A new bill introduced by California congressman Jerry McNerney (D-Stockton) could be handy when heat waves, like the one currently blanketing the Northeast, strain the electrical grid as people blast their air conditioners.

The Smart Grid Advancement Act, introduced into Congress last Thursday, calls for every utility with a capacity of over 250 megawatts to have a plan for peak demand reduction goals. Essentially, every state would need to work with its utilities to draft a demand response plan, with the option of using the Federal Energy Regulatory Commission’s 2009 assessment of demand response potential as a guide. By 2015, utilities would need to reduce peak demand by a minimum percentage from an established baseline.

If the bill, which was cosponsored by Representative Matt Cartwright (D-Penn.), were to get anywhere, it would not only ingrain peak reductions into every utility, but it would also call for the Environmental Protection Agency to review smart grid potential as a part of the Energy Star program.

On the surface, the two issues seem like a worthwhile effort to curb peak demand, which usually occurs during the hottest days of summer in most regions of the U.S. But it’s not clear just how much it would improve upon other efforts to increase demand response.

The Current State of Demand Response

FERC’s Order 745, which calls for economic demand response to be paid the full wholesale price, has already opened up more demand response opportunities in PJM, although most of that is from large commercial and industrial customers. It is expected that as Order 745 is implemented in other regions, the prices paid for demand response will go up and participation will therefore increase. Various grid operators are also looking at the details of allowing demand response access to various markets, such as ancillary services.

In some states, like Pennsylvania and Florida, demand response is already mandatory. Other regions, like the Pacific Northwest, don’t have the peaks of hotter regions and demand response is less of a requirement, although it can also be used for grid stability.

In Texas, where more demand response is badly needed, a bill that paves the way for more demand response passed in the state senate in May. However, more market changes have to take place in order for demand response to be a more meaningful part of the energy equation in Texas.

There are some states that do not have energy efficiency standards or demand-side management plans on the books, so the pending bill could light a fire under those states. But many states and regions that are seeing increasing summer peaks have already taken action to encourage demand response.

Because states would be allowed to set their rates of peak reduction, it’s unclear whether the bill would help the U.S. get to the 188 gigawatts of demand response that FERC says is possible. Utilities would be able to call on customer load to reduce peak or invest in efficiency on the grid itself, such as conservation voltage reduction.

Many experts in the demand response sector argue that what demand response needs is the ability to play on the same footing as generation in order to take off. Others argue that only focusing on peaks takes away from the need to build a truly dynamic and flexible energy system where loads can respond in real time to the needs of the grid.


Would an Energy Star-Rated Smart Appliance Matter?

The other aspect of the bill is to include smart grid capability in Energy Star ratings, so that consumers could allow their appliances to take part in utility demand response programs. That might not be as difficult as it might have been even a few years ago, given that the new CEA standard that defines a modular communications interface for smart appliances was established earlier this year.

But utilities will need to be on board if appliance makers are going to start putting a smart-grid-ready module into every AC, hot water heater, refrigerator, dishwasher or pool pump. One of the problems is the lack of pricing programs that entice people to run their largest appliances during off-hours.

Also, new appliances are already much more efficient; the savings from running the new dishwasher in the middle of the night is just not going to be that much money. Utilities are more likely to offer rebates for new appliances because of their increased efficiency, and not necessarily because they can talk to the grid.  

Another issue is that many utilities already have successful old-school load control programs that cycle off hot water heaters or air conditioners. Some of those utilities have an “If it ain’t broke, don’t fix it” approach to their demand response programs.

And lastly, new residential demand response programs are proliferating because of next-generation wireless thermostats that control the largest load in the house, the HVAC. It might not take a bill in Congress to get utilities to craft new demand response programs; it’s already happening.