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Corporate Citizenship Pays Off Demand Response 3 Pursues Commitment to Shed Peak Load
November, 2008
By Yves Lemoine
Demand Response 3 (DR3) is one element of the Ontario Power Authority's (OPA's) three-part initiative to reduce demand on Ontario's electricity system during peak periods. Effective management is needed to ensure that Ontario can meet its electricity needs without having to turn to more costly suppliers.
Demand Response 1 was launched in 2006 as a voluntary year-round program that encourages large industrial customers to curb electricity use during peak periods. Demand Response 2 focuses on contracting with facilities to shift electricity use from peak to non-peak periods. With DR3, larger commercial, institutional and industrial electricity users have the opportunity to shed electricity load during peak periods and get paid for it.
DR3 is a contract-based program that pays in three ways. First, participants receive monthly revenue just for registering with the program and being on standby, whether or not there is a request for reduced demand. This is referred to as "availability" revenue.
Second, if called upon to lower demand, participants earn "utilization" revenue for the period under reduced load. Third, by curbing demand during peak periods when electricity rates are usually the highest, participants benefit from direct savings in their electricity costs.
Generally, the OPA is looking for participants who can shed significant amounts of electricity load when required. Contracts are available for a one-year, three-year and five-year commitment, with the maximum financial benefit available under a five-year term.
The OPA's Integrated Power System Plan (IPSP) calls for more than 600 megawatts (MW) of reduced load from demand response participation by 2010. The OPA can deal directly with very large electricity customers who can provide 5 MW or more of demand response, but this is far more than most commercial and industrial users are capable of. Alternatively, an aggregator can manage the program for a pool of participants, each one committing to a minimum peak reduction of 50 kW.
50-KILOWATT CAPACITY SECURES ENTRY
The OPA has authorized eight aggregators to work with commercial, institutional and industrial operations. The aggregator acts as an intermediary between participants and the OPA, handling all contracts and administration, notifying participants of the request to shed load, collecting electricity performance data to measure and verify load reductions, calculating participant compensation, settling with the OPA and paying the participant.
Demand reduction requests will vary by season and may be activated from noon to 9 p.m. in the summer months and between 4 p.m. and 9 p.m. in all other seasons. If a facility has the potential to shed demand loads of 50 kW or more during these periods, it's worthwhile to investigate the benefits of participating in DR3.
Some of the more obvious ways to shed load include: reducing temperatures in cooler months and increasing them in warmer weather; dimming lights and taking advantage of available daylight; reducing the number of elevators and escalators in operation; and shutting down non-essential loads such as fountains and decorative lighting.
Demand response is classified as a temporary reduction in load. If a business chooses to implement the demand reduction on a permanent basis, it becomes a conservation measure and is no longer part of the demand response action.
ECONOMIC & ENVIRONMENTAL MOTIVATION
Organizations that commit to DR3 generally do so based on two key motivators - the drive to lower energy costs and earn revenue, and a desire to do something positive for the environment. A commercial property owner/manager may want to be branded as environmentally responsible and can use the commitment to DR3 as evidence. In addition, earning revenue while curbing electricity costs are seen as prudent moves in today's economic environment.
A realistic business case that clearly outlines the implications of the DR3 goals will likely help to gain the buy-in of all stakeholders, including the board of directors, management, employees and/or tenants. Aggregator should have the expertise to identify curtailment opportunities, estimate potential revenue and establish the operating protocols based on the needs of a business.
A trial run to test curtailment measures and make sure the client can deliver the kW reductions set out in the contract can help to fine-tune the contract and ensure that DR3 results will be realized as planned. Building management can also communicate the results of the trial run to their stakeholders to foster continued commitment and support.
With the DR3 contract in place, the aggregator will integrate enabling protocols with existing business automation systems and provide training for any manual procedures. In addition, metering technology will be upgraded or introduced, if not in place already. Revenue for availability - typically about 80% of all revenue received - is paid out monthly with utilization revenue included as it is earned.
Through DR3, companies have the opportunity to earn significant revenue just for being a good corporate citizen. This is revenue that can be reinvested to generate even more savings through energy efficiency and conservation.
Yves Lemoine, P.Eng., is Vice-President, Engineering and Business Development at Toronto Hydro Energy Services Inc., one of authorized aggregators for the Ontario Power Authority's Demand Response 3 program. For more information, see the web site at www.THenergyservices.com.
Chart:
ESTIMATED REVENUE
Measure 1- year contract 3-year contract 5-year contract
Availability $4,000 to $6,400 $6,000 to $9,600 $8,000 to $12,800
Utilization $2,000 to $3,200 $2,000 to $3,200 $2,000 to $3,200
Total $7,000 to $11,600 $9,000 to $14,800 $11,000 to $18,000
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