How Does DR Work?

Demand response programs exist in energy markets across North America, and each region has opportunities that help meet their unique energy reduction goals. In general, energy incentive programs, such as demand response programs, can be classified into four types of initiatives. For more information about how RTP can help you maximize your incentives and impact in the community, please visit our Solutions page.

Emergency Demand Response

Emergency demand response programs are designed to relieve grid reliability issues such as significant transmission constraints, shortages of generation, or extremely high demand for electricity. Often, emergency demand response participants are one of the last resources to be called before rolling blackouts are initiated. These programs generally require less than 100 hours of curtailment in any given year (and as few as 10 events). Emergency demand response programs follow two models:

• Voluntary Programs: When the utility needs energy reductions, you have the option to participate. Payments are issued for the amount that you reduce during a system emergency.

• Capacity Programs: When the utility needs energy reductions, you are expected to participate. In exchange for your commitment to curtail, you are paid for your availability to participate, even if the utility does not call for a reduction in consumption.

Economic Demand Response

Economic programs are generally very flexible—you offer your ability to reduce energy consumption on your own terms. Participants set up a “strike price” at which reducing energy use makes sense for them. When that price for electricity is reached, participants reduce their energy usage and are paid the current price for electricity for their reduction. Economic demand response programs follow two models:

• Self-scheduling Programs: These programs offer the most flexibility. When the energy price exceeds your “strike price”, you have the option to voluntarily reduce your energy use. For every kWh of energy reduction, you not only capture cost avoidance, but you also receive an incentive payment for your reduction.

• Bid-based Programs: Under this option, you bid against existing generation resources on the energy market. You offer your reduction capacity and what you want to be paid. If your bid is cleared, you are committed to reduce consumption according to your bid, and you will receive an incentive payment.

For an example of how economic programs work, watch this tutorial.

Operating Reserves

Reserve markets are designed to provide a certain amount of rapid, short-term responses to grid conditions. You are able to set your schedule for when you are willing to provide load reduction in the market. If you are accepted into the reserve, you are paid for your availability and you are committed to reduce consumption during a short-term event, if necessary. Load reductions are generally infrequent and short-lived (10 to 15 minute durations). Because events are short and infrequent, these programs are ideal for maximizing load reductions in sensitive applications.

Index Price Control (Real-Time Price Control)

If you are purchasing electricity on an index market, index price control strategies mitigate the risk of high-price times and represent significant cost avoidance opportunities for you. You can set up a “strike price” at which reducing energy use makes sense. When that price for electricity is reached, your cost avoidance is the amount of energy you reduced times the price for electricity that you would have paid. If you have flexibility in your load reduction capability and you buy power off an index market, RTP has a valuable solution for you.