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Industrial Ethernet Book Issue 98 / 15
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Energy monitoring leverages demand response strategy

The ways electrical energy is produced and used, and the ways companies balance supply and demand in the grid, are changing rapidly. Demand response offers strategies for companies to take advantage of these changes and improve their company′s bottom line while addressing both energy needs and costs.

Demand response (DR) networks have the potential to transform electrical energy usage from a fixed cost to a future source of revenue for businesses.

THE SMART GRID IS DESIGNED as an interconnected infrastructure that will embed digital intelligence into the whole process of producing, distributing, pricing and consumption of electrical energy.

In the development of electrical grids, there are many proposed practical ways in which small and medium-sized commercial and industrial businesses can reduce energy costs now, without waiting for the Smart Grid.

This article introduces demand response (DR), a concept that goes beyond reducing energy costs. DR has the potential to transform electrical energy usage from the fixed cost it traditionally has been to a future source of revenue for your business. And DR is a program that automation professionals can use to significantly improve a company′s bottom line.

First let′s take a look at how electrical power gets to a business. Then we′ll discuss four steps automation professionals can begin now to take advantage of demand response (DR) programs offered in their area.

Complex production and distribution

The electrical grid in North America covers the U.S. and Canada. At the top of this system are three independently synchronized grids: the Eastern Interconnection, the Western Interconnection, and the Electric Reliability Council of Texas (ERCOT). These grids are operated under the authority of the Federal Energy Regulatory Commission (FERC).

Within these three grids, some U.S. regions (New England, mid-Atlantic, Florida, Texas, California) have organized wholesale markets called Independent System Operators (ISOs) or Regional Transmission Organizations (RTOs).

Other areas have more traditional vertically integrated markets, where electricity is delivered directly from the producer to the consumer, or where federal, municipal, and co-op utilities provide energy to consumers. So generation, transmission, and distribution vary widely depending upon where a business is located.

But there′s still another layer: 107 additional organizations, called balancing authorities, that are responsible for balancing supply and demand in real time in specific areas-some large, some very small.

Organized wholesale energy markets cover about two-thirds of the U.S. population and two-thirds of overall demand. In these areas, prices vary based on long-term contracts and short-term bidding, much as in any commodity market.

Short-term bidding actually works in multiple directions simultaneously. Producers bid to provide more or less energy to meet demand; consumers bid to use less energy to lessen overall demand or (much less frequently) bid to use more energy to meet the supply.

Balancing the grid

This complex, overlapping array of entities works to keep supply and demand within the grid in balance. Ancillary services are the primary tools used to do so.

These ancillary services including regulation, spinning reserves, supplemental reserves, and replacement reserves make sure that enough energy is available in case of extra demand or disturbances on the electrical grid. Ancillary services are designated based on how fast they can kick in, with regulation at less than a minute, and spinning reserves at less than 10 minutes.

How demand has changed

The electrical infrastructure in the U.S. has remained largely the same for decades. The amount and nature of demand, however, has changed over time. One key for the future is flattening demand. Over the last 50 years, the proliferation of residential air conditioning and other household electrical appliances has changed the balance of consumption. One study noted: "From 1950 to 1959, industrial customers accounted for half of the total demand for electrical energy; from 2000 to 2009, industry was only 28% of total demand."

Industrial demand tends to be flat. Factories continually run equipment, often in multiple shifts throughout the day and night. But residential demand fluctuates. It tends to peak at certain times, notably in the afternoon when everyone arrives home, turns on the A/C, and starts making dinner. With a higher proportion of residential use, overall demand is less flat. So older, less efficient generation sources are used and power plants must be built to accommodate the peaks.

Reducing peaks by flattening demand and designing the Smart Grid to flexibly respond to new generation sources, can keep supply and demand in balance.

Future stresses on grid

Future stresses on the grid will come from the increasing use of new generation methods, such as wind and solar. In 2010, only about 10% of U.S. electrical energy was produced using renewable sources. As these sources of generation become a larger percentage of the total, the grid must change to accommodate them.

