Gulf Power’s residential demand response program may be 20+ years old, but that doesn’t mean it hasn’t kept up with the times. In fact, last summer it was tapped twice to do something it wasn’t even designed for -- to help the utility’s distribution grid operators avoid blackouts or equipment overloads on a specific feeder. 

Here’s how Caroline Stickel, team leader at Gulf Power’s Energy Select program, described it in an interview at the Itron Utility Week conference in Houston this week. Twice last summer, her group got calls from Gulf Power’s distribution operations team, asking for immediate load reduction on a specific circuit, adjacent to another that needed to be taken out of action. 

Energy Select doesn’t usually dispatch its customers in this pinpoint fashion -- like most residential demand response, it’s typically used at a systemwide level. But over the years, it has tapped continuing waves of technology to communicate with its customers, from cellular-connected free programmable thermostats and load switches starting in 2000, to customer broadband-linked Wi-Fi thermostats and smartphones starting around 2011. 

Meanwhile, Gulf Power, along with its other Southern Company subsidiaries, had rolled out smart meters to its customers, allowing distribution grid operators to link Energy Select customer accounts with specific points on their geographic and grid software models. That came in handy last summer, when it sent out emergency price signals to several hundred customers it knew were served by the problem circuit. 

All but a handful of homes responded, between “immediately” and within half an hour, she said. A typical peak price event drives about 2.5 kilowatts of load reduction per customer, or anywhere between half and three-quarters of a megawatt in aggregate. That’s not much compared to what it gets out of its nearly 19,000 customers across the system. But in that moment, it was enough to avoid a blackout for many thousands of customers, as well as the risk of equipment blowing up. 

The demand-response-as-grid-asset business case, from Pensacola to Poughkeepsie 

Locational demand response is the term for this kind of pinpoint demand-side energy management trick, although lately it’s been going by the moniker non-wires alternative (NWA). Beyond the fun of using the name of a seminal gangster rap group in a grid context, the term has caught on largely because it’s what New York is calling its first-of-a-kind projects to defer billions of dollars of infrastructure investments with distributed energy resources. 

The link between Gulf Power’s experience and New York’s Reforming the Energy Vision (REV) initiative comes via Comverge. Gulf Power started its 20+ year partnership on residential demand response with a company called Scientific Atlanta, one of the two corporate divisions (the other from Lucent) that would eventually form Comverge. The company went public in 2007, but agreed to a buyout by private equity firm H.I.G. Capital in 2012 that reflected broader challenges in residential and commercial and industrial (C&I) demand response markets. 

H.I.G. then built a deal in 2014 to combine Comverge's C&I operations with Constellation Energy's CPower, itself created out of a former Comverge business line, and leave the residential and small-business side exclusively to Converge. The company started to win big contracts, including a large-scale pilot project with New York utility Central Hudson Gas & Electric in 2015, to build a NWA project to help avoid some major grid upgrades to maintain grid reliability for a region with about 50,000 customers. 

In May, Comverge was acquired by Itron, making its projects part of Itron’s smart meter and grid networking portfolio, and making Evan Pittman part of Itron’s Distributed Energy Management business development and strategy team. While an associate director of corporate strategy at Comverge, he worked with Central Hudson for some time on finding the right combination of residential and C&I load to accomplish a demand-side alternative to upgrading a substation, reconductoring a feeder, or making an upgrade to an interconnected transmission line, each an expensive proposition. 

The utility isn’t saying just how much these capital improvements might cost -- that’s one of the figures it’s been permitted to keep confidential, he said during a Monday lunch session with reporters at Itron Utility Week. But he did say that, of the 16 megawatts of responsive load targeted for the program, “We’re about halfway there” -- an increase from the 5.9 megawatts of load it reported in April. 

On the cost side of the program, Central Hudson’s Peak Perks offers customers an $85 check, plus $50 or so paid out in annual bill benefits, along with free Wi-Fi thermostats (up to two) or a pool-pump load switch. That’s a pretty hefty incentive, and has helped it reach a greater than 30 percent customer participation rate in its targeted areas within six months, rather than the more typical three years or so. Simple Energy, which runs the utility’s CenHub platform, has also played a part in keeping customers engaged. 

But Comverge/Itron is aiming to capture an even greater share of customers, approaching 50 percent, in certain regions, Pittman said. That’s because it’s being asked to squeeze a lot more load per household, business, factory and farm than most demand response programs -- nearly 10 percent of the targeted region’s peak demand, compared to 1 to 2 percent share of peak load contributed by a typical demand response portfolio. 

At the same time, “our incentives are perfectly aligned,” he said. Any savings to come from the difference between paying for the program and its still-confidential deferred capital costs will be shared, with 30 percent going to utility shareholders and 70 percent going to customers. That provides an incentive to each side to achieve and exceed their goals. Comverge/Itron’s pay-for-performance contract also puts it on the hook for any shortfalls in load reduction, he added. 

Peak pricing, time-of-use rates and localizing demand response

Central Hudson’s demand response program differs from Gulf Power’s, in that the former is designed specifically with locational grid needs in mind, while the latter just happened to be available for the task last summer. But Gulf Power’s experience indicates that today’s technology, properly integrated into utility operations, has the ability to be localized to some extent.

The question then becomes how to incentivize them to do so. In the past, most utilities paid customers in advance for letting them turn their air conditioners off during the hottest days of the year. But Gulf Power, from the beginning, has used a tiered rate structure, combined with equipment that can respond automatically to its peak price spikes, to enlist customers, said Stickel. 

This Residential Service Variable Price rate has four tiers. Two are below retail rate about 85 percent of the time. The third is a bit higher, and is called in for much of the remainder of that time. But the fourth, called only for a handful of hours per year, is way up there. Today, it’s at 74 cents, compared to the standard rate of 11.5 cents, she said. 

That’s much steeper than any of the time-of-use (TOU) rates being applied in mass-market programs, such as the one Canada’s Ontario province has implemented, or those being considered by California utilities under mandate to roll them out by 2019. But since it’s an opt-in rate, it self-selects for people willing to take the risk in return for an overall lower electricity bill, according to Stickel. 

New York’s NWA projects to date have relied on a number of methods, from Central Hudson’s contract with Comverge to Con Edison’s auction for demand-side resources for its Brooklyn-Queens Demand Management project. Steve Hambric, vice president of Itron Distributed Energy Management, noted that his company is also working on a TOU pilot for Central Hudson, as well as a coming partnership with a smart thermostat vendor whose products are widely available.

The one thing that Central Hudson doesn’t have and Gulf Power does is smart meters. Like the rest of New York’s investor-owned utilities, the Fortis subsidiary has just begun to offer customers Itron smart meters, currently under an opt-in program that comes with a cost of $5 per month. Not surprisingly, there hasn’t been much uptake yet. Itron is also rolling out 12,400 electric meters and 7,300 natural-gas meters for New York State Electric and Gas. 

Itron is set to own a large share of the state’s unfolding smart meter markets, given that it’s in the midst of acquiring competitor Silver Spring Networks, the smart meter networking vendor of choice for New York City utility Con Edison and sister utility Orange & Rockland’s $1.3 billion, 5.2-million-unit smart meter rollout.