EE-6050

ADVANCED SMART GRID

SYSTEMS

Course Instructor:
Engr. Muhammad Rayyan Fazal
Assistant Professor
Target Audience:
MS Electrical Engineering

Riphah International University

 Chapter 05

DEMAND SIDE
MANAGEMENT

2
Objective is to review the importance and need of demand side
management in Smart Grid environment.
NEED…
An important issue concerning the design of SGs is
how to support the consumers’ participation in the
electricity market minimizing the costs of the
global energy consumption. The aim is to develop
the understanding of how can one achieve a better
integration of different types of DG improving
flexibility while reducing the costs of energy for
customers.
1- DEMAND SIDE MANAGEMENT
DEMAND RESPONSE
 Demand response (DR) is the voluntary reduction
or shift of electricity use by customers, which can
help to keep a power grid stable by balancing its
supply and demand of electricity. It can help to
make electricity systems flexible and reliable,
which is beneficial if they contain increasing
shares of variable renewable energy.
 DR is also a quick and cost-effective way to
reduce the demand for electricity during peak
periods, providing an alternative to increasing
the amount of electricity being generated or
building new power plants.
CONTI…
 DR typically involves paying some energy consumers to
voluntarily cut or shift their use of power to better
match supply.
 It can lower the amount of electricity required from the
grid during peak periods, reducing the likelihood of a
blackout, or to shift demand to off-peak periods, or when
renewable energy output is high, to use excess
electricity more efficiently. It can even help to bring
down wholesale electricity prices, which increase when
demand is high.
The next evolution of smart grid will allow users to make
more informed decisions about their energy consumption,
adjusting both timings and quantity of electricity used.
This ability to control usage is called demand side
management.
DEMAND SIDE MANAGEMENT
DSM is a set of interconnected and flexible
programs which allows customers a greater role in
shifting their own demand for electricity during
peak periods, and reducing their overall energy
consumption. DSM comprises of two major
activities:
1. Load Shifting

2. Energy efficiency and conservation

DSM
Critical  Shifting customer demand
Peak during the ~20 hours per year
Shift with the highest demand for
Load electricity.
Shifting Daily  Shifting customer demand during
Peak the ~1 hour per day
Shift with the highest demand for
electricity.
 Reducing overall demand for
electricity by reducing the
Energy amount of utility the customer
Conservation
receives.
Energy
Efficiency  Reducing overall demand for
and electricity while maintaining
conservation Energy the amount of utility the customer
Efficiency receives.
LOAD SHIFTING
 DR programs transfer customer load during
periods of high demand to off-peak period and
can reduce critical peak demand.
 Shifting peak demand flattens the curve allowing
more electricity to be provided by less expensive
base load generation.
 DR programs can save the cost of building
additional generation capacity to meet future
critical peak demand.
ENERGY EFFICIENCY AND CONSERVATION
 Energy conservation programs encourage customers to give
up some energy in return for saving money. Such as
turning up thermostat a few degrees in summer to reduce
air conditioning.
 Energy efficiency programs allow customers to use less
energy while receiving the same level of end service.
 When they replace old refrigerator with more energy
efficient model.
 It has been proved that real-time access to information
provided through smart grid networks can cut the energy
consumption by up to 18%.
 Additional gains in energy efficiency are possible through
technologies that provide targeted education or real-time
verification of customer demand reduction.
HISTORY
 Demand Side Management programs have existed since
1970s.
 California utilities have used such programs to hold per-
capita energy consumption constant over past 30 years.
 Mckinsey Research found that a successful DSM program
incorporates some or all of the six levers (coming next).
 First wave of DSM programs were limited by technology
available – measurement and verification efforts were time
consuming, causing programs to focus on large customers
only.
 Next wave of DSM programs promise to change the face of
energy savings throughout global economy.
 Federal Energy Regulatory Commission (FERC) of US
estimates that DR program can cut peak demand by up to
20% with in 10 years.
THE SIX LEVERS OF EFFECTIVE DEMAND-
SIDE MANAGEMENT
INTRO…
Based on the work with major utilities, researchers have
identified six key levers of successful DSM initiatives:
 Rates
 Incentives
 Access to information
 Technology and controls
 Education & marketing
 Customer insight & verification.
Each lever has a distinct impact on customer behavior,
and, depending on the circumstance of the particular
utility, such as its customer base and geography, certain
combinations of actions within and across levers will
produce greater results.
1- RATES
Utility tariffs are already designed to achieve a range
of objectives, from making electricity more affordable
for lower income customers to making electricity
prices better reflect the cost of generation. Fully 60
percent of the benefit from demand response
predicted by FERC for coming years will come from
altered pricing programs. Utilities will need carefully
to tailor their tariff designs, including opt-in or opt
out participation, to yield the desired behavior.
Utilities (and their regulatory partners) must also
account for the winners and losers in any rate design
and ensure that particular segments, such as socio
economic classes, do not bear unnecessary costs.
1- RATES

