COVID-19 has had a significant impact on energy demand as a result of business closures and quarantine behavior. But overall reduction in demand due to COVID-19 has not triggered the abandonment of utilities’ demand response goals.
Rapidly evolving energy consumption patterns as a result of COVID-19 have created an unusual challenge that demand response programs can help address. With continuity plans in place, utilities continue to rely on these programs to provide valuable grid services during this crisis. As we look ahead, the role of demand response may become even more important as utilities look for solutions to create flexibility on the grid that do not require sending workers into the field. Rather than physical solutions, utilities will increasingly need to rely on demand response to strengthen grid resilience, reduce risk, and smooth congestion challenges.
Distributed energy resources (DERs) provide a way for utilities to make the necessary adjustments to accommodate COVID-19’s impacts on customer behavior and thus grid needs.
Utilities have seen an evolving role for DERs within the context of COVID-19.
The importance of residential demand response will rise relative to commercial and industrial
Residential demand response may become more important than it has been in previous years. The great advantages of residential DER programs are that they bring visibility and control to the utility, even in traditional dark spots behind the meter. In pre-COVID-19 times, these programs helped utilities to make a successful transition to a world where an electric vehicle sits in the garage, a battery in the basement and a smart thermostat on the wall. Post-COVID-19 residential loads can have more of an impact on system-wide peaks than usual.
While commercial and industrial (C&I) loads have decreased, residential load has increased due to the high number of people staying at home throughout the day. Early studies indicate homes have increased their daytime energy usage by up to 25 percent. A recent survey suggests that nearly three-quarters of the American public are still not engaging in a “normal” level of out-of-home activity and do not plan to increase their engagement in the short term1.
This all means that residential demand response may need to continue to play an outsized role relative to C&I programs.
Quarantine has not compromised demand response performance
Utilities have typically been able to meet their goals according to data collated to monitor the performance of demand response events. Utilities could see a higher rate of customers opting out of demand response events during the COVID-19 crisis. However, a higher overall residential load means a utility may achieve their desired total kW load shed for an event, even if the average percentage load reduction per device is lower than usual.
In general, utilities should avoid overestimating the negative impact of customers opting out. Demand response participation is not all or nothing. The average customer who opts out during a demand response event still contributes about 50 percent of the load shed of a customer that fully participates.
Finally, utilities have room to focus their demand response strategy on meeting their top priority goals. A typical demand response season includes a degree of experimentation, typically 5-20 events per season. To ensure customer comfort and reduce opt-outs, utilities can choose to focus on where load is needed most in order to ensure the system gets as much of a load reduction as possible during a select few events.
The crisis will pass. Utilities must not lose focus of the long-term
The planning horizon for most utilities is closer to ten years than one. Utilities launch DER programs to build resources that will have a positive impact on the grid for years to come. While overall load may have reduced this summer, utilities are continuing to grow their demand response programs in line with their long-term goals. Utilities have not lost focus on mitigating the risks to the grid that existing shifts are bringing, such as increasing renewable penetration and the rapid uptake of electric vehicles.
For those utilities just starting on their journey to draw value from DERs, here are five tips based on our experience of implementing, growing, and evolving DER programs across more than 50 utilities.
1. Let the customer choose
A bring-your-own-device (BYOD) approach empowers the customer and removes barriers such as having to purchase a specific device to participate. Customers have the flexibility to join a DER program through the device provider of their choice.
BYOD programs allow customers to participate in utility programs with their own equipment. This enables utilities to build a demand response resource without a truck roll.
In normal times, the BYOD model holds several advantages for utilities including cost-effectiveness, improved customer comfort, and enhanced customer choice. During the COVID-19 crisis, the BYOD model offers a way to scale demand response programs while keeping utility employees and customers safe since there is no need to enter homes to grow the resource.
The BYOD model also affords utility customers the ability to manage their participation in demand response events, directly through their connected thermostat of choice. This should reduce call center volumes, especially during a summer in which many switch customers at home may want more participation flexibility during demand response events.
