A Balancing Act: Demand response programs reduce strain on the electric grid

By Claire Swedberg | Dec 15, 2023
grid connections
Extreme weather and high electricity demands are straining the nation’s electric grid. One solution that has provided some immediate relief is the demand response (DR) programs that put residential, business and industrial users in charge of timing their electricity consumption.




Extreme weather and high electricity demands are straining the nation’s electric grid. One solution that has provided some immediate relief is the demand response (DR) programs that put residential, business and industrial users in charge of timing their electricity consumption. These programs rely on controls that create a smarter grid. To work at scale, however, demand response requires a stronger grid to provide power sources for these smarter networks. 

For line contractors, DR programs initially mean a reduced need for new power lines by optimizing existing infrastructure. DR also results in greater opportunity in controls and programming, not to mention the need for building a more robust network across the country.

Changing how consumers use the grid

DR programs offered by utility operators are designed to balance supply and demand. With these programs, consumers reduce or shift their electricity use during peak times, according to time-based rates or other kinds of financial incentives. These programs have the potential to help electricity providers save money in addition to the ability to defer construction of new power plants and power delivery systems—specifically those reserved for use during peak times.

According to a spokesperson for the Department of Energy (DOE), a growing number of consumers are leveraging the programs. Utility DR programs in 2021 reported almost 10.5 million customers enrolled and a total of more than 1 million megawatt-hours of energy savings and 12,211 megawatts of peak demand savings. That was 42% of potential peak demand savings, according to the U.S. Energy Information Administration’s Annual Electric Power Industry Report. 

So far, residential use represents 97% of DR participants, 85% of the DR-related energy savings and 31% of peak demand savings. Commercial consumers represent just 2% of those enrolled, with 8% of energy savings and an outsized 23% of peak demand savings. Industrial represented less than 1% of customers, 7% of energy savings and the greatest peak demand savings at 46%.

Job gains for line work

Initially, this use management has meant utility construction jobs are reducing extensive new line construction. However, DR opens new construction opportunities, said Massoud Amin, president and chairman of Energy Policy & Security Associates, Minneapolis, an energy, defense and security think tank. Lineworkers will find opportunities in smart grid technology deployment, expanded microgrids, grid maintenance, resilience enhancement and grid adaptation for renewables—all factors that play a part in DR programs. 

California provides an example of these programs and their effect. The state’s adoption of DR programs and smart grid technologies has helped it avoid building new power plants and transmission lines. Between 2013 and 2020, California saved more than $2.6 billion in infrastructure costs by using DR to manage peak electricity demand.

The other part of the story is that smart grids with DR capabilities can reroute electricity supply, isolate damaged sections of the grid and quickly restore power to critical facilities. For instance, after Hurricane Sandy in 2012, smart grid technology helped reduce outage durations in some areas.

Expanding such grid modernization efforts is necessary to keep these programs running. Some improvements are sensors to detect peak load problems and automatic switching to divert or reduce power in strategic places.

Creating smart grids introduces a form of traffic control into the electric system, Amin said. Smart grids can predict when customers want more electricity, such as during a hot summer day when air conditioners are running on high. When the smart grid sees the potential for an outage, it can send messages to consumers asking them to use less electricity for a short time. 

Advanced metering infrastructure expands the range of time-based rate programs that utilities offer customers. Some companies sell smart-home systems to make it easier for consumers—with in-home displays or home-area networks—to provide information about power consumption and costs. 

Consumer and demand-side options evolve as policies, technologies and markets provide more opportunities for consumer benefits. Today, demand-side capabilities can provide an increasingly wide variety of benefits to grid operators and consumers. 

“As pricing, communications and technological capabilities evolve, consumers are actively participating in a future grid,” according to a DOE spokesperson.

Funding will be part of the growth ahead. Part of the Grid Resilience and Innovation Partnerships program administered by DOE’s Grid Deployment Office, Smart Grid Grants support technologies designed to increase the flexibility, efficiency and reliability of the electric power system. 

The grants have a particular focus on increasing capacity in the transmission system, “preventing faults that may lead to wildfires or other system disturbances, integrating renewable energy at the transmission and distribution levels and facilitating the integration of increasing electrified vehicles, buildings and other grid-edge devices,” the DOE spokesperson said.

Altogether, Smart Grid Grants will invest up to $3 billion in grid resilience technologies and solutions. 

Virtual power plants

The advent of cloud-based virtual power plants (VPPs)—which aggregate distributed energy resources, such as solar panels, battery storage systems, electric vehicles and demand-side assets that can respond to a signal—helps enable DR programs. Those assets include smart appliances and HVAC systems.