Design options Description

 Flat rate  Same rate at all times
 Critical peak pricing  Extremely high rates
(CPP) during critical peaks
 Time of use (TOU)  Variable pricing for
prescheduled blocks of
 Real-time pricing time
(RTP)
 Variable pricing at all
 Interverted block times, informed close to
pricing instantaneously
 Increase rate for higher
use customers
2- INCENTIVES
To encourage participation in demand-side
management programs, utilities have found that
rebate checks, compensation for participating in a
pilot, or free technology such as an in-home display
can increase customer adoption.
2- INCENTIVES

Design options Description

 No incentives  Base case
 Provide rebates on  Debit bill based on
bill degree of behavior
change
 Provide cash  Provide separate
compensation check to encourage
behavior change
3- ACCESS TO INFORMATION

When consumers have access to real-time

information they become much more aggressive about
managing their usage. In a series of pilots conducted
by Hydro One in Canada, customers reduced their
electricity consumption by 6.5 percent based on
information provided through an in-home display.
OPower, a smart grid information services company,
has developed software that analyzes in the area
with similar attributes such as house size. The utility
can then provide recommendations on how to reduce
energy use. This software has been piloted by the
Sacramento Municipal Utility District (SMUD) and
has produced energy savings of 3 percent.
3- ACCESS TO INFORMATION

Design options Description

 Monthly paper bills and
 None consumption information
 Event notification  Notification of DR events under
way
 Real time usage  Consumption at a given moment
 Historical usage (e.g., kW, light bulb equivalents)
 Consumption compared to
 Comparative usage previous period of time
 Device-specific usage  Consumption compared against
last month’s or peers’
 Billing usage  Individual device usage in real
time; can be paired with above
 Real-time billing information
4- UTILITY CONTROLS
Direct load control programs are used to curb
demand, such as air conditioning, during critical peak
periods. The smart grid will enable customers to
manage their own demand (and distributed
generation resources) based on price or other signals
from the utility. These controls could be integrated
with programmable communicating thermostats,
home energy controllers, or other automation tools to
match customer preferences. Increasing levels of
control by utilities will enable automated demand
response programs, ensuring load shed and enabling
utilities to bid this capacity into markets as a
resource.
4- UTILITY CONTROLS

Design options Description

 None  No automation of devices to
reduce energy consumption
 Programmable
 Automated AC control
communicating
 Automated appliance on/off
thermostats (PCTs)
 Centralized control &
 Smart automation of major home
appliances/plugs appliances
 Home energy  Optimized charging of
PHEVs
controller
 Optimized usage, storage,
 PHEV smart chargers and later discharging of
 DG/S control devices energy.

5- EDUCATION AND MARKETING
Customer education on the benefits
and the technology of DSM programs
can be targeted to different market
segments, different education goals, or
different channels.
 5- EDUCATION AND MARKETING

Design options Description

 No education  Base case
 Vary by income,
 Educate by segment consumption behavior,
 Educate by channel attitudes
 Educate by  Use various means: e-mail,
bill inserts, newspaper, etc.
positioning
 Emphasize different HAN
benefits (reduced energy
costs and carbon emissions,
increased competition with
neighbors, etc.)

6- CUSTOMER INSIGHT AND VERIFICATION
To drive improvements, it is essential to verify
DSM program results and collect feedback,
regardless of whether the targets are broad or
narrow. A powerful benefit of the smart grid is that
it enables verification of the impact of DSM
programs over different time horizons.

Successful pilots indicate complementary effects

interact across the levers and design options.
Providing both in-home displays (IHDs) and pre-
pay options, for example, resulted in energy
conservation benefits of 13 to 15 percent, while
IHDs alone yielded a median impact of 7 percent.
6- CUSTOMER INSIGHT AND VERIFICATION

Design options Description

 None  Base case
 Verification of benefits  Verify DSM (EE, EC,
capture and DR) and economic
utility captured
by customers
GROWING ROLE OF SMART GRIDS
 Smart grid provides scale and scalability to make
demand side management cost-effective and
convenient.
 Increasing penetration of smart energy meters
allow homes to connect to data and usage of
price.
 An intelligent grid gives utilities visibility into
real-time supply and demand balancing.
 These new technologies giving DSM programs
now being designed a number of crucial
advantages over those of past. Some of them are
discussed:
1- REAL-TIME INFORMATION
 US utilities alone have installed 90 million smart
meter units till Dec 2018.
 These smart devices allow the utilities to collect
and analyze usage information at intervals as
narrow as 1 hour or 15 mins, rather than relying
on monthly reading.
 This data transferred to customers via HAN,
allowing real-time feedback on consumption.
2- TWO-WAY NETWORK
 Smart grid network allows utilities to:

