Commercial properties use demand response programs to manage energy costs

As energy costs rise and demand increases, commercial property owners, developers and managers are turning to demand response programs to better manage their power usage and help power grid reliability. According to the United States Department of Energy "2007 Buildings Energy Databook," commercial buildings account for 35% of the total electricity consumed in the U.S. In New York City, commercial buildings are one of the city's largest energy consumers, responsible for 25% of all carbon emissions, according to Mayor Bloomberg's 2030 PlaNYC. As such, these properties can play a major role in helping local power companies and energy collectives smooth out spikes in demand and help avoid power disruptions that can lead to blackouts, brown outs or the use of additional peaking power plants. At the same time, they stand to benefit by effectively managing their power and the associated costs, which continue to climb. Given the increasing demand and limited new supplies of electricity, regional power pools have introduced financial initiatives known as demand response to help the reliability of local power grids. The Need for Demand Response According to PlanNYC, electricity consumption in New York City is expected to increase by at least 44% from 2005 to 2030, and peak demand is expected to grow by 29%. However, electricity generation is not expected to grow as quickly. This growing imbalance of supply and demand creates stress on local power grids, resulting in spikes in electricity prices. To help the reliability of local power grids, regional power pools, including the New York Independent System operator (NYISO), have developed programs known as demand response to provide short-term relief. Demand response programs enable the temporary reduction of peak energy usage for a defined duration, triggered by reliability concerns. These programs provide financial incentives to demand response providers for making electricity capacity available during peak usage periods. For commercial facilities, participating in demand response programs presents an opportunity to help improve grid reliability, generate a new source of revenue and at the same time manage energy usage more effectively. How does demand response work for commercial real estate in N.Y? Today, there are several demand response providers that work with commercial and industrial customers in New York. One provider that understands the energy needs of commercial properties in the area is Hess Corporation. Once a company decides to participate in the Hess Demand Response program, its locations receive in-depth energy audits and are outfitted with advanced metering and monitoring equipment, at no additional cost, that records detailed, real-time electricity usage data. With the data that is initially collected, a "curtailment plan" is created, which identifies a series of tactics that the facility can employ to temporarily reduce its electricity consumption, if and when there is a demand response event. It is important to note that in New York, these events are called for very infrequently and only last for a few hours. In 2007, only two "test" events were called throughout the entire year. How can a demand response event improve a commercial property's bottom line? For participants in the Hess Demand Response Program, the data from monitoring equipment can be used for much more than preparation for a demand response event. Energy usage data helps energy consumers make more informed energy decisions and identify energy-saving opportunities within their facilities. For committing to participate in a demand response program, depending on which area of New York, participants could earn a "capacity payment," ranging from $12,000 per megawatt curtailed to $105,000 per megawatt curtailed - regardless of whether a demand response event was called. If an event did occur and a participant reduced its electricity usage to the level they'd committed, they would have received an additional payment of up to $500 per megawatt hour curtailed. As the demand for electricity continues to outpace supply and energy costs continue to rise, it will become increasingly more important for commercial entities to turn to demand response as a way to better manage their energy usage, generate recurring revenue and help improve the reliability of the local power grid. John Sutherland is the product manager, electricity products at Hess Corp., Woodbridge, N.J.