April 2011

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Smart Grid’s Killer App
Demand Response in Commercial Buildings
David K Roberts

David K. Roberts,
Director of Marketing
Cypress Envirosystems

Jon Wellinghoff, the chairman of the Federal Energy Regulatory Commission (FERC), noted that “[demand response] is clearly the ‘killer app’ for the Smart Grid.” 1  Since utilities across the country are implementing new rate structures with the deployment of Smart Grid technologies that can leave unprepared facilities with much higher utility bills, it is important for building managers to understand demand response, the Smart Grid and their impact on commercial buildings.

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Two of the major benefits of the Smart Grid include: 1) reducing the need to build new power plants, and 2) increasing the ability to absorb and use the power from renewable sources.  Fewer power plants would be needed because demand will be shifted from the peak, when producing assets are near capacity, to off-peak, when there is surplus capacity in the system.  Renewable energy sources will be more effectively incorporate into the grid’s portfolio because demand will be able to respond quickly to the intermittent nature of wind and solar.  In simple terms, the Smart Grid provides the infrastructure to match demand to supply in the most economically efficient manner.

The challenge is that the depersonalized term ‘demand’ refers to things such as people choosing to run their clothes dryers, turn on their chillers, or operate their plants.  If demand is not managed in a way that empowers people to optimize their use of electricity to run their lives or businesses as they best see fit, then the benefits of the Smart Grid will be limited.  This is why demand response is the killer app for the Smart Grid. 

Demand response is not new.  For years, utilities have been paying customers and demand aggregators to shed load at peak times.  The programs of the past made progress, but were limited because they consisted of operators running around their plants manually turning off lights, equipment and systems.  This labor-intensive approach was well suited for some industrial sites that could shift hours of operation or shed large loads with just a few switches.  Unfortunately, this addresses only the low-hanging fruit and has a significant impact on the customers’ operations.  What is needed to make significant inroads are automated technologies that can respond quickly to dynamic price signals and reduce demand without disrupting the customer.  This concept is often referred to as auto-demand response.

Commercial buildings account for 37% of electricity consumption2 on average and can exceed 50% of peak loads when air conditioning strains the system on hot days.  As it happens, commercial buildings have been under represented in the demand response market.3  Due to its high share of peak loads and low participation in demand response programs, commercial buildings offer the greatest opportunity for shed.  More important for commercial building managers is that as states introduce peak rates exceeding $1.00 per kWh4  and exorbitant reserve capacity fees5 , operators must have the capability to minimize these costs.  Frustratingly, only 14% of existing buildings are equipped to shed load automatically.1 

The easiest and most effective way for commercial buildings to participate in demand response is to increase thermostat settings.  Fully integrated DDC thermostats can communicate and respond to prices and utility signals automatically, raising temperatures with little notice by tenants.  Contributing to the low number of buildings equipped to automatically shed load is the 70% of buildings that have pneumatic thermostats, which cannot communicate or be controlled remotely.  Since retrofitting from pneumatic to DDC is very disruptive and expensive—installed costs range between $2,000-$3,000 per thermostat—most of these buildings are locked out of the demand response market and will be stuck paying higher peak-time prices.  Ironically, the potential of the 21st-century Smart Grid will be constrained by the prolific 19th-century pneumatic thermostat.

The Wireless Pneumatic Thermostat (WPT) provides a solution.  The WPT enables buildings with pneumatic thermostats to cost-effectively participate in auto-demand response, providing building operators the opportunity to avoid high peak-time rates and reserve capacity fees.  It does so by reducing the cost of retrofitting from pneumatic to digital controls by 80% without being disruptive to building occupants. With a typical payback period of 18 months—even lower when coupled with utility demand response incentives—the WPT is bound to be one of the critical technologies required for enabling the Smart Grid’s killer app and its main benefits.

Santa Clara


1 http://www.intelligentutility.com/article/10/03/commercial-demand-response-smart-grids-killer-app

2 http://www.eia.doe.gov/electricity/epm/table5_6_a.html

3 http://drrc.lbl.gov/pubs/59975.pdf

4 http://www.pge.com/mybusiness/energysavingsrebates/demandresponse/peakdaypricing/facts/

5 http://www.pge.com/mybusiness/energysavingsrebates/demandresponse/peakdaypricing/facts/charges/

About the Author

David K. Roberts, Director of Marketing
Mr. Roberts is the Marketing leader for Cypress Envirosystems.  He has worked in energy for over 10 years with the last five focused on energy efficiency, auto-demand response and their enabling technologies.

Before coming to Cypress, Mr. Roberts worked as a strategy consultant for Accenture where he helped develop California’s Long Term Energy Efficiency Strategy, assisted utilities in their selection of smart meter/AMI technologies and crafted approaches for enabling smart homes. He also worked for Shell Oil and was a Peace Corps volunteer in Kazakhstan.

He holds a BS from Michigan State University and an MBA from Dartmouth College.


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