Breaking Down the Barriers to Residential Demand Response

Breaking Down the Barriers to Residential Demand Response

Demand response has been identified by the U.S. Federal Energy Regulatory Commission as a “killer application” for the smart grid.  With residential and small commercial customers consuming 80% of the electricity used in buildings (excluding industrial facilities), there is significant potential for reducing peak demand.  Yet despite the upside benefit, residential demand response programs remain stuck in the pilot stage at nearly all utilities.

Most utilities are progressing slowly on residential demand response because the barriers just seem to be too great.  But every one of the perceived barriers to residential DR—whether technical or regulatory, or whether involving consumer adoption or utility integration—can be overcome today with manageable risk.  This article examines the four biggest barriers, including a very real and final one that now has a solution.

The Biggest Barriers—Perceived and Real

Consumer acceptance of dynamic pricing and other changes associated with DR could be a barrier to widespread adoption, and therefore, a barrier to success in reducing peak demand.  But several studies have shown the real issue here is consumer education, and rather simple education in the form of effective messaging to provide meaningful insights into why DR and dynamic pricing are both related and beneficial.  The more consumers understand the problem, the more willing they become to participate in the solution.  IBM’s 2011 Global Utility Consumer Survey, for example, found that respondents who were most knowledgeable about energy issues were 64% more likely to change their usage patterns.

Similar results were revealed in the 2011 Consumer Pulse Survey conducted for the Smart Grid Consumer Collaborative.  A full 80% of respondents strongly or somewhat agreed that the smart grid would help them save money, avoid wasting energy, and make the grid more reliable.  Perhaps equally surprising is that “political correctness” also ranked quite favorably, with 78% strongly or somewhat agreeing that the smart grid would better protect the environment and help make the U.S. more energy independent.  So it should come as no surprise that 75% also now want more control over home energy use and rate/billing choices.  And with the constant barrage of consumer advocate pressure to make DR programs voluntary, there is nothing more voluntary than letting consumers choose how much they are willing to buy at a certain price.

With consumers more accepting of change, utilities no longer have any excuse for postponing the inevitable migration to dynamic or time-based pricing.  That is not to say this migration will be easy or painless.  Because static residential rate structures have long been the norm, the industry has had little experience with time-of-use (TOU), critical peak pricing (CPP) and real-time pricing (RTP) rate structures.  The bad news is: Because these dynamic rate structures are new, the industry will not get them perfect at first.  The good news is: Once implemented, changes to dynamic rate structures are easy to make (albeit with some regulators and utility executives potentially experiencing a few battle scars!).  Indeed, early experience has shown that fear of making this “major” and inevitable change is greatly exaggerated.

If consumer acceptance is not a real barrier, perhaps it’s the perceived maturity of standards needed for home energy management and home area networking.  But the requisite standards on the consumer side of the meter are proven in both numerous pilots and some production rollouts.  The critical standard here is the Smart Energy Profile (SEP).  SEP 1.x was created by the ZigBee Alliance as the application-specific upper layers of the ZigBee wireless networking protocol and is available today.  SEP 2.0 is network-agnostic, which has earned it additional support from other organizations, including the HomePlug Powerline Alliance, HomeGrid Forum, SunSpec Alliance, Wi-Fi Alliance, IPSO Alliance and International Society of Automotive Engineers.  Based on its robustness, maturity and widespread support, SEP version 2.0 was selected by the U.S. National Institute of Standards and Technology for residential demand response in the Smart Grid Interoperability Standards Framework.  Although SEP 2.0 may still be years away, some vendors will be able to upgrade their SEP 1.x devices over-the-air to support SEP 2.0.

Another barrier to residential DR does indeed present a bit of a problem: the lack of robust and inexpensive two-way communications between some utilities and their residential customers.  The smart grid’s advanced metering infrastructure (AMI) should be able to provide sufficiently robust communications to support dynamic pricing, but that is not always the case depending on other applications utilizing the AMI communications path, such as distribution automation.  What can utilities without an AMI, or a sufficiently robust one, do to implement a comprehensive residential DR program?  Use an existing network that already reaches virtually every home: the Internet.

An Alternative to AMI

According to Parks Associates, approximately 45% of all U.S. households will be served by smart meters by the end of 2015, but as few as 10% of those will be enabled for two-way communications between a home area network (HAN) and the utility’s back-end systems.  Other analysts predict more or less smart meter/HAN penetration, yet the result is the same:  The end-to-end, two-way, near-real-time communications needed for system operators to send pricing signals and monitor demand response actions may be a “missing link.”