2. Go to the customer, don’t expect them to come to you
Utility programs may produce lower levels of engagement when they require the customer to participate through the utility’s app versus the native thermostat app. The fact is, you have to meet customers where they are.
If a customer has gone out and spent hundreds of dollars on a thermostat or another type of DER, then they probably feel some loyalty towards that brand and likely use the device’s native app. Asking them to then download another completely separate app adds a layer of friction. Instead, work with device manufacturers and recruit participants through their channels. Working with thermostat brands to implement in-app program marketing and enrolment, we see program enrolment rates rise from under 10 percent to upwards of 30 percent.
3. Minimize friction in the enrolment process
Make the enrollment process as simple as possible to ensure interested customers do not miss out on participating.
For example, try to require as little information as possible in the sign-up process. Asking for a customer’s utility account number is an example of a barrier to enrollment. In side-by-side comparisons, we’ve seen enrollment rates in the single digits when the account number is required, versus 40 percent or greater without the requirement.
Similarly, don’t let language be a barrier. Try to avoid industry jargon and stress customer choice and comfort when describing DER programs to customers.
4. Get the incentives right
Putting cash in customers’ pockets while meeting grid needs is a win-win that is especially important now. We’ve even seen some of the utilities we work with go above and beyond by further paying down the cost of a connected thermostat in their marketplaces so customers can purchase an energy-saving device. It’s a meaningful gesture to support customers during these tough times.
You have to explain customer incentives in terms that are easy for consumers to understand. Flat incentives are preferred over performance-based incentives because customers likely won’t understand an incentive, based on kilowatt hours or other performance metrics. An upfront incentive ensures customers will see an immediate benefit to participating. Second, make sure the incentive is attractive enough. Every utility will have a different cost-effectiveness number, but generally speaking, as close to $100 total incentive will optimize enrolments.
Utilities can also experiment with creative incentives. For example, we’ve worked with utilities to partner with Google and offer a Google Home Mini as part of a program incentive for a limited period. We’ve even seen a utility successfully run a sweepstake to reduce incentive costs.
5. Keep customers comfortable
Programs must be designed to maximize both load-shed and comfort. If you cut corners on customer satisfaction, then you will simply get less customer participation in the program (and therefore, less value).
With thermostat programs, we encourage clients to do a longer pre-cool. It keeps customers more comfortable and maximizes load shed for each device.
Similarly, make sure there is always an opt-out for participating in demand response (DR) events. Even if a customer never uses the option, having the choice puts their mind at ease. Those who do opt-out of an event typically still deliver on average 50 percent of the load shed of customers who participate fully.
Next steps
As utilities explore different avenues for demand response, they should look to a solution that can meet grid needs while prioritizing the customer experience. Utilities should look for a solution that enables customer choice, manages multiple classes of DERs at scale, and integrates with complementary utility systems to unlock value across the enterprise. Designing DER programs that meet the criteria mentioned above can help utilities meet their goals even during challenging times such as the current pandemic.
If utilities plan ahead and deploy a scalable DERMS platform for their demand response programs, they can benefit more readily from the opportunities provided by the ongoing evolution of the grid. This will pave the way for them to achieve their strategic goals, extract operational grid value, and ultimately deepen relationships with their customers.
Erika Diamond is the VP of Utility and Market Services at EnergyHub, where she oversees program delivery, customer engagement and market development. With more than 15 years of experience in the energy space, Diamond is EnergyHub’s resident expert on wholesale energy markets, customer marketing/engagement and regulatory affairs. She is a frequent speaker on the energy conference circuit and is the vice-chair of the Advanced Energy Management Alliance (AEMA) and co-chair of the Women in Demand Management group of the Peak Load Management Alliance (PLMA).
Diamond holds a Bachelor of Arts in environmental studies from Vassar College, an MESc from the Yale School of Forestry and Environmental Studies, and an MBA. from the Harvard Business School.