Wind and solar power are dependent on winds that change direction and force and sun that may disappear behind clouds. So their output is by nature variable and unpredictable, unlike a coal-fired plant that produces energy at a steady rate. The grid will need to be more flexible to accommodate these variations in supply.

Prime locations for wind and solar generation tend to be in remote areas, away from population centers where the energy is needed. Distance and jurisdictional issues among regulatory bodies complicate transmission.

Distributed generation from solar arrays on local buildings, for example, is desirable but could cause problems within the grid. Current distribution systems are designed to handle the flow of power from upstream generation to downstream consumption, not in the other direction. If distributed generation becomes widespread, generation could exceed demand and power could flow dangerously from the substation into the transmission grid.

If we can reduce peaks by flattening demand over days and seasons, and design the Smart Grid to flexibly respond to new generation sources, we can keep supply and demand in balance.

Smart grid from both sides

Most discussions regarding the Smart Grid are focused on the supply side, not the demand side. These discussions tend to center around public policy, government programs, changes to transmission and distribution infrastructure, and so on. But let′s take a closer look at the demand side, the energy consumer′s end of the grid. Here is where you, as an engineer, controls technician, or facility manager can have a huge role to play.

Automation and control professionals have the skills and interest necessary to work on the Smart Grid from the demand side, to ensure that the Smart Grid develops in ways that make sense for industrial and commercial consumers. And right now, while the Smart Grid is still in development, companies have the opprtunity and ability to turn electrical energy use into a real source of revenue for the business.

The rest of this article focuses on four steps: (1) terms and who the players are in the overall grid structure; (2) local demand-side programs that may apply to your company; (3) detailed data on your company′s energy usage and analyze the data to understand your use; and (4) getting started with the programs that work for your company.

Learn terms and players

Let′s take a look at some of the players in this game as we move toward the Smart Grid. For simplicity, we′ve put them into three categories: energy producers, energy retailers, and energy consumers.

Energy producers are part of the generation and transmission section of the grid. Utilities (public or investor owned), independent system operators (ISOs), and regional transmission organizations (RTOs) that generate and/or transmit high-voltage electrical energy are in this group.

Energy retailers are part of the distribution section of the grid. Demand response providers (DRPs), curtailment service providers (CSPs), and energy service corporations (ESCOs) are all in the retail group. Many retailers offer pricing and demand response programs to energy consumers.

Energy consumers are commercial, industrial, and residential customers who use the electricity the grid produces.

Where electricity comes from

We′ve seen that supplying electrical energy is a complex process, and every geographical area is different. Your first job is to find out who produces and distributes the energy your business uses, and whether you have options for energy providers.

Next, you′ll want to find out about the demand-side management (DSM) programs available to you. DSM programs can include:

  • Conservation: reducing energy use
  • Energyefficiency: usingthesameamount of energy but doing more with it
  • Demand response: temporarily shedding loads or shifting loads to a different time of day, to reduce demand during peaks

Conservation and energy efficiency mean less energy is used overall. Energy providers offer programs such as rebates, financing, and education to encourage efficiency and conservation. Appliance standards and building codes also encourage efficiency. Conservation and energy efficiency do not necessarily require you, the consumer, to change your operations, and they are not time-dependent.

Demand response programs, in contrast, do require you to change your operations and are very closely tied to time. They range from time-of-use pricing, where electricity costs more at certain times of day, to agreements where you shed load if an "event" occurs. DR events may be triggered by energy price changes, additional demand, or changes to grid reliability. When an event occurs, DR programs reward immediate, short-term reductions in usage.

These are the programs you want to find out about, because these are where you′ll gain revenue for your company.

The company gains revenue in two ways:

  • Your energy retailer pays you every month for your agreement to shed load, whether an event occurs or not.
  • If an event occurs, your energy retailer pays you for shedding load.

