Residential Demand Response (DR) consists in performing power-cuts of electrical household equipment (mainly heaters, HVAC and domestic hot water) which delays the consumption of such equipment. These power-cuts are made over short periods (between few minutes and an hour) in order to control the household’s load and change its consumption curve with a possible carryover effect. Residential demand response contributes, alongside industrial demand response, in providing an answer to different issues related to the electrical system: supply and grid security concerns, peak demand situations that traditionally require the startup of high carbon power stations and, to a lesser extent, energy efficiency objectives.
The end-user, key stakeholder of residential Demand Response
Tariff signal response is one among the simplest ways to perform DR. In France, turning off the hot water tank during peak hours using a local relay is an effective example that exists since decades. Although there is no reduction of his energy consumption, the end consumer can benefit from substantial savings on his electricity bill. With simple programming tools, it is possible to operate additional energy intensive appliances in order to move the consumption to more favorable rate periods. This is referred to as “Implicit DR”: the customer accepts a “price-based” load management plan, and plays a “proactive” role by deciding what appliances are monitored according to the price period.
These energy management tools will be more and more popular in a context of continuous increase of energy prices, especially in the case of ToU (Time of Use) and/or dynamic tariffs expansion. Hence, the arrival of smart meters enabling new tariffs schemes will improve the quality of metering and help consequently in the spread of tariff signal response DR programs.
“Explicit Demand Response” is another way to perform DR. It consists in the organization of planned or real-time automated operations of usage decrease on electrical devices. It is an active way of managing demand with the benefits of low carbon impact and energy cost efficiency on wholesale markets. Explicit Demand Response involves an entire value chain: technical enablers are in charge of home monitoring and piloting, technical aggregators manage different flexibility bases, and commercial aggregators trade these flexibility assets on different markets.
Source: IJENKO – Value chain of the flexibility market
In this value chain, the final consumer plays more a “reactive” role, and the challenge for DR operators is to involve the consumer at the right extent to increase participation level and restrain opt-outs or overrides during DR operations.
French residential DR, a business model yet to be found
If industrial Demand Response has boomed since decades, residential Demand Response, apart from the price-based scheme (peak / off-peak hours, “EJP” and Tempo tariff) provided by the historical energy provider EDF, is still in pilot and experimentations phase. This soft start is due to a major factor: uncertain economic model.
The technical chain of residential Demand Response does not involve the same actors than the commercial and industrial one. Moreover, it requires substantial efforts and technologies to provide high volume and reliable capacity that commercial aggregators can price for markets. In France, the public authorities have laid the first stone and showed their willingness to support residential Demand Response through a “Residential DR incentive” policy that sets the amount to €16 per megawatt hour of shed energy and per customer. Would this bonus help operators in building a profitable business case and allow end-users to receive an incentive? It certainly helps, but may unfortunately require additional initiatives.
In the industrial world, a plant where production lines can be operated by a SCADA system and / or be supplied by local electric generators, providing capacity can be done at short notice and with reasonable guarantee of volume and reliability. In the residential world, a consumer provides a limited capacity and cannot guarantee its availability at any time. An electricity-heated household, offering the possibility to control two radiators, represent 2 to 3kW capacity. Thousands of homes are required to reach the threshold of 10 MW necessary to access the French balancing market for example. Moreover, aggregating residential capacity is not the only issue. Its price should be competitive compared to the commercial and industrial one.
This brings us to the question of how to involve consumers at large scale while ensuring their commitment in the long term.
Feedback, control and incentives, the watchwords for consumer engagement
Little impact on comfort
The first concern of a user who is given the information that his electric heater will be turned off during the day is the impact on his comfort. It is possible to measure this impact in terms of the drop of ambient temperature (estimated at 0.4 ° C for a 15, 20 minutes power-cut, according to a study of ADEME, the French energy agency), but it is difficult to quantify it in terms of sensitivity, which remains a subjective concept.
The qualitative study conducted by the Modelec project team (project supported by ADEME and Direct Energie, the 2nd alternative energy supplier in France), revealed that consumers felt little discomfort at the end of DR operations of 15 till 60 minutes duration.