Enter the Internet, which already provides reliable and secure broadband communications in every utility’s service area and is already installed in the U.S. in 63% of all homes.  The penetration in larger residences with the highest potential return on the DR investment is even greater.  And broadband penetration will only continue to increase as digital subscriber line (DSL), cable modem, third- or fourth-generation (3G/4G) cellular communications, and satellite services are expanded, and competition among these alternatives lowers subscription rates.

All that is needed for utilities to take advantage of the Internet’s ubiquity is a dedicated gateway, as shown in the diagram.  The gateway provides continuous two-way communication between the utility and the consumer’s home energy management system devices, such as a programmable communicating thermostat (PCT) or an in-home display (IHD).  The gateway establishes a secure “service entrance” into the home by connecting both to the broadband modem (via Ethernet) and to the ZigBee, Wi-Fi or other HAN.  The gateway is configured for secure, encrypted communications between the utility’s DR application and the in-premises system, and if the utility chooses, voluntary direct load control.


Shown here is a wireless ZigBee HAN served by both a broadband Internet gateway and an AMI network.  Note the ability to control other loads, including the charging of electric vehicles, which will be supported in future versions of SEP.

Astute readers may be wondering what happens when a home has both a utility-provided smart meter and a consumer- or utility-provided Internet gateway?  SEP version 1.1.1 includes a provision for more than one Energy Service Interface (ESI), which is the gateway into the HAN.  In addition to this gateway function, each network must also have trust center and network coordinator functions; the smart meter (the point of demarcation between the utility and the premises) normally provides all three functions.  Support for multiple ESIs enables the trust center function to have different gateways into the same HAN in a secure fashion, thereby changing the HAN from a utility’s AMI-limited interface into a robust consumer platform that preserves the integrity of the utility’s program while enabling shared control with the consumer.  Another advantage of having an Internet gateway for the utility is the ability to implement additional voluntary applications, particularly those requiring higher bandwidth than the AMI supports.

Maximizing Consumer Acceptance

Even with consumers ready for residential DR, the standards sufficiently robust and mature, and the Internet able to serve as a separate or companion network to AMI, there is one other potential barrier: the home energy management system (HEMS) itself.  Because most consumers continue to have difficulty programming home appliances like microwave ovens and digital video recorders, how can they be expected to make the optimal tradeoffs necessary to balance energy consumption with personal comfort?  The best home energy management systems make these tradeoffs automatically and prudently based on an individual customer’s general preference, while also providing a mechanism to help the consumer “tweak” that preference.

The ideal home energy management system should, therefore, operate something like the dial on an old-fashioned thermostat, enabling users to “crank down” the cost or “crank up” the comfort—or chose something in between favoring one or the other.  For those consumers who are enthusiastic about home energy management, more in-depth optional capabilities should also be available.  These include: switches and outlets for controlling other loads; sophisticated energy management displays, potentially as dockable stations; Web portals showing detailed usage information; and mobile device applications that enable users to check and change settings while away from home, perhaps from a second or vacation home that also has its own remotely-controllable HEMS.

Operational simplicity combined with good customer communications works.  And not just in pilots either.  Oklahoma Gas & Electric had such tremendous success with its pilot that the utility is now embarking on large-scale roll-out to almost 40,000 customers by the end of 2012, with more to follow.  Pike Research calls OG&E’s demand response program “one of the most advanced initiatives in the industry to date” and the firm’s forecast of a 38% annual growth in residential DR services over the next five years reveals an expectation that other utilities will shortly be following OG&E’s lead.

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About the Author

Louis Szablya is VP of marketing and product management at Energate, Inc., where he is responsible for marketing, product management and partner programs.  Prior to joining Energate, Szablya was Director of Smart Grid Integration at SAIC, a Smart Grid and Utility Consultant, and VP of Sales and Delivery at GridPoint.

About Energate

Energate ( is a leading provider of demand response and home energy management solutions including software, wireless communications, gateways, smart thermostats, switches and consumer energy displays.  The Consumer Connected Demand Response (CCDR™) solution allows utilities to immediately address residential energy demand and empowers consumers to more effectively manage their energy use.  Energate products seamlessly connect to the Smart Grid to deal with supply and demand challenges, the increased use of renewables and dynamic rate structures.  Founded in 2004, Energate is headquartered in Ottawa, Ontario with offices in California, Illinois, Texas and Toronto.


Source:  Breaking Down Barriers to Residential Demand Response

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