In some DR programs, events are called 24 hours in advance; in others, you are notified and must respond within a certain length of time: 10 minutes, 30 minutes. Generally, the faster you can respond, the more you are paid.

Supplying electrical energy is a complex process, and every geographical area is different. Your first job is to find out who produces and distributes the energy your business uses, and whether you have options for energy providers.

Sample DR programs

What do DR programs look like? As an example, Southern California Edison (SCE), a utility company based in Los Angeles, offers several programs including these five options.

Demand Bidding offers credits on your bill when you reduce demand in response to an event announced one day in advance. Available only to customers with a service account of 200 kW or higher.

Critical Peak Pricing offers a dynamic pricing rate schedule. Charges higher rates during peak periods during events; in the summer applies discounted rates based on time of day.

Capacity Bidding provides monthly incentive payments for capacity reduction and for actual energy reduction during events; bids must be placed one month in advance. Penalties apply if you don′t participate when an event is called. Credits are paid whether an event is called or not.

Demand Response Contracts consist of programs offered through third-party aggregators; SCE contracts with the aggregator, who then contracts with customers.

Real Time Pricing offers rates based on the daily peak temperature in downtown Los Angeles. This program applies all year round, not just in summer.

In addition to these programs, SCE offers technical assistance in the form of demand response audits at little or no charge, and significant reimbursement for installing automation to respond to an event.

Since the grid′s operation varies so much from region to region, programs also vary widely, but you′re likely to find programs similar to these. In some places your local utility company is the only place to look; in other places aggregators and other energy service companies offer a variety of options. If you don′t find much now, look again in six months. The energy landscape is changing quickly, and the sooner you′re involved in demand response, the better.

Detailed energy usage data

You can′t manage it unless you can measure it. So before you can figure out which of the demand-side programs in your area will work for your company, you must determine your patterns of energy usage.

Here′s where commercial and industrial consumers often find they need more than just a smart meter. Starting with overall facility usage data is a step in the right direction, but sooner or later you′ll probably need to gather more granular data on sub-panels, individual chillers, compressors, manufacturing lines, or other equipment and processes that depend on electricity.

Similarly, starting with hourly data may be sufficient in the beginning, but you can′t maximize potential savings and revenue unless you have data in one-minute intervals or less. Especially for demand response programs, you must acquire detailed, near-real-time data from your facility and equipment. As an automation professional, you′re a key resource in setting up energy monitoring and dealing with the data it produces.

"Utilities, Property Managers, and BAS [building automation system] OEMs are not accustomed to managing large amounts of data that the smart grid and smart buildings are starting to produce," notes a report from a Smart Building Technology conference in September 2011.

Automation professionals, however, know how to acquire data and use it in processes and business decisions, and some automation manufacturers are offering suitable products for energy.

For example, Opto 22 produces an industrial-quality energy-monitoring appliance (the OptoEMU Sensor) that can be attached to pulsing meters, electrical panels, and equipment. The Sensor monitors energy usage in real time, logs data, and sends both real-time and historical data to online energy monitoring services, company databases, and control systems using open standards including Ethernet, TCP/IP, and Modbus.

A second product, the OptoEMU Sensor DR, monitors energy usage and responds to DR events or pre-set thresholds by turning equipment on or off automatically.

Now that you have installed an energy monitoring system and understand your detailed energy usage, you′re ready to get started with the DR programs that are advantageous for your business.

Energy curtailment plan

Based on the detailed usage data you now have, determine a reasonable plan for curtailing use.

You′ve probably already taken steps to increase efficiency and reduce overall use, especially during peak times. If not, do it now. Consider variable frequency drives for motors. Check maintenance on chillers and compressors. Look for energy-intensive processes that could run at another time of day. Think about pre-cooling buildings in the summer with cool early-morning air, ice that you make overnight when energy is cheaper, or more efficient equipment.