Source: Extract from the qualitative study conducted by the Modelec project team
Thanks to the technology , there are other tools to make DR operations even more unnoticed to end-users. One is preferences settings: consumers can configure periods where their participation to DR events is unwelcome, or temperature levels they consider as minimum to feel comfortable. Emerging technologies such as “machine learning” (self-learning by machines to improve their algorithms) and distributed intelligence (partly in the home and not cloud-only) are able to integrate these decision-making criteria to operate precise control actions, hence meeting both consumers and operators expectations. This is more complex than a price signal sent by a smart meter and executed by an ON/OFF dry-contact switch.
User experience and possibility to opt-out
Users seek simplicity. Quick access to desired functionalities and limited data capture are all adoption criteria.
When the consumer is selected to participate in an upcoming Demand Response event, it is necessary to notify him with comprehensive information: the reason why a DR operation is being scheduled, the date and time of the operation, the equipments involved, etc.
Relevant notifications should work in mobile environment (smartphones, connected watches) to be accessed everywhere. If opt-out (withdraw from an operation) opportunity is given to users, it has to be simple and immediate, without repetitive clicks and deep navigation, and the same for overriding actions (for e.g. to restart an HVAC switched off during the DR event).
This flexibility given to consumers to opt-out or override may look like a risk for the system reliability. Sociological studies conducted during the Modelec project reveal that, on the contrary, the feeling of keeping control over its own comfort contributes into maintaining a high level of involvement and, consequently, increasing the level of participation and engagement.
Making the Energy a social network
It would be obvious to say that the social and collective dimensions are powerful levers to involve users.
Climate data, performance regarding similar homes, individual and collective contribution to the balance of the national electricity grid, peak management, energy efficiency best practices, all these are relevant information to be shared through a social media (Facebook, etc.) They contribute into a clear understanding of Demand Response aspects and benefits to each of the stakeholders. This is about changing the image that users have about energy so that they better apprehend their individual use and their impact at a community scale. This educational work, to be undertaken by operators and public authorities, will lead to a collective consciousness around the energy issues and the emergence of smart grids.
A comprehensive Home & Energy management service
Many operators agree on the fact that a consistent business case is one that covers DR among other consumer services.
This approach has been adopted in some countries by utility companies that offer to their customers a home energy management service including Demand Response complementary to energy efficiency, local generation management and / or smart heating services etc.
It is a user-centric driven approach as much as an economic driven one. The value proposition is more comprehensive from a user-point of view, where Demand Response is a service among others allowing the consumer to better manage the energy of his household. So far, bill savings, thanks to both DR and energy efficiency, have been a real opportunity to bring customer satisfaction. The emergence of local generation and domestic storage are even more opportunities to create and enrich the user experience and bring profitability to service providers. Indeed, it is not easy to offer a unique service that is sufficient to create value for both customer and operator. It seems more significant to develop packaged services, a subset delivering more value to the user (energy management, savings on his invoice, the link between energy and other connected devices in the house, etc.) and another subset delivering more value to the operator, such as demand management. Moreover, a packaged service provides access to different data and features from a central point, making it more acceptable and enjoyable from end-users.
Financial and tariffs incentives
Addressing the question of compensation is essential for customers’ empowerment and engagement.
A US firm study reveals that consumers start paying attention to their usage when they have the means to perform at least 30% savings on their bill. This level amounts to several megawatt-hours and hundreds of euros for electricity-intensive homes. This part of the energy bill is significant when compared to the bonus of €16 per megawatt hour and per customer defined by the French residential DR incentive policy mentioned above. More attractive schemes need to be built, ones that combine new service value and provides effective savings for the consumer. The example of the partnership between PG&E (Pacific and Gas Electric company) and BMW in the United States is quite innovative: BMW customers receive financial compensation by accepting that PG&E manages the load of their BMW electric vehicles for a short period of time during peak periods.
Lessons to be learned for European markets
Given the success of Demand Response programs over the Atlantic, it is difficult to imagine that Europe, and particularly France, would not follow the same trend. Economic conditions (energy prices, depreciation cost of electricity plants, continuous increase of the national load peak, more efficient and less expensive technology, and digitalization of energy) will converge to help create a viable and sustainable business model. The commitment of the consumer will be a natural consequence of the implementation of value-added services that help him achieve significant savings either by direct incentives either through energy efficiency programs.