 Collect usage data

 Verify reduced demand
 Send time-of-use rates to customers
 Other relevant information to customers

 Network cost is low enough to allow ubiquitous

deployment, hence making it possible to allow
utilities to communicate in real-time with its
entire customer base.
3- INTEGRATION OF UTILITY INFORMATION
SYSTEM
 Smart grids driving utilities to stich together
many disparate information technology solutions
into highly capable decision engines.

 Utilities begin to develop comprehensive view of

consumer base, and build targeted programs to
appeal to specific segment of customers.
4- SHIFTS IN CUSTOMER BEHAVIOR
The availability of real-time data on energy cost
and consumption comes at a time when customers
are:

 Increasingly aware of cost

 Aware of environmental impact of their energy usage
 Begun to expect price fluctuations
 Ability to respond to price
5- REGULATORY CHANGES
 Some governments have enacted decoupling
regulations to allow utilities to recover revenues
lost due to DSM program
 Regulators and utilities have explored
opportunities to use demand response as another
source of generation through “negawatts” or
ability to reduce loads upon request.
 Some governments even allowed utilities to bid
demand response capacity into wholesale market
as if it were generation.
These steps encourage utilities to pursuit DSM
opportunities and may improve the market as a
whole.
CAPABILITIES REQUIRED
INTRO…
While smart grid technologies will make these
savings possible, utilities need to develop new
capabilities to capture the potential benefits fully.

A primary focus will be on augmenting

program design functions to enable the micro-
targeting of customers.
1- INCREASE THE NUMBER OF PROGRAMS
AND PRODUCTS

 Smart grid technologies will slash the associated

cost of developing, refining and managing DSM
program.
 Smart meter network provide ubiquitous
connectivity to electric meters, making it easier
to verify the impact, to test and refine different
design options.
 Lower cost of DSM program will make it cost-
effective to provide offerings to market but also
enables to use demographic data they gather to
target micro-segments of their customer base
with tailored program.
2- MANAGE A PARTNER ECOSYSTEM
 Many utilities and regulators predict the smart
grid network will become open platform to allow
third-party development of energy management
applications.
 In this worldview, utilities will need to develop
the capability to manage and coordinate a wide
variety of complementary partners.
 Everyone will need to clearly define their role in
ecosystem.
3- ACCELERATE THE PACE OF TESTING
 Two-way reach of smart grids will allow the
utilities to speed and widen the testing cycle for
new products.
 They will be able to ‘test and learn’ to understand
which features of program features are most
effective for specific segments, thereby reducing
the time to market for new ideas.
A day, utilities will be like a bank whose rigorous
and analytical marketing strategy measure the
relative impact of hundreds of thousands of
different offers (rates, card designs, promotional
materials) to determine which one will have the
greatest effect on customer behavior.
4- BUILD ACCOUNT MANAGEMENT
CAPABILITIES
 It is estimated in US that two-fifth of the DSM
opportunity lies in 262,000 large commercial and
industrial customers.
 May out of these participated in fledging DSM
program such as curtailment or direct load
control programs.
 Utilities are required to develop full-service
support for customers to navigate and manage
what will likely be increasingly complicated DSM
program.
5- EDUCATE RESIDENTIAL CUSTOMERS
 Nearly half of the demand reduction potential
comes from the highly fragmented residential
market
 To reach it, utilities have to develop easy to
understand programs that give customers the
necessary tools (and incentives) to better manage
their energy use.
MAJOR HURDLES FOR DSM

1. Adaptation of right blend of technology &

program design for optimize response &
results.

2. Regulatory reforms allowing utilities to

capture value from DSM need to be
established.
RESERVATIONS
 Utilities have every reason to remain skeptical about
projections of DSM results. Since 70s, they have tried to
capture load shifting and load reduction benefits with
mixed results. These efforts are however limited in
scope and relied on costly proprietary technological
solutions.
 good news is there has been significant progress in
areas vital to the success of DSM. Utilities are using
federal stimulus funding opportunities to deploy
statistically significant pilots to measure the impact of
various DSM program designs. Regulators are
considering the reforms that credit the utilities for
demand side reduction. Still, much work at all levels
need to be done if economic and social promise of DSM is
to be fully realized in upcoming years.