These VPPs represent a new paradigm in demand response, said Glenn Bogarde, senior vice president of sales, marketing and customer experience at Baltimore-based CPower Energy Management, which provides VPP solutions. 

Examples of how VPPs are in use today include the time shifting of EV charging to avoid overloading local distribution system equipment, and supplying homes with energy from on-site, solar-plus-storage systems during peak hours to reduce demand on the bulk power system, Bogarde said. 

VPPs can help time the charging of distributed batteries to reduce utility-scale solar overloads. They can dispatch energy from commercial EV batteries back to the grid, and contribute ancillary services to maintain power quality.

Overcoming challenges faced by the grid

The grid needs more flexibility to balance supply and demand as traditional “peaking” generators retire, Bogarde said. Aggravating factors include renewable energy generation, an increase in distributed energy resources, electrification expansion and acceleration of extreme weather events. Utilities and grid operators have relied on centralized generators, which in turn rely on large, remotely located power plants connected by transmission lines that can be susceptible to extreme weather, cybersecurity and equipment failures. 

However, the distributed nature of VPPs makes them more resilient, Bogarde said. In early September 2023, CPower dispatched 386 megawatts through VPPs to stabilize the grid and avoid blackouts across Texas after grid operator ERCOT called an Energy Emergency Alert 2. This was the first time such an alert had been called since winter storm Uri in February 2021. 

VPPs also come to the grid’s rescue during extreme cold. During winter storm Elliott in December 2022—which hit the Mid-Atlantic and Northeast ahead of Christmas—Bogarde said CPower customers provided more than 50 gigawatts per hour of load relief, enough to avoid blackouts at 1.7 million homes.

The grid is facing some daunting challenges, including integrating a growing amount of load, managing the increasing complexity of energy systems, maintaining grid resilience in the face of climate change-related disruptions and meeting evolving regulatory requirements. CPower sees the market moving toward more innovative solutions that leverage advanced analytics, automation and artificial intelligence to optimize VPP participation and enable real-time grid monitoring, Bogarde said. 

On a basic level, a smarter grid has been underway with the wide-scale deployment of better meters. In 2021, U.S. electric utilities used over 111 million advanced meters, equal to nearly 70% of total electric meter installations, the DOE’s spokesperson said. About 70% of total residential electric meters were advanced ones by November 2021. 

In the meantime, DR programs continue to provide consumers with incentives to reduce their usage during periods of high system demand, said Scott Burns, vice president of enterprise innovation at NRG Energy, Houston. NRG offers a DR program to enhance resiliency and lower market volatility for its business and residential customers. It has more than 100,000 customers participating in its programs separate from a customer’s electricity plan. 

NRG’s commercial and industrial DR program allows customers to get paid for being smart, responsible energy users, Burns said. “When extreme heat or extreme cold creates high demand, our demand response helps businesses reduce energy when the local grid approaches a critical peak.”

Supply and demand inflection point

One of the upcoming hurdles, Burns said, is the integration of more renewable energy resources. While they are environmentally friendly, if conditions are not optimal, it may add stress to the electric grid that didn’t exist even five years ago. 

Another challenge is the retirement of legacy power generation facilities. NRG is working to enhance resiliency and reduce market volatility through improved solutions, according to Burns. 

“These include developing a demand-side management plan, asset optimization and providing guidance to our customers in real-time,” he said. 

To date, most of the focus has been on the supply side, by building additional, dispatchable generation to meet growing demand. 

“But the energy equation has two sides, and today we are at an inflection point where demand-side actions can provide meaningful, controllable support to the power grid,” Burns said.

NRG’s retail electric providers are uniquely positioned to add value in the DR space by directly communicating with customers to encourage conservation when needed, Burns said. They can help design plans or programs that incentivize or encourage customers to conserve energy when needed.

Demand response is just one of the eight or so trends in energy consumption that underline the need for a stronger backbone for the high-voltage grid, according to Amin. Other work will be needed for enabling microgrids that would create opportunities to install more wires for local distribution systems, he said.

“I am often asked, ‘Should we have a high-voltage power grid or go for a totally distributed generation, for example with microgrids?’” Amin said. But we need both. “Just to integrate distributed resources such as wind power, we need to add about 42,000 miles of high-voltage line, and that would create over 210,000 jobs.” 

Ultimately, these programs are part of a broader shift toward more efficient grid management and renewable energy integration, which can create different—but still important—roles for utility construction workers. 

About The Author

SWEDBERG is a freelance writer based in western Washington. She can be reached at [email protected].





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