But for demand response, you also need to look at temporary curtailment. Find the flexibility within your normal usage pattern. Plan exactly where, when, what, and how fast you can curtail use if an event is called.

One of the keys to applications working properly is that fast reserves must be able to kick in when demand peaks. For demand response to achieve its goals, responses within 10 minutes are considered good; faster response times could earn even more.

So what kinds of responses could be in your curtailment plan?

  • Temporarily shutting down heavy power-using equipment or processes
  • Raising or lowering setpoint temperatures for heating or air conditioning
  • Reducing lighting levels
  • Switching to backup generators during an event

Choose reasonable changes you can make that affect power usage but don′t hamper business unnecessarily. This is not disaster planning, but planning for an intelligent, temporary reduction in use. Consider the cost of the curtailment plan as well. If you′re going to switch to onsite diesel generators, will it cost you extra in fuel and maintenance to run them? Or can running them during events be considered part of your normal periodic testing schedule?

If you′re going to shut down a process or system, what are the costs and time involved in starting it up again? For example, many HVAC systems experience rebound after an event-that is, they use extra energy to come back up to normal conditions. You may be able to minimize rebound and avoid possible demand charges by gradually ramping back up to normal.

Your curtailment plan must be suited to your company and its individual priorities. Temporarily stopping a process may work for one manufacturer but cause major problems for another. For example, a material process plant with a buffer tank could shut off transfer pumps temporarily, keeping the material in the buffer tank until the DR event is over. Another plant might not have this flexibility.

Analyzing your detailed usage data and understanding your own processes and business will help you develop your energy curtailment plan. Your CSP may also have suggestions you′ll want to incorporate.

Initially you may plan on a manual response to events. When a phone call or other notification comes through, your company personnel respond by turning off equipment or otherwise shedding load. Manual response is probably a good way to start, as long as you can be sure responses will be timely and complete. If an event is called and you do not respond within the time specified or shed the required load, there is usually a penalty.

Measure and verify

You must be able to measure detailed energy usage in order to verify your response to a DR event. Minimally you′ll need to acquire data at one-minute intervals. The same monitoring units and software that monitor your energy usage should be able to log historical data to verify response.

Don′t leave verification up to the utility company or service provider; make sure you have historical data on hand so that you know exactly how fast you responded to an event and how much energy you saved. This data will help you refine your curtailment plan and prove your response if there′s ever a dispute.

This step of measure and verify is especially important when first starting a DR program, so you can fine-tune your initial energy curtailment plan. But it′s also important to keep measuring and verifying as time passes. Pricing, programs, and your processes and needs will change over time. If you have the data, you can make adjustments promptly.

Automate response

Once you′re satisfied that your curtailment plan works and you′ve verified actual response to events, you′ll probably want to automate your response. Automation adds speed and accuracy to DR programs just as it does to processes.

Automation can take several forms, from control systems and protocols you already use to new standards specifically designed for DR. The most promising of these is OpenADR, a proposed standard for exchanging information between a server (at your CSP) that sends event notifications and a client (at your end) that automatically responds to the event.

In many ways automating your response to a DR event is just another automation application. Using open standards for control such as Ethernet, Modbus, or OpenADR gives flexibility for future changes. And in energy, change is certain.


The ways we produce and use electrical energy, and the ways we balance supply and demand in the grid, are changing rapidly. Demand response offers a way for companies to take advantage of these changes and improve the bottom line.

As an automation professional, you′re in the best position to help your company be proactive in addressing energy needs and costs. Now is the time to begin.

  • Start monitoring energy usage. Gather detailed, real-time data and analyze patterns.
  • Develop a curtailment plan.
  • Find a local DR plan and track results. Consider automating responses.

You′ll find that energy monitoring and demand response will not only reduce energy costs, but significantly increase your company′s profitability.

Technology report by Opto 22.

Source: Industrial Ethernet Book Issue 98 / 15
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