In this final part of the series “Cost Reduction Strategies Delivering Value Today and Tomorrow” we learn more about the bottom-line financial opportunities obtainable with economic need response.
What is Economic need Response?
While we may not be overtly aware of it, on event, the electrical energy industry experiences times when the need for electricity is high and the existing production and delivery systems are strained. This stress on the strength grid can be relieved if users cut back on the amount of electricity they request and use. Customers who cut-back on the amount of energy they use and are able to offer a portion of their electricity “back to the grid” can win big. This is especially true when the integrity of the grid is in jeopardy or when the wholesale price of electricity is high. This course of action of cutting load at periods of high system stress and receiving payment for consumption reduction is the basic idea behind need response programs.
This kind of program is not new or rare. Many organizations have participated in CURTAILMENT programs in the past. However, today’s innovations in these programs have to do with the variety of options obtainable for payment and the number of providers that manage this exchange.
What’s the motivation?
Participating in or enrolling in a need response program has multiple benefits. From a global perspective, voluntarily choosing to cut back on electricity consumption, results in reduced carbon emissions. Our global ecosystem benefits when carbon emissions are lowered. The economic need for more fossil-fuel burning, generating stations is lessened as the need for electricity is controlled and our natural resources are impacted less.
Coming closer to home, the possible for electrical service interruptions decreases when system stresses are more manageable. Finally, at the individual site and/or building level, participation in a need response program provides a way for the building managers to graduate from strictly a cost maker to a revenue generator.
Participants enroll in need response program that are offered
- by utility companies
- by Independent System Operators (in an unregulated energy market) and
- by 3rd party aggregators who contract with utility companies
Companies and organizations are compensated in need response program in three dominant ways.
Credits can be earned and applied to the customer’s monthly bill, or after a curtailment event.
According to the contract terms of the program, a customer receives a check issued from an aggregator after an event.
The participant becomes eligible for reduced kilowatt-hour rates for their total strength.
Participants win when the need for a curtailment event occurs. Events occur when need is high and when prices for energy are high.
Programs that pay when the curtailment is caused by a high need and the energy supply is marginal are termed Reliability Programs. Alternatively, Pricing Programs aka as need Bidding programs are structured to capitalize on an expected need to “discarded load”. The need response program administrator advises participants to project their load shedding capability at a set time before an event occurs. In exchange for reducing consumption at the stated time, the administrator agrees to pay a certain rate.
Do your research….
In reliability programs and need bidding programs it is basic that you ask questions to fully understand both the terms and the conditions under which you are committed to curtail your load. The length of curtailment, the frequency of events, options to participate or not and the rules for declining participation in an event are just a few of the contract specific issues that must be clearly understood and incorporated in your enrollment agreement.
Understanding the rules between your company and the program manger is just one side of the coin. As a facility manager, you must also understand how your organization operates and specifically you must be clear about how your company will reduce its load. Conversations and plans must be developed that spell out how and where load reduction can occur within your operation. Engaging your building engineers is basic. In situations when building engineering skill is not obtainable you should seek out external resources. Oftentimes program managers can help by performing comprehensive energy audits. Energy management companies and firms focusing on Energy Engineering can help you navigate the path to the best economic need response program appropriate for your organizational structure and culture. They have the resources to help get a manager on calculating if, how and when to curtail your facility operations load.
As a final observe, as you seek to cut costs and create revenue, you must keep fully aware that it is your responsibility to assure your facility remains safe and operable as you analyze and utilize this energy management tool.