer adoption of smart energy-using devices, which now number in the tens of billions worldwide. It can’t be because it’s technologically difficult to automate equipment to respond continuously every five minutes: your other apps like email do it already.

Rather, when WattTime researched consumer reactions to using DR for the environment, one of the most interesting results we found was that it was about control. As long as DR programs were about receiving an incentive, both residential and C&I consumers reported that they tried to keep the number of events low. But as soon as they had an environmental motivation, the results flipped. When considering such programs, consumers were more likely to ask how they could participate in DR events more often, and also how they could set their equipment to fire-and-forget permanent opt-in status.

Based upon our research, consumers are more comfortable turning over the keys of their devices to a program that uses their DR Swiss Army knife for a goal that feels like a service, such as environmental benefits. That’s why DR automation is the way of the future. Customers still have the benefit of defining their personal preferences, but once they do so, smart devices take over and run DR programs in the background on their behalf. That’s the secret sauce that bridges the aforementioned themes: continuous and granular DR, emissions-based DR, and renewable-responsive DR. Automation allows them to seamlessly chug along so that demand response doesn’t require a response… at least not from human beings.

Put these radical innovations together, and you get something that is not technically much more complex than regular DR, but is vastly more powerful. WattTime calls the resultant package “Automated Emissions Reduction,” to reflect changing customer attitudes towards DR’s purpose.

Today we are living with the flip phone version of DR; we have come a long way from landlines, and demonstrated that much more is possible. The even sexier smartphone version of DR is likely waiting just around the corner, bringing even more amazing app-like capabilities sooner than you think.

Gavin McCormick is the Co-Founder and Executive Director of WattTime. To learn more about WattTime, click here. Peter Bronski is the Founder and CEO of Inflection Point Agency.